By Sanah Gumede
What does a future-ready economy look like for South Africa? This was the question under the microscope at the recent Business 20 (B20) summit in Cape Town, where hundreds of local business leaders joined forces to plot a more sustainable, human-centric course for businesses and workers to thrive.
As part of the build-up to the Group of Twenty (G20) summit – set to be hosted in South Africa later this year – the B20’s newly established task forces are formulating recommendations set to influence global policy and ensure that African voices are being heard at the highest levels of economic governance.
Many of last week’s initial B20 South Africa discussions centred on how technology is going to be essential to transforming African economies, with a focus on digitisation and digitalisation. For South Africa, conversations around readying workforces – and by extension, small and medium enterprises (SMEs) – for advances in technology took centre stage. Notably, digital inclusion strategies were some of the first recommendations to be discussed, such as dropping the price of data and upskilling workers and entrepreneurs.
Considering Absa’s commitment to SME development, we know the power these businesses hold in the South African economy – often cited as employing more than half of South Africa’s formal workforce. Therefore, it is vital they receive support to digitalise and keep up with global trends, and we are so glad to hear that fellow leaders at the B20 are aligned in these efforts.
The benefits of digital transformation have been documented repeatedly: increased efficiency, greater agility, better resource management, and overall cost-saving once the initial investment is made. Thankfully, local entrepreneurs are already embracing digital tools to take advantage of such benefits.
A recent Mastercard study revealed that 90% of South African SMEs have already adopted digital payment methods, enhancing their efficiency, security, and business credibility. Meanwhile, the Xero 2024 State of Small Business report revealed 56% of surveyed small businesses plan to invest in new technology, and 55% in upskilling their current staff in the coming year. These are clear indicators of the desire for novel tools and skills that can bolster business capabilities.
But how can we speed up this rate of transformation?
SMEs often struggle with digital transformation due to a lack of skills, support, and financial constraints. A recent Council of the European Union meeting on Artificial Intelligence (AI) argued that with the right framework, AI could be a “game-changer” for SMEs – as long as these solutions are accessible, cost-effective, and easy to use.
So, while those developing AI tools need to take this into account, policymakers have an important role as well: providing support measures, such as AI literacy programmes, funding initiatives, and AI roadmaps for SMEs specifically.
However, more ubiquitous use of digital tools comes alongside greater security risks, which is why cybersecurity frameworks also need to be a priority for small businesses looking to expand their capabilities. With around half of cyberattacks targeting small businesses, according to communication giant Verizon’s cybersecurity research, it is essential that such frameworks are also easily accessible and affordable for growing SMEs.
And as the rest of the world becomes increasingly digital, the local private sector has a vital role to play to ensure we don’t fall further behind. As our Minister of Communications, Solly Malatsi, said last year, private industry must partner with the government, investing in the digital infrastructure to connect businesses, critical institutions like schools, hospitals, and clinics, and individuals to online services and tools. Once the digital divide has been closed in the most rural areas of the country, that is when entrepreneurship will be truly democratised.
Meanwhile, the finance sector must ensure SMEs have access to the funding required to embrace this new era. Developmental lending has been core to our own business strategy since 2015, from direct financing to building relations between SMEs and other funding institutions, to enterprise development and training for our entrepreneur clientele.
For finance institutions that work heavily with SMEs, it is also important to document the current state of South African entrepreneurship, so that we can directly help facilitate the right policies and assistance they need. This was the underlying reason for our recent establishment of the Small Business Growth Index (in partnership with the South African Chamber of Commerce and Industry).
In-depth insights into the SME ecosystem will enable both the private and public sectors to implement solutions and interventions to enhance the operating environment for these businesses. Whether that be addressing their concerns around economic uncertainty, or helping them to digitally transform, such research will be at the core of our own recommendations to building South Africa’s economy.
In the coming months, I suspect that many of the B20’s findings will be highly digitally focused. While we can rely on our fellow G20 nations to help implement this roadmap, it is local leadership that needs to light the way. Now is the time for business leaders, policymakers, and financial institutions to take the bold steps – or risk our country being left behind in the global digital economy.
Sanah Gumede is the managing executive: Strategy and CVM, Relationship Banking, Absa Bank
BUSINESS REPORT
