By Viresh Harduth, VP Small Segment at Sage Africa & Middle East​

There’s no disputing that Small & Medium Businesses (SMBs) play an outsized role in the South African economy, accounting for 87% of employment opportunities per the Department of Small Business Development. Those that are formally registered – about 37% of the total SMBs in the country – contribute around R3 trillion to GDP a year.

The government has long recognised that this sector is a vital engine for economic growth, job creation and tax revenue generation. The National Development Plan (NDP) envisages that SMBs will generate 90% of the country’s 11 million new jobs by 2030, underlining their critical role in inclusive economic transformation.

Yet despite SMBs’ significance to the economy, we are a long way from unlocking their full potential. In a world that is rapidly moving towards a new generation of digital technologies such as artificial intelligence (AI), South African SMBs risk getting left behind. While SMBs recognise the value of digital technologies, they face many barriers to adoption.

Research such as Vodacom’s Levelling the SME playing field report finds that SMBs see the value of digital tools, but uptake is uneven. The survey, covering eight African countries with a particular emphasis on South Africa, shows that 81% of SMEs see cloud computing as essential for competitiveness

Cost, skills, and complexity stand in the way

Adoption of technologies like automated inventory management, digital payments and billing, and the Internet of Things lags. Skills shortages, cost concerns and operational complexity remain hurdles for digital transformation and cloud adoption among smaller businesses.

For many SMBs, particularly small businesses, the upfront costs of hardware, software and training remain a hurdle. Digital literacy gaps compound the challenge, especially with tech like Artificial Intelligence (AI) demanding new skills and new ways of working. Cybersecurity concerns and, in some organisations, resistance to change slow down the momentum of change.

Yet the potential benefits of digital transformation and the cloud are hard to ignore, both for individual SMBs and for the wider economy. A digitally enabled SMB sector will be more globally competitive, efficient and resilient. Wider digitalisation among SMBs will contribute to sustainable GDP growth.

A study from AWS and Access Partnership shows that cloud adoption alone is forecast to generate up to R186 billion in economic value for South African SMMEs between 2023 and 2030. This value comes from cost savings on IT infrastructure and personnel, efficiency gains, and improved ability to reach new markets.

For each SMB, digital transformation translates to more streamlined operations. For example, cloud accounting, HR and payroll software automates routine tasks, reduces errors, allows teams to collaborate remotely wherever they are, and provides instant insights into financial health. These systems can scale as the business grows, providing a platform for growth.

Technology already proven to benefit SMBs

In the Sage Small Business, Big Opportunity (SBBO) 2024 research, 78% of SMBS report that digital technology plays an important role in their business operations. It drives business growth, improves efficiency, and strengthens competitiveness, while enabling SMBs to move away from manual processes that are slow, rigid, and error-prone.

Furthermore, the cost efficiencies and pay-as-you-use nature of digital and cloud solutions allow small businesses to benefit from powerful tools that large businesses take for granted. This helps SMB owners and managers free up time and resources to focus on strategy, growth, and customer engagement.

Solutions providers such as Sage play a central role in helping SMBs navigate the digital landscape. Our suite of cloud-based software spans accounting, payroll and HR, providing simple, affordable tools that automate core business functions. Sage also offers solutions that bridge compliance requirements and operational needs.

Functionality like automated reporting, real-time dashboards and integrated tax management helps SMBs meet regulatory obligations while reducing the administrative burden. This reduces risk and cost, and also opens pathways for small businesses to formalise their operations and participate more fully in the digital economy.

The rise of AI

Cloud computing and the first wave of digital technologies have already been transformative. But the technology isn’t standing still, and SMBs are now looking at how AI can help them streamline operations and improve agility.

AI integrated into business tools like cloud accounting will enable SMBs to make faster, smarter decisions and sharpen their competitive edge. The combination of cloud and AI will potentially level the playing fields for SMBs, enabling them to innovate faster and scale their businesses.

Sage Ai, for example, is designed for finance, leveraging advanced AI to streamline tasks, provide real-time insights, and support better financial management. It integrates seamlessly into workflows, helping SMBs close books faster, answer financial questions quickly, and focus on strategic growth.

A global study, conducted by Forrester Consulting and commissioned by Sage, highlights how rapidly businesses are adopting AI.  The research forecasts that over 90% of SMBs will leverage AI for continuous monitoring and anomaly detection by 2030.

Over 70% will integrate real-time data into financial decisions, using AI to drive growth and innovation. Just as many will integrate real-time data streams into their financial decision-making processes

A digitalised SMB sector is key to achieving NDP ambitions

Digital transformation of the SMB sector will help to realise its full economic promise. Overcoming the barriers to digital adoption should thus form a key part of the national economic strategy. An SMB sector that thrives in the digital economy will be foundational for the inclusive growth and economic resilience envisioned in the NDP.

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