How We can Really Help SMBs Digitally Transform in Africa
Small and medium-sized businesses are the main drivers of jobs and economic growth in Africa. Africa has now become a highly competitive globalized market environment, attracting a lot of investors from different continents. The significance of small and medium sized Businesses (SMBs) in the economic growth and development of Africa is clearly evident. With businesses starting to rely more on data analytics, digital tools and automation, resilience of the digitally enabled businesses is becoming an increasingly important component for SMBs’ survival in Africa. Despite the many benefits that come with adopting tech solutions, SMBs in Africa have been slow to embrace digital technologies. In this piece, I take time to highlight some of the key actions we can take to help small and medium sized businesses to digitally transform in Africa.
First things first, what is digital transformation?
Digital transformation, abbreviated as DT, is the act of implementing/using disruptive technologies to boost productivity, value creation, and social impact. This, according to Bharadwaj enables “modular, distributed, cross-functional, and global business processes that enable work to be carried out across time, distance, and function boundaries” in ways that were previously not possible.
Let’s explore some key challenges faced by SMBs on their Road to Digital Transformation in Africa
The dynamic market conditions resulting from globalization, technological progress, and market demands compel small and medium-sized businesses (SMBs) to utilize technologies in their day-to-day activities in order to maintain competitiveness in the market. Despite the presence of these factors, business owners in Africa still encounter the following obstacles that we must examine closely before we discuss how we can help them digitally transform.
Economic based challenges
The fourth industrial revolution is in full swing, bringing with it a wave of technological advancements that have the potential to reshape industries and economies across the globe. For SMBs to digitally transform and succeed, there’s a need to remove negative economic factors such as inaccessibility to new markets, inadequate access to financial support, and currency unions that make it hard for entrepreneurs to tap into new market segments and expand their product portfolio.
Industry- or market-based challenges
The continent of Africa offers a wealth of economic potential in practically every industry, and the continent’s youthful population structure presents a tremendous opportunity in this digital era. As a result, it is important that Africa places a high priority on the development of its socio-economic infrastructure, which is facilitated by digital technology.
Low levels of managerial and financial skills; corruption; inadequate infrastructure and resources; poor power and water supply; inadequate human capital development; increased competition; and a lack of access to relevant market information are some of the challenges SMBs in Africa are faced with.
Bureaucratic challenges
It is the duty of governments to establish a conducive atmosphere through laws and regulations that facilitate the advancement of digital transformation. An enabling environment encompasses political dedication at the highest echelons, guaranteeing stability and predictability in policy-making, fostering a sustainable atmosphere for private sector investments, implementing the most effective regulatory methods, and encouraging the need for digital solutions. Creating a favorable climate across key areas and industries is essential for successful digital transformation.
Policy makers and regulators must stay up-to-date with technological advancements, tackle emerging regulatory challenges, and establish the necessary frameworks to fully realize the potential of digital transformation. It is essential to be ready for digital transformation and the rise of advanced technologies like Artificial Intelligence (AI), the Internet of Things (IoT), machine-to-machine communications (M2M), and 5G. Public policy, legal, and regulatory frameworks must be current, adaptable, incentive-driven, and market-oriented to facilitate digital transformation in various industries and throughout different regions of the continent.
The digital and technology divide hinders the ability of least developing countries (LDCs) to utilize data effectively and innovatively in order to support policymaking and decision-making processes regarding issues that impact Africa, such as climate change, food security, and energy security.
Socio-technical Challenges
Another difficulty arising from the digital divide, is created by low digital skills and literacy among some SMEs in Africa. This barrier is further exacerbated by a lack of self-efficacy and the perceived utility of technology. Experiencing exclusion from information and technological opportunities constitutes an additional manifestation of poverty. The expense associated with digital tools and mobile services represents one of the primary obstacles to achieving digital literacy.
A significant aim for numerous African countries is to greatly augment the number of young people and adults equipped with pertinent skills, such as technical and vocational skills, to facilitate employment, decent jobs, and entrepreneurship by the year 2030. This will enable small and medium-sized enterprises (SMEs) to recognize and harness the revolutionary capabilities of digital technologies.
Helping SMBs to Embrace the Digital First Future
After exploring factors that influence Digital transformation for SMBs in Africa through the above listed challenges, it’s time to look into the different ways we could help these business owners adopt new technologies. SMBs with digital initiatives often fail because of their inability to recognise the link between digital technologies and their profit drivers. Due to the ‘simple’ nature of their business structures, one of the major challenges SMBs face when integrating technologies into their operations is a lack of business strategic planning and business information structures. It’s important for entrepreneurs in Africa to develop comprehensive strategies for integrating digital technologies into their operations to build resilience.
Aligning SMBs’ Business Needs with available technologies
SMBs in both formal and informal sectors account for a sizable portion of economic activities in Africa. It is obvious that small and midsized businesses play a crucial role in addressing these socio-economic issues in a region with high rates of unemployment, poverty, and inequality. One of the main reasons why most of these businesses haven’t fully embraced technology is a lack of strategies that align SMBs’ business needs, goals, context, and available digital technologies. By developing comprehensive strategies, SMEs can foster an environment that allows for adaptability, responsiveness and transformation that is appropriate for the nature of their business
Infrastructure
The impact of emerging technologies on organizations and economies is undoubtedly huge in Africa. The establishment of cost-effective, easily reachable, and dependable infrastructure serves as the fundamental basis for attaining comprehensive digital advancement in Africa. Information and communication technologies (ICT), including computer and mobile technologies, applications such as e-mail, electronic commerce, websites, cloud computing, electronic payment devices, social media platforms, and other technologies like the Internet of Things (IoTs), should be provided to small and medium-sized enterprises (SMEs) to assist them in transitioning from less efficient business practices. The Africa Union (AU) has recently developed the Digital Transformation (DT) agenda for the period of 2020–2030. The goal of the plan is to offer assistance to the digital ecosystem. In order for any change to be successfully implemented, it is crucial that the strategy align with the current policies in place.
According to a World Bank study, it is estimated that every 10% increase in broadband penetration in low and middle income countries results in a commensurate increase of 1.38% of the GDP2.
Leveraging digital tools to drive business growth in African Markets
- Payment processing
By mid-2021, there were about 100 million micro-, small, and medium businesses (MSMBs) working in Africa. Again, by mid-2021, most of them still relied on cash. These enterprises would definitely benefit from payment solutions that allow them to accept electronic payments as well. Kenya and South Africa are at the forefront of the electronic payment industry among African countries. These are local payment solutions targeted at new startups switching to electronic payment rails and SMEs need to be encouraged to utilize such solutions to simplify their payment processing. Some of the notable online and card payment processors in Africa include: Zapper, Yoco and Mpesa. For SMBs looking to build a conventional or crypto-friendly payment solution, an omni-channel payment technology such as UniPay processes electronic payments internationally.
- Data collection, storage and analysis
Africa is experiencing incredible change, presenting both opportunities and challenges. To help businesses harness technology to experience growth, growth engineering will help them attain significant business goals. Growth engineering is a technical and systematic approach to organizational growth. It is a fusion of the scientific, data-driven decision-making method of software engineering and traditional marketing processes to produce custom growth solutions. Taking one element from growth engineering, such as data collection, storage and analysis, SMBs need to leverage the data they already have to understand their markets and customers better.
- Customer Relationship Management
The continent, home to 1.4 billion individuals, now holds the title of being the most prominent region globally in terms of mobile usage, with a mobile user penetration rate of 83%. Africa is projected to experience the highest growth in the number of digital buyers globally by 2026. As the number of consumers increases, small and mid-sized businesses have the ability to utilize CRM tools such as Monday.com to effectively interact with their existing clients across Africa.
- Financial Management
VSBs (very small businesses), as Microsoft calls them, SBs (small businesses), and MBs (medium businesses) in Africa have a need to manage and keep their books in order. When entrepreneurs realize the transformative potential of integrating digital technologies into their business operations with the benefit of gaining long-term resilience, they’ll embrace the different financial management tools available in Africa.
- Business process improvement
Digital technologies have the ability to bring about significant changes in corporate processes, allowing for the optimization of overall operations. This includes the efficient and cost-effective manufacture of high-quality products and services, as well as the ability to respond quickly to market changes and offer customized products or services. By implementing these enhancements in their business operations, small and medium-sized businesses (SMBs) would attain a competitive edge, enabling them to redefine their role as key contributors to the region’s socio-economic development.
With tools like bumpa you’re able to manage your business with ease
The internal operations of SMBs in Africa must undergo a digital shift using digital technologies in order to remain competitive and relevant in the market. These technologies are used for a wide range of activities, including communication (e-mails), transactions, sales recording and processing, automation, production planning and stock control, document management, general accounting and finance, marketing, and so forth.
- Route to Market
As its name suggests, a route to market is essentially a path that connects you, the manufacturer or distributor, with the people you want to buy your product. The Route-To-Market approach in Africa differs significantly from the tactics employed in First World countries due to the presence of a substantial informal consumer base in Africa. A greater quantity of merchandise is sold in Africa through spaza shops, street vendors and hawkers compared to shopping complexes.
For any business owner or investor, entering new markets can be a difficult task. There are numerous aspects to consider, ranging from local legislation to cultural differences, and knowing where to begin can be challenging. The agile world has changed the way that products are delivered, deployed, and announced to the market and customers in Africa through the use of technology.
- Streamlining your business model and strategies
Pervasive computing technologies, new delivery models (cloud computing), and digital tools and methodologies for data exploitation are a few examples of disruptive digital technologies that can be implemented in SME’s business operations. Through the extensive use of mobile money or digital wallet services systems in some countries in Africa, this wealth of mobile Internet-based digital technologies presents enormous growth and development potential for businesses in Africa.
- Marketing your business
According to the Global System for Mobile Communications Association (GSMA), internet access has increased to 522.8 million, or 39.8 percent of the population, since 2000. Further studies by the Brookings Institute show the continent could reach parity with the rest of the world by 2030. Such progress gives business owners the chance to use digital channels to market their products and services to customers from different regions. Using marketing tools to reach a wider audience, like Google Ads or customer communication platforms like Beem, helps SMBs in Africa to engage with their customers efficiently.
Conclusion
Africa is improving its economic performance, macroeconomic management, political governance, and entrepreneurial spirit on a daily basis. It is essential to look for easy approaches that will assist SMEs from various African countries in developing comprehensive strategies for incorporating digital technology into their operations in order to increase resilience.
Small and medium-sized firms (SMBs) must get support from all sectors, including the government, private sector, and civil organizations, in order to profit from digital transformation through DT technology roadmaps and ecosystems. This will ensure a stable business climate in Africa.
