News Release: Digitalisation – the best hope for South Africa and its small firms


10 March 2021

Digitalisation – the best hope for South Africa and its small firms

After more than a year of Covid-19 and various corresponding levels of lockdown, the Small Business Institute (SBI), with assistance from the SBP research team and funding from Exxaro, has digested over 100 policy documents, research and media reports related to digital transformation to understand its role in the survival and future growth of small businesses, job creation and the country.

“It’s clear that South Africa needs to embrace the future and embrace it fast,” said SBI CEO John Dludlu. “From all that we read and the case-study examples of SMEs which were able to continue to trade by using digital tools or building digital-first businesses, at an urgent commitment to digitalisation is South Africa’s best hope, as much for small towns and rural areas as urban centres.”

The paper [click here to view] released today (the second in a suite of papers to be issued in the coming weeks) makes the case for digitalisation and the benefits it offers, including innovative, targeted, appropriate and efficient public service delivery; greater inclusivity and equality; better and cheaper products; and employment opportunities to make and distribute the related goods and services.

We looked at the challenges, including the inadequate skills base (for small as well as big business); poor digital infrastructure; uncertain, expensive power supplies; a government locked in the third-industrial revolution; policy confusion resulting from too many cooks in the kitchen; the oft-cited heavy hand of inappropriate and too much regulation; and the inability to put our taxpayer money where government’s mouth is when, for instance, ongoing bailouts for SAA and the most recent budget diverts allocations from the departments overseeing South Africa’s shift to the fourth industrial revolution.

“Corruption contributes enormously to our funding mis-priorities, which could be minimised were citizens able to monitor procurement and spending decision-making in real time, online,” said Dludlu. “For if the fourth industrial revolution is characterised by its use of data and its velocity, scope and impact, it is equally about responsive, citizen-centric governance.”

We also document successes. The real heroes of this story are the innovative entrepreneurs who, in digital or data-related industries, developed tech-based products or services like medical or contactless payment apps, or new uses for ‘wearables’, part of the Internet of Things (IoT) wave gathering pace. Others who reacted quickly adopted new ways to sell, or manage their staff, operational and financial information using digital technologies, products (especially cell phones), or services like social media platforms and the cloud.  Their pivots included changing their value propositions, delivery channels, or customer base. Many used tools available to anyone – Instagram, Whatsapp, Facebook or any of the 104 South African digital marketplaces where people buy and sell online.

While we found pockets of fruitful endeavours by government in, for example, research and development or at the CSIR and on the treasury’s vulekamali website, most analysts assessing government’s readiness for the fourth industrial revolution delivered abysmal report cards.

The document on digital readiness prepared by the National Planning Commission, is peppered throughout with terms like ‘stasis’, ‘incapacitated’, ‘compromised’, ‘paralysed’ and ‘ideological rigidity’. The World Bank tells us we’re losing ground to the likes of Kenya, Rwanda, Botswana, and Nigeria. And the African Development Bank refers to inconsistent policy and regulatory failure in key enabling areas, particularly the telecommunications and energy sectors.

“Continuous innovation is central to economic prosperity,” Dludlu said. “If we embrace it with urgency and purpose, and not just by publishing strategies or regulations to try and govern it inappropriately our economy will revive, jobs will be created, and businesses will become more productive in a virtuous cycle.”

Because SMEs were failing before Covid-19, we argue that South Africa cannot and should not go back to the old normal. To successfully empower a nation ready to leap ahead will require an urgent understanding of how best to unleash entrepreneurial innovation. It will require a government willing to lighten the heavy hand of over-regulation and relinquish the idea of ‘controlling’ the fourth industrial revolution or how businesses embrace its tools. And government itself must dip its toe into the future by modernising its approach to serving the public.

As Albert Einstein once said, “We cannot solve our problems with the same thinking we used when we created them.”

Recommendations to government

  • Prioritise long-term investment in digital and relevant softer education and skills development for students, the employed requiring re-training, and the teachers who teach them;
  • Build the requisite and affordable digital infrastructure to achieve economic advancement and inclusion; let the private sector help. Enable and incentivise them to do;
  • Seek public-private partnerships in respect of building ‘govtech’ solutions to e-governance, innovative institutions, and execution of digitalisation;
  • Rapidly accelerate the procedures for green lighting large-scale renewable power projects;
  • Commit to responsive, citizen-first governance and progress rapidly to a digitalised government;
  • Ensure procurement procedures are online and transparent to enhance efficiency and minimise corruption;
  • Constrain the regulatory environment to fewer and better laws with clear policy objectives and targets, paying heed, as the NPC suggests, to a “regime is conducive to small business needs and abilities.” Regulation should not simply require compliance, but promote:
  • innovation and competitiveness, i.e., entrepreneurship
  • job creation
  • digital platforms for e-commerce proliferation and mobile payment options
  • digital financial services
  • the adoption of emerging technologies
  • harmonising and easing cross-border trade
  • Hold yourselves accountable
  • Finally, “Ensure that the views and concerns of small businesses are more effectively articulated in decision- and policy-making structures. Policy-making and regulatory design needs to be more responsive to the needs of small business”. (NPC).