More than half of small businesses are lagging in digital progression

Male-owned & township-based small businesses slowest to take up digital solutions.

[Cape Town, South Africa](28 November 2023) — More than half of small businesses in South Africa are not ready for the digital future, a new survey has found. This is according to the DigiBiz Small Business Digital Progression Index Report, to be released in early December. The report is based on a survey by the DigiBiz Programme, conducted during September 2023 with 442 respondents.

The study into digital adoption trends shows that small businesses are mostly not preparing for change and are only reactively introducing digital tools. In addition, the study shows that female entrepreneurs are better prepared for taking on new digital solutions than their male counterparts and that city-based small businesses significantly outperform those that are township- or rural-based.

“The survey methodology allows for measuring a Digital Progression Score for each respondent, which is combined into a Digital Progression Index for overall respondents and for sub-categories of respondents,” says Dr Andre du Preez MBA. PhD. , the lead researcher of the DigiBiz Programme.

DigiBiz is currently attending the Kenya Innovation Week in Nairobi, where they have been invited to present their Digital Progression Model and key survey findings.

WOMEN ARE BETTER PREPARED DIGITALLY

The average performance of the respondents is fairly low, at an index score of only 41 out of 100, showing that there is lots of room for improvement in the uptake of digital solutions by small businesses. “The finding that more than half of small businesses are slow to take up digital tools and are also not preparing for change, is particularly pertinent,” says Du Preez.

On the index, women are doing better than men (index score of 42 for women and 40 for men), businesses based in city centres or suburbs do noticeably better than those based in townships, informal areas or rural locations (index of 44 compared to 38) and larger businesses that are VAT registered perform better than those that are smaller and not VAT registered (index of 45 compared to 39).

“These trends are underscored by noticeable variances in the uptake of digital solutions,” says Du Preez. “For instance, we found that 48% of women respondents use an email address with their unique company URL, compared to 44% of men; and in terms of location, the variance is even bigger, with 61% of city- or suburb-based small businesses using unique URL email addresses, compared to only 31% from townships, informal areas and rural locations.”

MEN PREFER DIGITAL SYSTEMS

The survey found that the same trend is observed in the use of social media pages, with 44% of women and 38% of men using it for marketing, while 67% of city or suburb-based businesses use social media pages compared to 60% from townships, informal areas and rural locations.

Interestingly, these gender trends are reversed when it comes to introducing digital systems. Says Du Preez: “For men, 21% are reporting that they make use of digital customer relation management (CRM) systems, with only 16% of women saying the same. This indicates that men are better at introducing systems, while women excel at digital marketing.”

The DigiBiz Programme is an entrepreneurship ecosystem supported by the Entrepreneurial Planning Institute, Catalyst for Growth and the Centre for Entrepreneurship and Innovation at the University of the Western Cape. It is funded by a grant from the RISA Fund, an initiative of UK Aid.

NEW OMBUD GAMECHANGER

As part of its commitment to digital inclusion, DigiBiz recently made a presentation to parliament in support of the National Small Enterprises Amendment Bill. The bill aims to improve the operating environment of the small business sector and introduce a Small Business Ombud to deal with all complaints in this sector, reducing the need for expensive legal fees. “The introduction of a new Small Business Ombud could be a game changer for the country’s struggling small businesses,” says DigiBiz Programme Director Sifiso (Sifis'esihle) W. Ndwandwe , “especially if it helps address the crisis of late payments and contract disputes they face.”

But addressing the current constraints that entrepreneurs face is only possible when it is simultaneously accompanied by embracing digital tools, says Ndwandwe. “Many participants in our coaching programme have been able to quickly introduce new digital systems, as their business processes were well defined,” he says. “For instance, one business implemented an off-the-shelf CRM application, so that their engagement with clients increased significantly.”

However, there are large variances among the businesses DigiBiz has coached. “For those who weren’t ready for significant shifts in their digital progression, our coaches had to adjust, focus on resolving personal constraints or help them refine their business models,” comments Ndwandwe. “The coaches had to help them with basic tasks, such as using digital signatures and organising their email inboxes better.”

DIGITAL PROGRESSION INDEX

Du Preez explains how the Digital Progression Index was created: “We designed a framework to score the uptake of digital solutions – we call this status. And we also score the preparedness of the business to introduce new technology? – we call these drivers.”

The resulting four-quadrant framework explains where small businesses are at. Each quadrant is assigned an archetype. The archetype for the quadrant where both the status and drivers are low is called Responders; the archetype for high status and low drivers is called Initiators; the archetype for low status and high drivers is called Arrangers; and the archetype for both high status and high drivers is called Transformers.

“More than half of the respondents are finding themselves in the Responders quadrant, meaning they’re slow to introduce new digital tools and are not preparing their businesses for change, while only 16% are in the best category, Transformers,” says Du Preez. “This must ring alarm bells.”

“The DigiBiz Programme and other initiatives aimed at building digital capacity in the small business market must take note of the big task ahead,” says Ndwandwe. “We need to meet the entrepreneurs where they are at, on their digital journey and help them to plan and implement the next step towards digital transformation.”

●?????? Join a public webinar where the Small Business Digital Progression Index findings will be shared. Visit this page for more information.

●?????? For more information on DigiBiz’s presentation to parliament in support of the National Small Enterprises Amendment Bill, read the submission here.

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ENDS

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About the DigiBiz Network

The DigiBiz Network consists of entrepreneurs and small business support practitioners from across South Africa. They have an interest in promoting small business growth, job creation and social inclusion through increasing the adoption of digital technology by small businesses.? 2 596 network members currently take part in events and the network has a total reach to 9 197 participants.

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Included in the network activities are hosting of regular online workshops and webinars; working on the promotion of good practice through several Communities of Practice (CoPs); publishing of Quick Guides and Success Stories on an online platform; offering one-on-one coaching support to entrepreneurs; and conducting research and surveys to contribute to evidence based decision-making. The DigiBiz Digital Progression Survey Report will be published on December 1st, 2023.

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Chido Myambo

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