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Sage Report Highlights Digital Potential and Challenges for South African SMBs

November 28, 2024
4 min read
Author: Aayushya Ranjan

South African SMBs display resilience, optimism, and increasing AI investment, though digital transformation gaps remain. Sage urges collaboration with government to boost efficiency, profitability, and growth.

In an ever-changing economic landscape, South African (SA) Small and Medium Businesses (SMBs) are proving their resilience and adaptability. Sage’s annual survey of 12,000 small and medium sized business leaders globally – ‘Small Business, Big Opportunity’  – reveals that 78% of SA SMBs are confident and optimistic about their future success, just slightly down from 84% in 2023.

Productivity and Technology as Cornerstones of Growth

This steadfast confidence can be attributed to improved operational efficiency, increased consumer spending, adoption of new technology, and enhanced cash flow. Nearly seven in ten (68%) of South African SMBs are satisfied with their productivity levels, while 44% cite improved efficiency as a key factor for confidence.

Nonetheless, it hasn’t been an easy year for all of the country’s small businesses. While 39% of SMBs saw revenues grow in the past year, 26% saw revenues fall. South African SMBs appear more optimistic than their global counterparts, with 40% reporting cost increases over the past 12 months – significantly below the global average of 51%. Looking to the future, 31% of South African SMBs anticipate cost reductions in the next year, compared to just 21% of SMBs globally.

While South African SMBs recognise the significant value of digital transformation, they are trailing the global market in fully leveraging technology. This paradox is highlighted by the fact that 92% of South African SMBs see digital technologies as vital for boosting business revenues—surpassing the global average of 87%—yet many have yet to translate this recognition into widespread implementation.

Just 78% of South African SMBs report that digital technologies are important for their daily business operations, below the global SMB average of 86%. South African SMBs are also less likely to turn to digital technologies to overcome barriers (26%, compared to 37% globally). Instead, they most commonly focus on cutting costs (43%).

Over two thirds (73%) of South African SMBs have invested in artificial intelligence (AI) technologies over the past year, slightly above the global average of 69%. However, only 47% of South African SMBs are relying on AI to drive revenue growth, compared to 63% of global respondents.

However, South African SMBs have the potential to close the gap quickly, with 76% planning to invest in AI technologies in the coming year, exceeding the global average of 72%. While 37% of global respondents are concerned about the costs of AI, only 26% of South African SMBs share this worry. Instead, they see data and privacy risks as a bigger concern (45%).

Resilience Through Adaptability: The SMB Outlook

South African SMBs are going for growth, with optimism and investment on the rise. However, there is a significant opportunity for them to drive higher levels of efficiency and profitability by fully embracing digital technologies.

SMBs are the backbone of the South African economy, and their ability to adapt and grow under pressure is nothing short of inspiring. By doubling down on digital adoption and working in partnership with government and large enterprises, SMBs can unlock even greater potential and contribute to the broader economy.

– Pieter Bensch, Managing Director and Executive Vice President, Sage Africa & Middle East

With nine in 10 global businesses reporting that digital technologies play an important role in enabling revenue increases, digital adoption could unleash benefits for the wider economy.

Government and big business have an ongoing role to play in creating an environment for SMBs to flourish, particularly through providing access to affordable finance and promoting digital transformation.

– Pieter Bensch, Managing Director and Executive Vice President, Sage Africa & Middle East

A Global Perspective on Challenges and Solutions

Despite the positive trends, SMBs worldwide face challenges as they run and grow their businesses. Cash flow difficulties and rising operational costs are primary concerns for 42% of global SMBs. Other challenges include supply chain disruptions (26%) and customer acquisition and retention (29%).

Global SMBs surveyed believe that the government has an important role to help create supportive environments for growth, including minimising friction. Key areas identified include improving access to affordable finance and simplifying invoicing through digital transformation like digital invoicing and payment systems.

As a small business, staying ahead in today’s fast-paced world means embracing new technologies like cloud-based tools and AI to enhance efficiency and productivity to meet our goals. We’ve seen firsthand how these tools can streamline operations, giving us the confidence to tackle challenges and focus on growth. The opportunities for South African SMBs to thrive through digital transformation are immense, and we’re excited to be part of this journey. Despite facing economic uncertainties, businesses are finding pathways to growth through innovation and by leveraging the transformative power of digital tools.

– Raydo Matthee, Chief Executive Officer, Skunkworks

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