entrepeneurship - Graduate School of Business

Transcription

ICT
&
entrepeneurship
2009
A research Report
presented to the Small
Enterprise Development
Agency
by
Jacqui Kew
Mike Herrington
ICT and entrepreneurship
CONTENTS
Abstract
Acknowledgements
5
6
Chapter 1
The SMME Sector and its Relevance to the South African Economy
1.1 Introduction
1.2 What is the SMME sector?
1.3 Development of SMME policy in South Africa
1.4 Constraints on SMME development 1.5 Information communication technology (ICT) and SMME development
1.6 Development of SMME ICT policy in South Africa
1.7 The problem statement
1.8 The purpose of the study
1.9 Scope of the study
1.10 Plan of the study
8
9
10
12
14
15
16
16
16
16
Chapter 2
Information Communication Technology and SMMEs in Developing Economies
2.1 Introduction
2.2 Digital divide
2.2.1 E-readiness
2.2.2 Digital divide
2.2.3 Urban/rural digital divide
2.2.4 Broadband
2.3 Global competitiveness and the role of technological readiness
2.4 How has the growth of ICT impacted on SMMEs?
2.4.1 How SMMEs use ICT: progression of ICT adoption
2.4.1.1 Human capital requirements
2.4.1.2 Reasons for ICT adoption
2.4.2 E-commerce
2.4.3 Obstacles to ICT adoption in the SMME sector
2.4.4 Business failure and ICT usage
2.5 Conclusion
18
18
18
19
20
22
22
24
25
25
25
26
26
27
29
Chapter 3
Research Methodology
3.1 Introduction
3.2 Research aim and objectives
3.2.1 Aim
3.2.2 Objectives
3.3 Research design
3.3.1 Face-to-face interviewing
3.3.2 Question types
3.4 ICT study
3.4.1 Questionnaire design for the ICT study
3.4.1.1 Content and description of the questionnaire
3.4.2 Sample size
3.4.3 Pilot study
3.4.4 Data collection, coding and capturing
3.5 Conclusion
31
31
31
31
31
31
32
32
32
32
33
33
33
33
1
2009
Chapter 4
Research findings: ICT study
4.1 Introduction
4.2 The study
4.3 The sample
4.3.1 Gender
4.3.2 Racial distribution
4.3.3 Age distribution
4.3.4 From where does the business operate?
4.3.5 How long has the business been operating?
4.3.6 Urban/rural split
4.3.7 Education levels
4.3.8 Monthly turnover
4.4 Do you have and use a computer in your business?
4.5 Use of various ICTs for business purposes
4.5.1 Gender
4.5.2 Race
4.5.3 Age
4.5.4 Educational level of SMME owners
4.6 Business characteristics
4.6.1 Urban/rural
4.6.2 For how long has the business been operating?
4.6.3 Formality of the business
4.7 ICT characteristics
4.7.1 Business skills of owner/managers
4.7.2 Have you ever been taught how to use a computer?
4.7.2.1 Where were you taught?
4.7.3 Why don’t you use a computer in your business?
4.7.4 Skills with respect to various ICT devices
4.7.5 The use of technology in the processing of day-to-day operations
4.7.5.1 What methods do you regularly use for placing orders with suppliers?
4.7.5.2 What methods do you regularly use for receiving payments from customers or making payments to suppliers?
4.7.5.3 What is your primary method of keeping control of your stock levels?
4.7.6 The effect of education on the use of technology
in the processing of day-to-day operations
4.7.6.1 What methods do you regularly use for receiving payments from customers or making payments to suppliers?
4.8 Access to the Internet
4.8.1 For what purpose do businesses use the Internet?
4.9 Computer sophistication
4.9.1 No computer or Internet access
4.9.2 Internet access
4.9.3 Where is the Internet accessed?
4.9.4 Local and wide area networks
4.9.5 Email and websites
4.10Software used in the business
4.10.1Word processing programme
4.10.2Spreadsheets
4.10.3Presentation software
4.10.4Accounting software
4.10.5Customer management software
2
35
37
37
37
37
38
38
38
39
39
39
39
40
40
41
42
43
44
44
45
46
47
47
48
49
49
50
52
52
52
53
54
54
55
58
58
60
60
61
61
62
62
63
63
64
65
65
4.10.6 Payroll software
4.10.7 Human resource software
4.11 Number and type of computers
4.11.1Desktop computers and laptops
4.11.2Smartphones and PDAs as part of the computing environment
4.12 Business management and computer programme requirements
4.12.1Management of business activities
4.12.2Computer programme requirements
4.12.3Internet or local computer-based solution
4.13 Enterprise Resource Planning (ERP) software
4.14 Conclusion
66
66
67
67
68
68
68
70
72
73
77
Chapter 5
Conclusions and Recommendations
79
References
Appendix1
Appendix2 : Pilot Study
83
88
93
List of Figures
Figure 1: 12 pillars of competitveness
Figure 2: Progression of ICT adoption
Figure 3: Monthly income of the sample
Figure 4: Which of the following have you used for business purposes?
Figure 5: Do you have and use a computer in your business?
Figure 6: Age and has and uses a computer in the business
Figure 7: Which of the following have you used for business purposes, with
education?
Figure 8: Which of the following have you used for business purposes, with
urban/rural split?
Figure 9: Where does the business operate from, and has and uses a computer in the business?
Figure 10: Competency with respect to business skills Figure 11: Perceived IT skills and education
Figure 12: Rate your skills on the following technological devices, by gender
Figure 13: Internet access and educational level
Figure 14: What do you use the Internet for, by business size?
Figure 15: Number of desktop or laptop computers
Figure 16: Are you familiar with the term Enterprise Resource Planning
software?
21
24
38
40
41
41
42
43
45
46
47
50
56
57
67
73
List of Tables
Table 1: Demand and supply factors limiting ICT usage
Table 2: Identifying characteristics of businesses at varying levels of sophistication
Table 3: SMME characteristics influencing ICT adoption
Table 4: Racial distribution of sample
Table 5: Length of business operation distribution of sample
Table 6: Educational level of sample
Table 7: Age and where did you learn to use a computer?
Table 8: Rate your skill in using a Smartphone, with urban/rural split
Table 9: Have you ever been taught to use a computer? Table 10: Computer education
28
36
37
37
38
39
43
45
48
49
3
2009
Table 11: Why don’t you use a computer in your business?
Table 12: Rate your skills on the following technological devices Table 13: What methods do you regularly use for placing orders with suppliers, with urban/rural split?
Table 14: What methods do you regularly use for receiving payments from customers, with urban/rural split
Table 15: What methods do you regularly use for making payments to suppliers, with urban/rural split?
Table 16: What is your primary method of keeping control of your stock levels, with urban/rural split?
Table 17: What methods do you regularly use for receiving payments from customers, with education?
Table 18: What methods do you regularly use for making payments to suppliers, with education?
Table 19: Where do you regularly access the Internet?
Table 20: Internet access and urban/rural split
Table 21: For what purpose do businesses use the Internet?
Table 22: EFT banking by business size
Table 23: Business size and no computer or Internet access
Table 24: Do you have access to the Internet, by business size?
Table 25: Computing environment: LAN, WAN and VPN
Table 26: Computing environment: Email and website
Table 27: Email access
Table 28: For what do you use the word processing software?
Table 29: For what do you use the spreadsheet software?
Table 30: Types of presentation software used
Table 31: For what do you use the presentation software?
Table 32: Types of accounting software used
Table 33: Types of payroll software used
Table 34: Businesses application of human resources software
Table 35: Number of Smartphones, pocket PCs or PDAs able to run programmes
Table 36: Ability to cope with respect to the management of various business activities
Table 37: Computer programme needs with respect to the management of various business activities
Table 38: Ability to cope with business activities and computer programme requirement
Table 39: Type of computer programme required to address the management of various business activities
Table 40: How much would you pay for this programme?
Table 41: General comments relating to the need for better combinations or integration of information
Table 42: Specific integrated computer requirements provided by respondents
4
49
52
52
53
53
53
54
54
56
57
58
58
60
61
61
62
62
63
64
64
64
65
66
67
68
68
70
72
72
72
74
75
ABSTRACT
According to Berry et al (2002:7), SMMEs play an
important role in the economy of every country and the
growth of the SMME sector has a direct impact on the
national GDP as almost all SMMEs are domestic firms
(Kotelnikov 2007). Small, medium and micro sized
enterprises (SMMEs) encompass a broad range of
firms, from established traditional family businesses
down to the survivalist, self-employed, informal micro
enterprises. Many lack the skills, support, finance and
other resources necessary to sustain their businesses.
This low rate of sustainability is particularly prevalent
in developing countries. In developed economies,
the rapid spread of ICT has lead to a decrease in the
price of communication, allowing markets across
the world to become more connected. Business Wire
quotes the SME Survey 2007 that indicates that
there is a statistically significant correlation between
using resources such as ICT and the likelihood of the
business being highly competitive. The survey argues
that business owners or managers that make use of
resources such as ICT allow their business a better
opportunity to be competitive. In the developing world,
to compete successfully, SMMEs will need to use
more sophisticated information and communication
technologies (ICT) to access timeous and accurate
information regarding the supply of and demand for
products and services in various markets. Businesses
require information relating to current market
conditions; market opportunities; sales prospects;
where and how to improve their technology and skills;
where and how to access finance and how to access
appropriate business development services. The
Internet is an important source of business information
as well as a source of potential business ideas.
Access to technology is important both in accessing
business information prior to starting a business and
in allowing existing businesses to remain competitive
in the market.
This study of SMMEs in South Africa explores the
adoption of ICT by lower-end SMMEs. The sample
of 1 914 potential respondents was drawn from client
lists provided by the Small Enterprise Development
Agency (SEDA). Respondents were selected using
simple random sampling and data was collected
using face-to-face structured interviews. The 1 914
responses were checked and 107 were rejected due to
incomplete information. The coded responses from the
questionnaires were analysed, quantitatively, using
SPSS software. The study develops an understanding
of the characteristics, both personal and businessrelated, that could be seen as having a predictive
value with respect to ICT usage, as well as the primary
functions of ICT usage in lower-end SMMEs. Then
findings indicate that there is a significant digital divide
even within the lower-end SMME sector in South Africa,
and business size, whether the business is urban or
rural based and the educational levels of the owner
were identified as key characteristics that determine
ICT usage. Male business owners are more likely to
use a greater variety of ICT devices and to consider
themselves more skilled at using the various devices
than are female business owners. At the lower-end
spectrum of SMMEs, ICT usage is dominated by cell
phone usage. However, given the lack of proficiency
with respect to smartphone usage, it is likely that cell
phones are still being used predominantly for SMS
and voice functions. The telephone or paper-based
communication i.e. fax machines are still significantly
more popular as a method of communicating with
suppliers and customers. Rural businesses make
significantly less use of a computer or the Internet in
their businesses. They also are far less positive with
respect to their belief in their own business and ICTrelated skills. A large percentage of the SMMEs do
not use the Internet for business purposes. Microsoft
Word and Excel are the most popular software
packages used by businesses. There seems to be a
need for integrated computer programmes that are
tailored to the small business market, affordable and
easily accessible.
The findings from this report suggest that there is a
need for both private and government intervention
through the initiation of courses or information
road-shows aimed at increasing the awareness of
the benefits linked to greater use of technology.
These courses or information road-shows should
also focus on how to use more sophisticated cell
phone technology options (e.g. Internet access) more
5
2009
effectively (as opposed to merely using cell phone for
phone calls and SMS). ICT training must be integrated
into general business training courses so that the way
in which ICT complements business practices can
be demonstrated. If ICT solutions are to be effective,
they need to be integrated into existing business
processes and form part of the longer-term strategy
of the business. ICT packages aimed specifically at
small businesses need to be promoted, as generic
packages, often created with large organisations in
mind, are not suitable for small business needs. These
packages need to be affordable and easily accessible.
A number of studies have highlighted the poor
quality of the educational standards in South Africa.
In order for South Africa to become more effective
as an efficiency-driven country, improvemenst in
the quality of education at many schools in South
Africa need to be addressed with some urgency. An
improvement in the quality of schooling is also critical
to ensure that South Africa has sufficient employees
and employers that are able to be effective in the
knowledge-based global economy. Liberalisation of
the telecommunications sector to allow for increased
competition is vital to assist in bringing down the cost
of telecommunication.
ACKNOWLEDGEMENTS
This study was made possible owing to the assistance
received from many individuals. We would like to
thank all those individuals whose contributions added
value to, and who assisted in the completion of this
report.
We would like to thank the individuals at the UCT
Centre for Innovation and Entrepreneurship at the
Graduate School of Business for their comments
and suggestions, without whose help and guidance
we would not have achieved the outcome. The
individuals are: Sithembiso Ntombela for checking the
questionnaires, Nicolette Laubscher for capturing the
data, Zakariya Mohammed for the statistical analysis
and Penny Kew for editing the document.
We would like to thank David Makakola, Ronnie
Mmotlane and Tlalane Teffo of SEDA Head Office
for their valuable contributions, assistance and
motivation.
We would also like to thank the SEDA provincial
managers, co-ordinators and interviewers in all of
the provinces for collecting the information for our
database. Our gratitude goes out to the respondents
who gave of their time to participate in the surveys.
Without their valuable input, this research would not
have been possible.
We would like to thank the Small Business Enterprise
Agency (SEDA) for sponsoring this research, thereby
making it possible to collect data. We trust that the
results of the research will be beneficial in developing
a better understanding both of ICT usage in lower-end
SMMEs and where business support agencies can
best offer ICT support.
6
7
2009
CHAPTER 1
The SMME sector and
its relevance to the
South African economy
1.1 Introduction
Economic growth rates (based on historical economic
growth rates) in Africa have been relatively high over
the past few years (Blanke 2007). However, they are
still not sufficient to meet the Millennium Development
Goal of halving poverty by 2015. Blanke (2007) also
argues that Africa’s growth has been driven largely by
external circumstances and interventions such as high
commodity prices, favourable international economic
environment and debt relief. In order to be sustainable,
growth needs to be based on improvements in domestic
conditions and not exogenous circumstances such as
those cited previously. He indicates that in order for
growth rates to be sustainable, African countries will
have to become more competitive.
The Global Competitiveness Report (2008) specifically
mentions health, primary education and the basic
literacy of a population as critical factors that
influence the competitiveness of a nation. Health and
primary education are identified as being particularly
important for increasing productivity for countries at
earlier stages of development (GCR 2008:15). While
South Africa as a whole is not considered to be a
country in the early stages of development, it is a
dual-economy with a number of provinces that are
significantly less developed. Within these provinces,
as well as in rural areas, health and primary education
will be of particular importance as factors affecting
the competitiveness of these areas.
The Global Competitiveness Report (2008:15) also
indicates the importance of the basic literacy of the
population in influencing the competitiveness of a
nation. According to the report, a workforce that has
received little or no formal education will only be
able to perform basic, predominantly manual jobs.
8
Given the effects of rapidly advancing technology,
these individuals will find it increasingly difficult to
move into work arenas that employ more advanced
production processes and will become increasingly
excluded from the global workforce. Toure (2007), in
the Africa Competitiveness Report 2007, argues that
for a country to become and remain competitive it will
require the implementation of long-term strategies
that enable the economy to become more efficient,
to improve skill levels and the use of technology, and
to move into the production of high-value products.
National strategies to improve competitiveness should
include a clear strategy on information communication
technology (ICT). As Toure (2007) indicates, ICT
provides fast, efficient communication which allows
the economy to become more efficient. In addition,
ICT products themselves are high-value products. He
highlights the dual role of ICT, both as a generator of
high-value products which could become a key sector
in the economy as well as a means of improving the
competitiveness of the country. Particularly in terms
of the latter role, the ability to use ICT is becoming a
necessity in almost all spheres of economic activity.
Small, micro and medium enterprises (SMMEs) are
seen as important in their contribution to economic
growth, employment and GDP (Frempong 2007).
Current research indicates that this contribution is as
important in developing countries as in developed
countries. According to the Ntsika Annual Report
(2000) the SMME sector represents 97.5% of the total
number of firms in South Africa, contributes 34.8%
of the GDP, employs 55% of the labour force and
contributes approximately 42% to total remuneration.
Given the important role the SMME sector is playing in
South Africa, combined with the inability of the formal
sector to absorb the growing labour market, the
sustainability and effectiveness of the SMME sector
is a pressing concern facing the country. The effective
development of the SMME sector is thus of paramount
importance to South Africa. However, as the world
becomes more knowledge-driven, the implementation
of effective information communications technology
(ICT) in the SMME sector needs to be reviewed. The
SMME sector needs to be encouraged to make use of
ICT that improves productivity, reduces administration
and other costs and improves the capacity to market
and sell products and services. It is within this
framework that this study aims to develop a better
understanding of ICT usage in the SMME sector.
1.2 What is the SMME sector?
According to Berry and von Bottnitz (2002:7) SMMEs
encompass a broad range of firms, from established
traditional family businesses employing over a
hundred people (medium-sized enterprises), down
to the survivalist self-employed from the poorest
layers of the population (informal micro enterprises).
These enterprises (SMMEs) play an important role
in the economy of every country; according to
Kotelnikov (2007) the growth of the SMME sector
has a direct impact on the national GDP as almost
all SMMEs are domestic firms. Many SMMEs, and
particularly those enterprises found in the lower
end of the SMME sector, often lack the skills,
support, finance and other resources necessary
to sustain their businesses. A low rate of SMME
sustainability is particularly prevalent in developing
countries, where the challenges linked to conducting
business are different from and more significant
than in developed countries. (Adam et al.,2009)
The SME or SMME market is difficult to characterise as
it consists of a large number of enterprises of differing
sizes (in terms of number of employees, turnover, and
level of formality) as well as including enterprises
from a wide range of sectors. Comparative research
is further complicated by the enormous variations in
the definition of SMMEs across different countries.
This study will use the definitions adopted by the
Integrated Small Business Development Strategy
South Africa, namely:
• Micro enterprises
These are the smallest enterprises in the small
business sector and can be found in both the formal
and informal economies. Because of their size, they
do not usually qualify for VAT registration. They
have informal accounting and operation procedures.
Typically, their compliance with labour legislation is
weak. The vast majority of micro enterprises is owned
and managed by black African women and men.
Most metal workers, furniture makers, spaza shops,
home-based enterprises and mini-taxis belong to
the micro-enterprise category. However, there may
also be artisans and professionals operating micro
enterprises, although these are a small proportion of
enterprises in this class size.
Sometimes, the term ‘survivalist’ is used when
referring to enterprises within this class. These
enterprises
generate
income that is less than
the minimum income
The vast majority of
standard or the poverty
micro enterprises are
line. Economic activity
is directed at providing
owned and managed
minimal means to keep
by black African
the unemployed and
women and men.
their families alive.There
are no paid employees
and asset value is
negligible. Examples of survivalist enterprises include
hawkers, vendors and subsistence farmers.
The term “very small enterprise” has been used
in the National Small Business Act (1996) to refer
to enterprises with less than ten paid employees
(except for the mining, electricity, manufacturing and
construction sectors, where the limit is 20 employees).
These enterprises operate in the formal economy and
have access to modern technology.
In employment terms, the Integrated Small Business
Development Strategy considers the class size known
as micro enterprises to cover self-employed with no
employees up to an enterprise with ten workers.
• Small enterprise
Small enterprises tend to be more established than
micro enterprises and their business practices tend
to be more complex. Most often the enterprise has
outgrown direct supervision by the entrepreneur, and
9
2009
has developed a secondary co-ordinating mechanism
distinguishing it from a micro enterprise. Growth into
a medium-scale enterprise requires an accumulation
of resources as well as the appropriate incentives for
enterprise expansion. There are fewer black people
who own and manage small enterprises, compared
with those in micro enterprises. In employment
terms, a small enterprise employs from 11 to 50 paid
workers.
• Medium-sized enterprises
The maximum number of employees is 100, except
for the mining, electricity, manufacturing and
construction sectors where it is 200 employees.
Although these enterprises are still owner-manager
controlled, the ownership and management structure
is more complex. Often, decentralisation of power to
an additional management layer, division of labour,
and functional differentiation are characteristics
that help distinguish between small and mediumsized enterprises. The separation of ownership and
management is the natural barrier between medium
and large enterprises.
1.3 Development of SMME policy in South Africa
Since 1994, the development of the SMME sector
has been an important focus for the South African
government. The SMME sector had been identified as
a vehicle to improve employment and living standards
of individuals who have been denied access to
opportunity under the apartheid government. The
apartheid policies in South Africa had a fundamental
impact on the educational levels and skills
development within the townships. The policies
inhibited the access to business opportunities, and
the ad hoc development of townships did not provide
adequate infrastructure to encourage small business
development. According to the White paper on the
National Strategy for Development and Promotion
of Small Business (1995), apartheid policies have
inhibited the development of African businesses in a
number of ways. These include the following: Bantu
Education did not provide the correct technical and
professional skills; the homelands did not provide
access to dynamic business environments; and the
Group Areas Act of 1950 limited markets available
to black businesses and increased the cost of doing
business. A further key constraint is that the inability
to own property meant that black business owners did
not have assets available to use as collateral for loans.
It is important that the policies and strategies aimed
at the SMME sector ensure that businesses that have
been previously disadvantaged are given adequate
support. This will ensure that the SMME sector is able
to fulfil its potential in South Africa.
Since 1994 much of the focus, both from the
government and in research, has been on the SMME
sector and the necessity of directing initiatives towards
skills development. Although the SMME sector has
been the focus of a number of research papers and
has featured high in the government’s thinking and
policy development, it is unclear whether this has led
to a sufficiently targeted and well-administered SMME
service sector. According to the Economic Policy
document, Provincial Government of Gauteng (1997),
it is accepted that in order for the SMME sector to
achieve the objectives associated with it, government
10
intervention will be required in the short and medium
term to facilitate this contribution. The document
also acknowledges that a crucial element in the
development of the SMME sector is the creation and
effective management of SMME support agencies and
support services. The awareness of the importance of
support programmes does not, however, guarantee
the effective design of support programmes (Thomas,
1998).
The National Strategy for the Development and
Promotion of Small Businesses provided the following
key objectives with respect to the development of
small business:
• The creation of an enabling environment for small
institutions came under criticism for not delivering the
promised services. In 2005, to combat concerns raised
regarding the effectiveness of the two governmentowned agencies, Ntsika Enterprise Promotion and the
National Co-ordinating Office of the Manufacturing
Advice Centres (Namac) merged to form the Small
Enterprise Development Agency (Seda). In 2008, to
address concerns relating to inefficiencies and lack of
adequate support provided to their constituents, the
Umsobomvu Youth Fund (UYF) and the National Youth
Commission were merged to create the National Youth
Development Agency (NYDA). The new National Youth
Development Agency (NYDA) is aimed at addressing
problems faced by the youth in South Africa.
business
The Integrated Small Business Development Strategy
disempowerment of black business
development in South Africa through three new
initiatives, namely:
• Addressing the legacy of apartheid-based (ISBDS) attempted to co-ordinate small business
• The support and advancement of women in all
business sectors
• Strengthening the cohesion between small
• establishing an Interdepartmental Committee on
businesses
Preparing small businesses to compete within the
competitive international economy
Small Business to ensure that all government
departments (national and provincial) work
together;
establishing the National Small Business Advisory
Council to advise the government on the small
business sector; and
establishing the Small Business Development
Agency which merged the previous small
enterprise
development
agencies
Ntsika
Enterprise Promotion Agency, NAMAC Trust and
the Community Public Private Partnerships (CPPP)
into a single small enterprise support agency.
•
A number of organisations were set up to implement
this strategy. These organisations included the
National Small Business Council, provincial SMME
desks and local business service centres. Due to a
lack of commitment, insufficient clarity of policy and
alleged corruption and nepotism, these structures did
not offer the levels of support that had been intended.
The National Small Business Council was terminated
and government departments such as the DTI and
organisations such as Ntsika Promotion Agency and
Khula Enterprise Finance (which were funded by the
government) were given the mandate to address
the challenges facing the SMME sector. In an article
in Business Report (2004), Andile Ntingi explains
that Namac was set up to provide advisory services
to the manufacturing segment of the SMME sector.
Ntsika was established to render support services
such as counselling, advice and technical support,
skills training, tender advice, access to technology
and a mentorship programme. However, the two
•
•
The work of SEDA is carried out in line with the
Department of Trade and Industry’s Integrated Small
Enterprise Development Strategy, which aims to
achieve the following goals:
• Strengthen support for SMMEs’ access to finance.
• Create an enabling regulatory environment.
• Expand market opportunities for specific
categories of small enterprises.
• Localise small business support through a grid of
SEDA-coordinated information and advice access
points.
11
2009
• Initiate
Inadequate funding to start a business has been well
documented in SMMEs, with research indicating that
many SMMEs raise start-up capital from their own
or family savings rather than approaching formal
institutions or agencies. However, SMMEs often
over-report the lack of finance as a key constraint
and underestimate other factors such as personal
business skills and training. Research has shown that
the access to and provision of finance is a constraint
within the SMME sector. However, other constraints
such as lack of infrastructure, crime, lack of market
opportunities and the lack of adequate management
and financial training may need to be addressed by the
business owner before the provision of and access to
capital can be seen as the key constraining factor.
that are mathematical in nature. Research by the
Centre for Development and Enterprise (CDE) in
2004 warned that the failure to improve maths and
science education was probably the most significant
obstacle to South Africa’s development. A particular
concern was the low number of African candidates
matriculating with higher grade mathematics. Higher
grade maths provides a crucial foundation for entry
into, as well as success in, many tertiary courses. A
review of South Africa’s performance in the 2003
Trends in International Mathematics and Science
Study (TIMSS) survey is of particular significance. This
international achievement test assesses mathematics
and science knowledge and skills, based on the school
curriculum for Grade 4 and Grade 8 learners. Perhaps
the most disturbing finding is that in all of these
surveys in which South Africa has participated, it has
been ranked last. In 1995, South Africa was the only
African country to participate. In 1999, 38 countries
participated, including a further two African countries
- Morocco and Tunisia. In 2003, 50 countries were
surveyed including two additional African countries,
namely Botswana and Ghana. Not only did these
African countries perform better than South Africa,
but there was evidence that other African countries
would also have performed better than South Africa
had they been included. The importance of developing
mathematically-based skills is further reinforced by a
recent report on South Africa’s world competitiveness
ranking (Business Day Management Review of May
2007) which revealed a 12-place plummet in South
Africa’s ranking, from 38th position to 50th out of 55
countries. In its analysis of business efficiency, the
report places South Africa last in terms of availability
of skilled labour, 52nd in terms of availability of
financial skills and 51st with respect to availability of
competent senior managers. Schooling in many cases
does not seem to prepare students for further training
in that many students leave school without becoming
functionally literate.
• Human capital constraints
• Market demand
Many researchers see the development of our
economy as well as our human capital as intimately
linked to the development of certain kinds of skills
Many businesses in the SMME sector work from
home which limits their access to markets, with many
of the home-based businesses selling only to the
•
a national entrepreneurship drive
and expand education and training for small
businesses.
Co-fund minimum business infrastructure facilities
in local authority areas across the country.
1.4 Constraints on SMME
development
SMMEs in African countries face similar problems
to SMMEs in other developing countries (Wolf
2001). These include limited access to finance, poor
business skills, limited access to technology, crime,
low levels of education or questionable quality of
education, inefficient legal systems, remote locations
and lack of economies of scale in production. Wolf
argues that poor information and communication
management is an increasingly important constraint
in SMME development. In a technologically-orientated
global community, these constraints could become
increasingly problematic.
• Financial constraints
12
surrounding neighbourhood. Duncombe and Heeks
(2001) indicate that many small enterprises sell only
to the final consumer and argue that enterprises
within a supply chain have better growth potential and
generally employ more people. Developing economies
are often characterised by small pockets of industry
serving localised markets. This is often due to poor
infrastructure which isolates markets (Wolf 2001).
• Information technology
According to Maier and Nair-Reichert (2007),
communities are often initially suspicious of ICT usage
within business. In order for ICT to become accepted
as an alternative method for processing various
business transactions,
businesses will need to
develop a sufficiently
Women remain
strong trust relationship
with their suppliers and
under represented
customers. According
in most forms of
to the United Nations
report (2004), brand
economic activity.
names are extremely
important to customers
when buying over the
Internet. Given that it is extremely expensive and
time-consuming to develop a well-known brand
name, SMMEs generally do not have the resources to
develop recognisable brand names. Although setting
up a website can be relatively simple and achievable
for SMMEs, promoting and developing a reputable
business that can generate significant on-line sales is
considerably more expensive and often beyond the
human or financial capacity of SMMEs. An additional
constraint to Internet business faced by SMMEs is that
they lack the logistical capacity to be able to deliver
products to customers. Shipping and other transport
tends to be more affordable if large volumes are
transported. This further disadvantages SMMEs that
often service smaller volume niche-businesses.
in most forms of economic activity. Research
has indicated that this is also the case in
entrepreneurial concerns. According to the 2006
Global Entrepreneurship Monitor (GEM), men in South
Africa are still more likely to start a business than
women. Although many of the constraints facing
women in their attempts to start small business
concerns are similar to those facing all small
business concerns, research has shown that women
face greater difficulties in becoming entrepreneurial.
These obstacles include: higher levels of domestic
responsibility; lower levels of education (particularly
in developing countries); lack of female role models
in the business sector; fewer business-orientated
networks in their communities; lack of capital or
assets; lower status in society and a societallyinduced lack of assertiveness and confidence in
their ability to succeed in business.
• Gender
Maier and Nair-Reichert (2007:47) highlight specific
business constraints facing women running micro
businesses, namely:
• Delays in receiving payments for work already
completed. They ascribe this to the greater
difficulties women have of travelling alone or long
distances to collect payments.
• Bureaucratic hindrances, which occur when male
government officials are resentful of successful
women and delay the processing of applications
or making of payments.
• Societal pressure from both male and female
members of communities can occur where there
is a concern that the entrepreneurial endeavours
started by women could change the existing
power-base within the community.
• Difficulties arise in managing both a family and a
business enterprise.
• The increased economic independence that
successful women can ascribe to should their
business endeavours prove to be successful can
cause conflict. This was found to be particularly
prevalent in areas where only men had traditionally
had access to economic independence.
Women form over half the working-age population
in most countries, but they remain underrepresented
Maier and Nair-Reichert (2007:48) also highlight
additional barriers facing women with respect to the
13
2009
effective use of ICT, namely:
• A lack of ICT skills, as well as the ability to use the
Internet effectively
• The language of the Internet i.e. English
• Lack of start-up capital which limits the amount of
funds that can be invested in ICT
• Poor business skills, particularly logistical skills
which would enable them to pack and ship
their products. This decreases their ability to
successfully use e-commerce to increase the
scope of their market
• A lack of knowledge regarding trade and customs
information
• The inability to deal with Internet payments both
from a technical and regulatory point of view
• Difficulties in improving customer confidence with
respect to the quality of the goods they are selling
over the Internet
currently operate. Toure (2007) quotes Waverman
et al. (2005), who indicate that the impact of mobile
phones on economic growth is twice as important
in developing countries as in developed countries
and that the impact on economic growth is likely to
increase as more and more people become connected.
Research has shown that in developed economies,
and increasingly so in developing economies, the
rapid spread of ICT has lead to a decrease in the
price of communication, which is allowing markets
across the world to become more connected. The
global economy is currently characterised by an
increased level of domestic, regional and international
competition. In order to compete successfully
SMMEs will need to be able to adapt to this rapidly
changing environment, and their ability to adapt is
becoming increasingly dependent on the use of more
sophisticated technology.
While it is important to note that none of the constraints
mentioned above are constraints faced exclusively
by women entrepreneurs, it was the opinion of the
authors that these constraints are exacerbated in the
case of women entrepreneurs. They justify their belief
by highlighting the inferior social position that women
in many developing countries face.
Maier and Nair-Reichert (2007:45) conclude that there
are numerous advantages for SMMEs that embrace
the use of ICT. These include the following:
1.5 Information communication
technology (ICT) and SMME development
Toure (2007) indicates in the Africa Competitiveness
Report 2007 that research has struggled to prove
that the adoption of ICT causes an improvement in
productivity and economic growth. He argues that
there are two reasons why this link has not been
consistently proved in the literature. Firstly, research
has focused mainly on the growth in the number of
computers and fixed lines and in so doing has largely
ignored the networking effect of connecting ICT
devices. He also reasons that many of the productivity
and economic growth figures quoted in current
research relate to a period during which the speed of
ICT was considerably less than the speed at which ICTs
14
• ICT allows firms in developing countries to
•
•
•
•
become more competitive in local, national and
international economies.
It reduces the uncertainty of doing business
in various markets. It allows for the efficient
collection of market information such as prices
and quantities.
It allows businesses access to more profitable
markets.
It allows rural producers to access information
regarding prices and quantities and in so doing to
bypass or better negotiate with middlemen.
It allows for access to credit and other financing
information.
Molla (2005) takes a more cautious approach in that he
looks at studies that mention numerous advantages
of e-commerce for developing countries as well as
studies that question the tangible advantages that
flow from e-commerce. Advantages of e-commerce
can be summarised to include access to global
markets, improved linkages in supply chains, cost
savings, disintermediation and improving the
business’s competitive position. Studies that question
the advantages mentioned above argue that the
efficiency gains are overstated, as they overlook the
lack of core capabilities and infrastructural problems
faced by many SMMEs in developing countries.
Molla (2005:5) in a study of SMMEs in South
Africa categorises a business’s ICT capabilities as
informational, interactive, transactional or integrated
capabilities. Informational capability refers to using a
website to publish basic information about the product
or service offering of a business whereas interactive
capability refers to the ability to use a website to allow
customers to find product information, make queries
and place orders. Transactional capability refers
to the ability to offer on-line purchases and sales,
including on-line payments, and integrated capability
indicates that the e-commerce system is integrated
with customers, suppliers and other back-office
systems. He concludes that although businesses in
developed economies showed significant benefits
from e-commerce, this was not the case in the South
African study. This could be explained by the fact that
the majority of the businesses in the South African
study were categorised as having informational or
interactive capabilities and that the real benefits from
e-commerce would only be realised when businesses
had transactional or integrated capabilities. In order
for businesses to lever benefits from e-commerce,
they would need to ensure that the internal
capabilities of their organisations were at a sufficient
level of e-readiness to be able to benefit from the
applications.
1.6 Development of SMME ICT
policy in South Africa
The
key
legislation
governing
information
communication technology in South Africa is the
Electronic
Communications
and
Transactions
Act (2002), the Telecommunications Act 1996
(and amendments) and the Convergence Bill. The
Electronic Communications and Transactions Act
(2002) regulates electronic communication and
transactions. It provides for the development of
a national e-strategy, the promotion of universal
access to and the use of electronic communications
by SMMEs. The Department of Communication
has the responsibility of assisting in liberalising the
telecommunications sector by providing underserviced areas with licences. The licensees are
SMMEs that provide telecommunication services in
areas designated as under-serviced. According to
Morris (2006:8), South Africa has a relatively wellestablished telecommunications infrastructure but an
outdated ICT policy that is currently under threat by
new market entrants and technologies. Although there
is some movement towards reforming the ICT policy to
accommodate new market entrants and technologies,
there have as yet been no major changes and South
Africa’s ICT policy still favours the Telkom monopoly.
The high cost of telecommunications, owing to
infrastructure limitations as well as a lack of effective
liberalisation of the telecommunications sector, is a
key barrier to SMME-driven economic growth.
Konde, (2007), indicates that countries that develop
their own policies seem to have more success in
Africa. These countries focus on the requirements for
an effective information society i.e. human resources,
infrastructure, effective government, ICT financing
and legal requirements. Policies that emphasize
needs, on the other hand, see the poor as victims of
the digital divide and contend that providing the poor
with the necessary technology will solve the problem.
He argues that this type of policy is rarely successful in
Africa, as it does not acknowledge the gaps in human
capital and infrastructure that need to be reviewed
prior to the provision of technology.
He justifies why ‘needs-based’ policies are often
less successful than ‘opportunitybased’ policies by
highlighting that ‘needs-based’ policies are often seen
as being an end in themselves, whereas ‘opportunitybased’ policies create an environment that could lead
to future development. Konde (2007:38) indicates that
a national ICT policy “should provide the basic building
blocks and streamline its legal and regulatory policies
to stimulate learning, creativity and innovation”.
He feels that the regulatory environment in most of
Africa is still not meeting best practice benchmarks
due to the lack of skills to assess the economic and
15
2009
social impact of policies, the lack of clear objectives
guiding policy and the lack of consistent, transparent
guidelines in the ICT industry.
1.7 The problem statement
According to Berry et al (2002:7), SMMEs play an
important role in the economy of every country
and the growth of the SMME sector has a direct
impact on the national GDP as almost all SMMEs
are domestic firms (Kotelnikov 2007). Business Wire
quotes the SME Survey 2007 that indicates that
there is a statistically significant correlation between
using resources such as ICT and the likelihood of
the business being highly competitive. The survey
argues that business owners or managers that make
use of resources such as ICT allow their business a
better opportunity to be competitive. However, many
SMMEs - and particularly those enterprises found in
the lower end of the SMME sector - lack the basic
skills, support, finance and other resources necessary
to sustain their businesses, leading to a low rate of
sustainability. A low rate of SMME sustainability is
particularly prevalent in developing countries, where
the challenges linked to conducting business are
different from and more significant than those prevalent
in developed countries. (Adam et al.,2009) In order to
afford as many SMMEs as possible the opportunity to
become more competitive, it is important to develop
an understanding both of what ICT is used by SMMEs
and what variables influence the adoption of ICT.
1.8 The purpose of the study
The purpose of this study is to develop an
understanding of the variables that are relevant in
explaining the adoption rates of computers and other
more sophisticated ICT by small business entities. The
study will also develop some understanding of what
ICT is used by lower-end SMMEs and to what extent
ICT is used in the management of various operational
areas within the business.
1.9 Scope of the study
The study does not intend to identify links between
the use of ICT and the profitability and sustainability
of SMMEs. It is also beyond the scope of this study to
determine why certain SMMEs make no use of any
form of ICT other than a cell phone.
1.10 Plan of study
In Chapter 2 the relevant literature will be reviewed,
with particular emphasis on developing countries. The
reasons why SMMEs adopt ICT as well as the difficulties
inherent in ICT adoption will be focused on. Chapter
3 outlines the research methodology and provides
an understanding of the process used in completing
the ICT study. The findings of the study are analysed
in Chapter 4. Finally, Chapter 5 suggests possible
recommendations and ideas for further research
within the area of ICT usage in lower-end SMMEs.
16
17
2009
CHAPTER 2
INFORMATION
COMMUNICATION
TECHNOLOGY AND
SMMEs IN DEVELOPING
ECONOMIES
2.1 Introduction
In the 21st century, information communication
technology is seen as an essential tool for businesses,
helping the businesses to remain competitive in
domestic as well as international markets. The Global
Competitiveness Report 2008 - 2009 (Dutta and Mia,
2007) regards connectivity as a key component of
public infrastructure, and high bandwidth is seen as
becoming as important a public utility as drinking water
(Dutta and Mia, 2007:ix). The report also indicates the
importance of narrowing not only the digital divide
between developed and developing nations, but
also the digital divide between urban and rural areas
within countries. Sahlfeld (2007), argues that there
is no indication that the benefits of ICT experienced
by the developed world, namely reduced business
costs and increased access to information, would
not also accrue to the developing world. Of particular
importance to businesses in the developing world
would be access to timeous and accurate information
regarding the supply of and demand for products and
services in various markets.
Although access to ICT is generally regarded as
desirable, a number of authors have sounded a
warning regarding the implementation of ICT policies
in developing economies. According to Weiner and
Rumiany (2007), the implementation of ICT in the
developing world is often inhibited because the
infrastructure, human capital development and
financial resources that are necessary to implement
ICT effectively are either absent or of a poor quality.
18
He argues that ICT policies adopted in developing
countries have the ability to increase (rather than
decrease) the digital divide within countries, and in so
doing make it even more difficult for businesses in rural
areas to compete. He justifies this point by arguing
that when new technology is introduced in developing
countries, this technology is made available in areas
that have the required infrastructure and market.
New technology is therefore introduced in urban
hubs, which become more competitive. With the rapid
advances occurring in technology there is a growing
fear that rural areas, which are already hampered by
large distances from markets and plagued with poorer
quality infrastructure, will be further disadvantaged
by their lack of connectivity.
Wolf (2001) argues that ICT may prove a doubleedged sword for rural businesses. The explosion
of ICT technology can decrease the disadvantages
associated with rural areas through quick, cheap and
efficient communication and information. However,
the digital divide could further disadvantage rural
areas as more technologically advanced organisations
may be in a position to cannibalise local markets that
had been afforded some protection from external
competition by their distance from major markets.
2.2 Digital Divide
2.2.1 E-readiness
According to the Economist Intelligence Unit (2007:1),
e-readiness is “the state of play of a country’s
information and communications technology (ICT)
infrastructure and the ability of its consumers,
businesses and government to use ICT to their
benefit”. The Unit further explains e-readiness as being
derived from more than just the number of computers,
broadband connections and mobile phones in a
country. The ability of the population to make effective
use of the technology, as well as having a transparent
business and legal system supporting the use of ICT,
is of paramount importance. This is complemented by
the government’s role in encouraging the use of ICT.
The Economist Intelligence Unit (2007:2) describes the
effect that ICT has had on economies, noting that “the
digital networks and applications underpin not only how
organisations work and do business but increasingly
how people obtain goods and services and remain
connected with friends”. While this may describe how
organisations, consumers and citizens in urban areas
within South Africa transact and communicate, it is
unlikely that semi-rural and rural areas have either the
connectivity or infrastructural support to make this
digital economy a reality. According to the Economist
Intelligence Unit, basic connectivity is no longer seen
to be sufficient - connections need to be fast, secure
and affordable (2007:2). Given that large areas of
South Africa do not even have acceptable levels of
basic connectivity, the requirement for fast, affordable
connections is an added
challenge in ensuring
In sub-Saharan
that e-readiness, or lack
Africa, nine out of
thereof, does not become
further entrenched as
every ten users of
yet another obstacle
a telephone make
faced by small and rural
use of a mobile
businesses.
phone
Morris (2006) indicates
that relative to other developing countries, the majority
of African countries still have a comparatively low
level of e-readiness. Urban areas in countries such
as South Africa and Mauritius have a significantly
higher level of e-readiness when compared to
African countries in general. Current research
highlights a number of reasons why Africa still lags
behind the rest of the developing world, namely
inadequate
telecommunications
infrastructure,
high telecommunication costs, low literacy levels,
lack of IT skills and the lack of legal and regulatory
frameworks. Key challenges facing the continent in
its drive to become more technologically advanced
include: lowering the cost of Internet access and other
communication formats, universal access, broadband
access and relevant local content.
2.2.2 Digital divide
The digital divide refers to the inequalities in access
to ICT (Kelly and Biggs, 2007). The literature identifies
multiple divides, namely between developed/
developing countries, within countries (urban/rural),
linked to firm size (micro/small/medium/large),
and between men/women and youth/the elderly.
Kelly and Biggs (2007) argue that the main factor
causing this divide is wealth, both between and within
countries. Kelly and Biggs (2007:13), in agreement
with the Economic Intelligence Unit, argue that as the
world becomes more dependent on ICT, the digital
divide may come to be measured more in terms of the
quality of access rather than simply the quantity of
access to ICT.
Researchers such as Kelly and Biggs (2007) state that
mobile phones, particularly in developing countries,
could play an important role in reducing the digital
divide. In developing countries the number of mobile
phones rose from a mere 12 million in 1995 to over 1.15
billion in 2005 (Kelly and Biggs 2007:11), while over the
period 2000 - 2005 the African market grew twice as
fast as the global market. These statistics concur with
the Africa Competitiveness Report 2007, which found
that mobile phones overtook fixed lines in 2001 and by
2005 outnumbered fixed lines by nearly five to one.
The mobile phone ratio in sub-Saharan Africa is even
more strongly biased towards mobile telephony, with
9 out of every 10 users of a telephone making use of a
mobile phone (Toure 2007: 93). Prepaid subscriptions
have been identified as a major factor in the growth
in mobile phones, with 92% of African subscribers
using prepaid packages in 2005 (Toure 2007: 94). The
growth in mobile telephony has shifted the balance
between fixed line and mobile services. The increased
use of mobile phones has seen increased debate as to
whether mobile phones could be the key to allowing
more users to access the Internet without being reliant
on fixed line technology (Morris 2006). Jagan et al.
(2007), in a study in Nigeria, explored the actual impact
of mobile telephony amongst weavers. Research had
19
2009
2.2.3 Rural/urban digital divide
suggested that mobile telephony increased the speed
of and access to information and reduced the cost of
communication. Trading, when assisted by mobile
telephony, should therefore become quicker, cheaper
and less risky. As buyers can deal directly with suppliers
and customers, an additional advantage should be
that the influence of intermediaries in the supply
chain would be reduced. His study concluded that
there was in fact a positive impact on cost reduction
in that the mobile phone replaced some of the travel
requirements. When travelling was required, all the
participants had been contacted prior to the meeting to
confirm the time, place and availability of participants,
leading to greater efficiency. However, mobile phones
did not remove the need to see physical products
and a certain amount of travelling and meeting time
was still required to develop a trust relationship
between the parties. The evidence relating to the
influence intermediaries have on the supply chain
was inconclusive as, with the introduction of mobile
telephony, the influence was seen to both reduce and
increase. The influence depended primarily on the role
assumed by the intermediary in the new relationship.
20
A study by Van Hoorik and Mteewta (2008:1) of
Internet usage in rural Zambia identified the following
advantages linked to the rollout of telecommunications
and ICT: communication, both within and between
villages, would be encouraged; new employment
opportunities could be generated; and individuals
could access additional educational resources that
could help decrease the educational deficit that
plagued many rural communities. Farrell, as quoted
in Van Hoorik and Mteewta (2008:1), indicated that
the huge gap in access to ICT infrastructure between
urban and rural areas is often owing to a lack of a
reliable electricity supply. There is also often a lower
average level of education and a lack of capacity
within rural areas to effectively offer ICT training and
support. As with Jagan et al. (2007), Van Hoorik and
Mteewta (2008:5) found that the most important
economic benefit that access to the Internet offered
rural communities was improved logistics with respect
to travelling. This saved individuals both time and
money as they were able to confirm that the product
and/or person they were collecting or meeting would
actually be available. The Internet has also allowed
farming communities to access practical information
on small-scale farming as well as information about
the price and availability of various produce.
Layton et al. (2008:2) quote a report by the World
Resources Institute that highlights the purchasing
power of the world’s poor. The report identifies these
households as being at the “Base of the Pyramid”
(BOP). Layton et al. (2008:2) indicate that, within
South Africa, 71% of total household purchasing
power and 75% of the total population are in the
BOP range. He also indicates that a large proportion
of these households are in small towns and rural
areas which, with changes in the global and local
economies, are becoming increasingly economically
marginalised. The World Resources Institute Report
identifies a number of strategies to improve the
economic empowerment of the BOP, such as creating
niche markets and localising value creation. Layton
et al. (2008) argue that high-quality information is of
fundamental importance in encouraging the successful
implementation of the strategies mentioned above. In
order for local communities to become self-sufficient,
households need to become both producers and
consumers. If not, local areas will be characterised
by net consumption, which will limit employment
opportunities. If information is a key resource in
this process, then the Internet must be seen as an
important device enabling the access to and transfer
of information. Economies that are excluded from the
flow of information would therefore find it significantly
more difficult to become self-sufficient. Layton et
al. (2008:5) identify three concerns with respect to
improving information transfer within communities,
namely:
• whether communities will value the information;
• delivery of information to individuals that have a
•
high-level of mobile phone usage but are largely
computer-illiterate; and
a lack of ICT infrastructure in many rural areas.
Layton et al. (2008) argue that, regardless of the
concerns raised and the fact that many ICT projects
in rural areas have not been successful, bridging the
digital divide between urban and rural areas is critical.
If it is not addressed, the digital divide between urban
and rural areas will continue to grow and exacerbate
the increasing inequalities visible in society. The
digital divide is defined by Boyera (2007:1) as “the
gap between those with regular, effective access and
ability to use digital technologies and those without”.
This definition clearly indicates the importance of not
only having access to ICT but also having the ability to
use it effectively. Although a large number of people
already have access to a mobile phone, and this
number continues to grow, Boyera (2007:1) indicates
that the gap will really only start to close when
access to more advanced ICT becomes widespread.
It is important to offer a word of caution at this point,
namely that while access is extremely important, the
digital divide will not be addressed until individuals in
rural areas are able to acquire both affordable webenabled handsets and the educational capacity to use
them effectively. An added requirement would be that
the necessary infrastructure would need to be in place
to allow access to the more advanced technologies.
Figure 1: 12 pillars of competitveness (Source: The Global Competitiveness Report, 2008:7)
21
2009
2.2.4 Broadband
In order for Africa to be able to compete with global
markets, access to wireless connections is important.
Given that significantly fewer people have access
to fixed-line telephones than have access to mobile
phones, broadband Internet access will most likely
be delivered over a mobile platform. According to
Sahlfeld (2007) there has been little improvement in
the broadband access, particularly in rural areas of
Africa, and the price for broadband connectivity has
remained prohibitively high in most African countries.
According to the Africa Competitiveness Report 2007
(Toure 2007), broadband speeds and quality are
improving in Africa and it is available in most urban
areas. The price of broadband is considered to be
“semi-reasonable” in South Africa. However, it is still
out of reach of the majority of small businesses and
individuals (Toure 2007: 98).
2.3 Global Competitiveness
and the Role of
Technological Readiness
“A nation’s level of competitiveness reflects the
extent to which it is able to provide rising prosperity to
its citizens” (Global Competitiveness Report, 2008:3).
The Global Competitiveness Index (see Figure 1)
identifies 12 pillars of competitiveness. These will
affect countries differently, depending on the stage
of economic development at which the countries are
i.e. although all of the pillars will be important to each
economy, the pillars of competitiveness which are of
most importance to a factor-driven economy will differ
from those that will be most important in an efficiencydriven economy. According to the GCI (2008:7),
factor-driven countries compete by using primarily
unskilled labour and natural resources. Companies
compete on the basis of price and sell basic products
or commodities. Countries at the efficiency-driven
stage of development need to develop more efficient
production processes and increase product quality.
The Global Competitiveness Report (2008) classifies
South Africa as being in the efficiency-driven stage
of development. According to the report, economies
22
at this stage of development need to develop more
efficient production processes and increase the quality
of products. As indicated in Figure 1, competitiveness
is driven by higher education and training, an efficient
market for goods and services, well-functioning
labour markets, sophisticated financial markets, a
large domestic or foreign market and the ability to
harness the benefits of existing technologies.
In 2008 South Africa was ranked 45th out of 134
nations. South Africa’s ranking for basic requirements
was 69th, for the efficiency enhancers 35th, and 36th
with respect to innovation and sophistication. The
quantity and quality of education (particularly higher
education) is becoming increasingly important for
economies aiming to improve the efficiency of their
business environment. South Africa’s rankings for
health and primary education and higher education
and training are, however, relatively poor (Blanke
2007:13). The Global Competitiveness Report 2008 2009 provides some interesting data relating to higher
education and training in South Africa. Although
94.7% of South African children attend secondary
school (ranked 45/134), only 15.4% (ranked 93/134)
are enrolled at a tertiary institution. With education,
and particularly tertiary education, being identified
as an important component driving competitiveness
in efficiency-driven economies, as well as being
identified in the Global Entrepreneurship Monitor as an
important element driving entrepreneurial activity, the
low percentage of tertiary enrolment continues to be
of concern. The Global Competitiveness Report 2008
-–2009 continues to paint a bleak picture with respect
to education within South Africa. With respect to the
quality of the educational system, South Africa was
ranked 110 out of 134 countries. South Africa scored
2.8 where 1 = educational system does not meet the
needs of a competitive economy and 7 = meets the
needs of a competitive economy. The lowest score
awarded was 2.0. What is of particular concern, and has
been raised previously in this report, is the quality of
maths and science education where South Africa was
ranked 132 out of 134 countries. South Africa scored
2.2 where 1 = lags far behind most other countries and
7 = are among the best in the world. The lowest score
awarded was 2.0.
South Africa is ranked relatively high in terms of some
aspects of technological readiness: the availability
of new technology (37 out of 134 countries), firmlevel technology absorption (32 out of 134 countries),
laws relating to ICT such as consumer protection and
digital signature ( 34 out of 134 countries) and mobile
telephone subscribers (48 out of 134 countries) (GCR
2008:460 - 462). Overall, however, South Africa
received a mediocre assessment with respect to
technological readiness (Blanke 2007:15). The uptake
of ICT on an absolute basis seems fairly impressive,
particularly mobile phones where the number of
phones have quadrupled in South Africa from 2002
-–2006 (Blanke 2007:18). Given the slow pace of
delivery of fixed lines, mobile phones have become
the telephony of choice in South Africa. Mobile phone
coverage, for voice usage and short message services,
is extremely widespread and the explosion of mobile
phone telephony has considerably reduced the lack of
connectivity in rural/semi-rural and semi-urban areas.
This growth has been fuelled by the access to prepaid
mobile phone contracts. However, the cost of prepaid
calls is still higher than the cost of contract calls.
Prepaid connectivity, while offering greater flexibility
and access to subscribers, also increases the cost of
using this technology.
Despite the increased use of mobile telephony,
however, South Africa still lags behind the rest of
the world in the uptake of the Internet and the use of
personal computers. While 83.3 per 100 inhabitants
in South Africa subscribe to a mobile phone, South
Africa scores significantly lower with respect to
personal computers, Internet users and broadband
Internet subscribers. With respect to Internet access
at schools, where responses can range from very
limited to most children have frequent access, South
Africa is ranked 91st out of 134 countries, with a score
of 2.8 out of 7. With respect to personal computers
8.4 per 100 inhabitants have access, while only 7.8
per 10 000 inhabitants are Internet users and 0.7 per
100 inhabitants are broadband subscribers. South
Africa’s rankings out of 134 countries are 68th, 95th
and 77th respectively. With respect to infrastructure
South Africa scored relatively poorly on the quality of
the electricity supply (GCR 2008:390), with a ranking
of 101 out of 134 countries.
Although South Africa compares well with other
African nations in terms of infrastructure provision and
ICT access, and urban populations have experienced
a rapid increase in the use of Internet, South Africa
still lags behind many other developing countries.
In particular, the available data on ICT usage with
respect to access to PCs, mobile phones, Internet and
broadband usage disguises the urban/rural gap in this
country. A recent report in the Business Day (9 March
2009) is a particular cause for concern. It indicates that,
although South Africa compares well with respect to
other African countries with respect to Internet usage,
with respect to growth in Internet usage South Africa
lags behind other African counties. Eight years ago
the total number of Internet users in South Africa was
2 million more than our nearest African rival. Currently
South Africa has 4.5 million Internet users, which is
almost double the number of Internet users in 2000.
Although this may seem like a significant growth, it is
miniscule in comparison with the growth in countries
such as Algeria and Sudan. These countries boast
a growth in Internet usage of 69 000% and 11 000%
respectively over the same period, and both now have
3.5 million users.
Toure (2007), in the Africa Competitiveness Report
2007, identifies the four indicators for technological
readiness used in the Global Competitive Index. These
indicators include the number of fixed telephone
lines, mobile phone users, Internet users and the
number of personal computers per inhabitant. The
Digital Opportunity Index discussed in the Africa
Competitiveness Report 2007 (Toure 2007) includes
the four criteria mentioned above and extends them
to include the geographical coverage of mobile
services, tariffs and the availability of high-speed
Internet access. In terms of digital opportunity, South
Africa ranked 5th in Africa and 86th in the world
(Toure 2007:105). According to the Global Information
Technology Report, “South Africa displays a rather
good regulatory environment (25th) and business
readiness (31st) but shows a marked deterioration in
23
2009
Figure 2: Progression of ICT adoption. (Source Kotelnikov, 2007:6)
ICT infrastructure (from 59th to 70th) and government
usage (from 59th to 70th)” (Mia and Dutta 2007:15).
This Report argues that although the ICT penetration
rates in Africa have increased in the past few
years, this increase has still been slower than that
experienced in the rest of the world. A lack of wellfunctioning infrastructure, over-regulated business
environments and poor educational standards are
preventing Africa from leveraging the benefits from ICT
investments. The problem of poor network coverage
is compounded by the unreliability of existing access
networks in many parts of the continent. It is argued
that the ability of SMMEs to take full advantage of
information technologies will determine their ability to
compete effectively in local and international markets,
and that without reliable and affordable local access
SMMEs will be disadvantaged in their ability to retain
and potentially increase their markets. The quantity
of network connections is no longer sufficient as the
quality of the access becomes increasingly important.
2.4 How has the growth of ICT
impacted on SMMEs?
According to Kotelnikov (2007), the global economy
has moved from an industrial to a knowledge-based
economy. The ability to access, create and disseminate
24
knowledge has become critical in order for businesses
to be able to compete in the new economy. Konde
(2007) argues that ICT can contribute positively to
economic development in that the effective use of ICT
leads to more efficient production, distribution and
marketing of products and services, while the reliable
communication offered through ICT saves businesses
time. Widespread access to the Internet means that
information about local conditions has become
easier to access, which means that businesses
not only need to be informed about their own local
market but will need to understand international
markets – both as potential markets or as potential
competitors. According to Kotelnikov (2007), ICT
has the potential to both positively and negatively
affect SMMEs. The positive effects mentioned include
the well-documented benefits such as increasing
the efficiency of business operations, reducing
transaction costs, improved communication with
both suppliers and customers, and the access to new
business opportunities. However, businesses could
find their existing opportunities eroded by competitors
accessing information about local conditions via the
Internet. Businesses with limited usage of ICT could
lose out on business opportunities, as they are unable
to participate effectively in technologically-advanced
supply chains.
2.4.1 How SMMEs use ICT:
progression of ICT adoption
According to Kotelnikov (2007:6), as represented
by Figure 2, relatively simple technology such as
fixed line/mobile phones and fax machines allows
businesses to communicate effectively with suppliers,
employees and customers without requiring faceto-face meetings. Given that access to fixed lines
and fax machines would require a more permanent
business location, formal businesses are more likely
to use these technologies than informal businesses.
A second level of adoption would be an upgrade to
a basic personal computer that could be used to
run basic word processing software and accounting
packages. A business that intends to have advanced
communication capabilities would require an
Internet connection. Modern technology means that
businesses’ access to the Internet is not necessarily
constrained by the lack of a personal computer. Many
of the new generation mobile phones allow SMMEs
to access the Internet without having to invest in
a personal computer. The usefulness of this type
of connectivity is, however, limited by broadband
connectivity, bandwidth issues and cost.
Kotelnikov (2007) also argues that ICT requirements
are sector specific and indicates that manufacturing
businesses, as they often form part of a supply
chain, are more likely to invest in advanced ICT such
as inventory management or Enterprise Resource
Planning Software (ERP). In order for a software system
to be considered ERP, it must provide an organisation
with functionality for two or more systems. Sundstrom
(2006) argues that the characteristics of SMMEs
influence their ICT adoption process. According to
Sundstrom SMMEs, due to their limited business and
ICT skills, will adopt short-term views with respect to
ICT adoption decisions. Their ICT adoption is driven
primarily by customers or suppliers and is therefore
rarely part of a long-term strategy. Sundstrom (2006)
also indicates that ICT adoption in SMMEs is strongly
influenced by the owner/manager. Wolf (2001) argues
similarly that as SMMEs operate in a particularly
uncertain environment, entrepreneurs often have a
short-term planning horizon. The decision to invest
in ICT will therefore depend on the entrepreneurs’
training and experience as well as their view of
the future economic outlook. This means that ICT
adoption is determined by the characteristics of the
enterprise, the characteristics of the entrepreneur
and the environment in which the business operates.
SMMEs will often start with the basic uses of ICT i.e.
improving the administration function of business,
word processing etc. and will only proceed to more
advanced uses of IT if they perceive a tangible benefit,
for example cost reduction, or if their suppliers or
customers use technology.
2.4.1.1 Human capital requirements
Research has shown that individuals should be
introduced to technology early in their schooling.
Primary and secondary schooling must equip citizens
with basic computer skills as well as a good basic
education. Both owners and employees require a
good basic education as a poorly educated workforce
reduces the efficiency and speed with which ICT can
be adopted and used within businesses. Basic literacy
is critical to Internet use, and countries with higher
illiteracy rates will be vulnerable to a deep-rooted
digital gap both within and between countries. This gap
is likely to prove insoluble in even the medium term
(ECLAC 2005: 45). Secondary education, in particular,
is considered vital for effective ICT use (ECLAC, Brazil,
2005:176).
2.4.1.2Reasons for ICT adoption
ICT provides businesses with relevant, cost-effective
information, which can enable businesses to compete
more effectively and efficiently in local and foreign
markets. Using the appropriate ICT can reduce
transaction costs and improve internal processes.
Research has shown that there are numerous benefits
that accrue to SMMEs that adopt ICT (Frempong 2007,
ECLAC 2005, Rae 2006, Wolf 2001). These benefits
include:
• Improved access to information: ICT allows for
a more informed decision-making process. The
Internet can decrease information asymmetry,
which can improve the bargaining power of SMMEs
25
2009
•
•
•
•
•
•
or can decrease the likelihood of the business
being exploited by businesses or individuals with
greater access to information.
Improved internal administrative management
and reduced operational costs because of
streamlining of business processes
Improved communication: ICT allows a business
to improve the speed and reliability of its
communication with both suppliers and customers.
Improved competitiveness: ICT allows a business
to acquire and manage information about
customers, improve customer management
and monitor customer preferences. Businesses
are able to connect with a variety of customers,
suppliers and other businesses regardless of the
location of the business.
Improved product management and quality
control
Enhanced productivity
Collaboration with other companies is facilitated.
2.4.2 E-commerce
Maier and Nair-Reichert (2007) define e-commerce
as online sales and purchase of goods and services.
E-commerce could be business-to-customer or
business-to-business purchases or sales. Although
businesses in developing countries are becoming
increasingly connected to the Internet, the involvement
in e-commerce, particularly with respect to SMMEs,
remains limited. Sundstrom (2006) quotes Stefansson
who argues that many small businesses are unable to
adopt e-commerce as they lack the basic IT platform to
allow them to consider the necessary IT adoptions to
make e-commerce a reality. With the increased use of
technology and increasing popularity of e-commerce,
it is argued that these businesses will find it more and
more difficult to compete in both local and foreign
markets. It is unlikely that they will be able to be
involved in more technologically sophisticated supply
chains. Research on e-commerce suggests that it
offers businesses the opportunity to access local,
regional, national and global markets; reduces costs
by cutting out the middlemen in both purchasing and
selling products; and potentially increases the range of
goods and services on offer and in so doing increases
26
the sustainability of the business. E-commerce is also
believed to offer SMMEs the potential to link into supply
chains. Research in developed countries has shown
that if SMMEs belong to existing supply chains, the
pressure from their suppliers and customers is likely to
lead them to explore e-commerce as an option. Given
that many SMMEs in developing countries are not part
of either local or international supply chains, however,
it is unlikely that pressure from trading parties will
lead to these businesses exploring e-commerce
possibilities. Maier and Nair-Reichert (2007) quote
studies by Goldstein and O’Conner as well as the
OECD, which conclude that e-commerce will only
be successful if it is able to replicate the trust and
confidence that society is familiar with, with respect
to day-to-day business transactions. In developing
countries, particularly if consumers themselves are
unfamiliar with various technologies, developing
this trust and confidence will be more difficult than
in economies where the majority of consumers are
familiar with a variety of technologies. Consumers
and producers also need to have confidence in the
legal and regulatory framework that governs online
transactions. Maier and Nair-Reichert (2007) quote a
study by Mitter that is cautious in promoting the benefits
of e-commerce. This study highlights three major
stumbling blocks inhibiting business-to-customer
transactions, namely the lack of secure payment
methods, the lack of legal and regulatory protection
and the lack of confidence in online transactions
amongst consumers in developing countries.
SMMEs in developing countries also battle to find
specialised knowledge to assist them in determining
which e-commerce investments would best suit
their business. This leads to fewer businesses being
prepared or able to move into the e-commerce arena.
2.4.3 Obstacles to ICT adoption in the SMME sector
Kotelnikov (2007) notes that if companies make
large investments in ICT, which are not managed
as part of the business’s strategy, they are often
disappointed by the lack of return generated from
these investments. These failures have created
a sense of scepticism regarding the sustainable
competitive advantage offered by ICT investments.
He argues that only where ICT investments are
aligned to the business’s vision and strategy will
the benefits to the organisation be noticeable and
sustainable. Kotelnikov (2007) offers a number of
other reasons for the low adoption of ICT in the SMME
sector. He refers to both supply side and demand
side issues that limit the adoption of ICT. Supply side
issues refer to factors that limit the quantity, quality
and accessibility of ICT within an economy, whereas
demand side issues refer to internal constraints
within the business or business owner that limit the
adoption of ICT. These are summarised in Table 1:
Frempong (2007) argues that the most common
constraints preventing the development of ICT usage
in the SMME sector are in fact basic business issues,
namely access to finance, government red-tape, the
high cost of training, lack of personal skills, labour
laws and a poorly or inadequately skilled workforce.
While businesses are still grappling with basic
business issues, it is less likely that they will be in
a position to understand or put in place a strategy
to adopt new technology. Access to finance is often
identified as a primary issue affecting the growth rate
for SMMEs. Given their limited resources, businesses
in the SMME sector are less likely to spend on ICT
unless there are clear short-term benefits accruing
from the ICT spend. The potential benefits that can be
derived from investing in an ICT platform are often not
realised by SMMEs, as they do not have the necessary
skills to effectively utilise ICT within the business.
Duncombe and Molla (2006) indicate that many
SMMEs learn by doing and argue that this approach
to business management often increases both the
cost and likelihood of ICT failure. Small firms often
adopt ICT strategies and investments that are not
suitable to their needs, and in these cases the costs
invariably outweigh any benefits derived from ICT.
Although SMMEs may be more accurate in measuring
the initial set-up costs, they often underestimate
the maintenance and upgrade costs attached to ICT
adoption. Rae (2006) concurs and notes that SMMEs
are often too small to afford dedicated ICT personnel
and are therefore reliant on consulting advice, which
is often expensive and generic and may not meet
their actual needs. The difficulties inherent in using
consultants are compounded by the fact that owners
often do not fully understand what the key problem
areas are within the business, and are therefore not
in the ideal position to attempt to implement ICT
solutions. Sundstrom (2006) highlights the fact that
small businesses may be resistant to automating
processes as this can lead to redundancies. Given the
close relationships that owners often have with their
employees, the owners are unable to deal with the
redundancies efficiently. SMMEs also have difficulty
in integrating the new systems into their existing
systems, as this ability often relies on a skill-set not
prevalent in many small businesses. From a supply
side point of view, Sundstrom also raises the problem
of a consistent power supply and the potential for
significant Internet downtime - which could have a
major impact on the sustainability of small businesses.
Maier and Nair-Reichert (2007) conclude that the
primary concerns highlighted by those entrepreneurs
in developing countries showing a willingness to
integrate ICT into their business processes included
connectivity issues, namely high cost, low speed and
inadequate coverage; low computer security; and a
lack of trust in the regulatory and legal framework
within the economy.
2.4.4 Business failure and ICT
Baard and van den Berg (2004) concluded that up
to 80% of SMMEs fail within the first 3 years. Tweed
and McGregor (2005), however, caution against an
uncritical acceptance of the high failure rates quoted
in much of the literature regarding SMMEs. They
question the methodology and the definition of failure
used in much of this research. Tweed and McGregor
(2005) found in their study of small businesses in
New Zealand that at least 75% of their sample was
still operating after seven years. If one questions the
validity of the SMME mortality rates quoted in much
of the literature, one may need to look more critically
at research that sees ICT as the “panacea to drive the
SMMEs from the spectre of failure past mere survival
and into growth for ultimate success” (Baard and van
den Berg 2004:2). Research should possibly question
whether and where the use of ICT should be considered
27
2009
Table 1: Demand and supply factors limiting ICT usage. (Adapted from Kotelnikov, 2007)
Supply side
Demand side
Poor infrastructure, limited access and high costs
• State-owned monopolies
• High costs
• Limited coverage particularly in rural areas
Limited ICT skills of owner
• Lack of ICT know-how
• ICT knowledge often self-taught
• Unsure what the business actually requires with respect to
ICT investment
• Unsure whether investment in ICT will have sufficient
benefits to justify expense
More advanced ICT products designed for
larger firms
• Products too expensive
• Products too complex
• Products not applicable to SMME problems
Limited ICT skills amongst employees
• SMMEs often do not have sufficiently qualified employees
to maximise benefits from ICT investment
• Relying on consultants is an expensive option
• Limited training budget and often cannot afford the time
away from work
• Training programmes often not tailored to suit the SMME
market
Managing change
• ICT investments are only maximised if the business adapts
its existing business processes to accommodate the
technology
• SMMEs may be reluctant to dramatically change their
business processes to implement new technology with
which they are not completely comfortable
Financing
• SMMEs have limited funding available and often find it
more difficult than corporate organisations to borrow the
necessary funds
• Day-to-day operating costs also affected due to the cost of
upgrades, maintenance and other incidental costs related to
the ICT investment
Legal infrastructure
• SMMEs would need to feel comfortable with the security of
Internet and other ICT transactions
Customers not ICT literate
best practice within the SMME sector. As mentioned
previously in this document, a considerable amount
of literature exists that promotes the benefits of ICT
usage in small businesses. However, certain limitations
regarding ICT usage in small businesses have also
been raised: cost of implementation, generic packages,
lack of skilled employees, lack of owner/manager ICT
knowledge and the high cost of consultant services.
It is important to develop an understanding of what
level of ICT is being used by SMMEs in South Africa,
28
as well as to question whether there is in fact a need
for more sophisticated ICT adoption in SMMEs. It is
important that researchers explore more fully whether
there is a benefit to SMMEs in investing in more ICT,
and attempt to quantify this benefit.
The feasibility of ICT as a primary tool to prevent
business failure is debatable, given the difficulties
facing many SMMEs, with respect to their own lack
of skills (i.e. poor quality or incomplete education,
correct educational capacity, appropriate investment
in skills, the required organisational change, and
appropriate changes in business processes.
The inability of ICT to be the “panacea to drive SMMEs
from the spectre of failure past mere survival and
into growth for ultimate success” (Baard and van den
Berg 2004:2) raises the question again of the critical
role of education and training. ICT, as a stand-alone
solution, is unlikely to be significant in minimising or
preventing business failure; it can, however, be seen
as an additional tool at the disposal of small business
owners. This presupposes that the business owners
have an adequate basic education as well as business
know-how that allows them to access the potential
benefits that can accrue from ICT adoption.
2.5 Conclusion
insufficient business skills, lack of computer
knowledge and ICT expertise, and limited financial
resources) as well as supply side issues (such as
inadequate infrastructure, high tariffs and connectivity
issues). Not only is there often a mismatch between
the needs of the SMME and the ability of ICT to fulfil
these needs but ICT purchases are generally not
integrated into the long-term strategy of the business.
This occurs because the long-term business strategy
has not been clearly identified by the owner, or the
owner has limited knowledge of ICT. ICT will only lead
to productivity gains when it is complemented by the
Although research has shown that the use of ICT,
particularly in developed countries, has a positive
impact on SMME development, and that it is becoming
more difficult for businesses with no or little ICT
infrastructure to compete effectively in larger markets,
ICT access and training as a stand-alone solution is
unlikely to be successful. Managerial training, as well
as training relating to a myriad of business practices,
is needed to complement the ICT benefits. Small
business owners do not merely need training on
how ICT integrates into business processes but also
training on what good business processes are. For
small businesses to better leverage the benefits of ICT
and potentially venture into e-commerce, communities
need to be educated about the benefits and safety of
e-commerce. This presupposes a basic knowledge of
ICT within the community. Technological readiness
is an important step in allowing an economy at the
efficiency-driven stage to improve its competitiveness.
However, economies need to ensure that the basic
requirements that are key for factor-driven economies,
such as infrastructure and primary education, are of
an acceptable standard and are offered equally to all
citizens in the country. Without this backbone, the
economy, or less advantaged sectors of the economy,
will continue to be disadvantaged by an ever-widening
technological gap.
29
2009
30
CHAPTER 3
RESEARCH
METHODOLOGY
3.1 Introduction
The chapter on research methodology will specify the
main research aim as well as sub-aims. The choice
and rationale for the research design will be outlined.
The content and compilation of the ICT questionnaire,
the sample, selection of respondents, pilot study, data
collection and capture for the ICT survey will also be
discussed.
•
•
•
SMMEs are with various ICT devices i.e. computers,
the Internet, cell phones and PDA
To understand how business functions such
as recording cash, paying suppliers, inventory
records etc. are managed within the businesses
To understand whether ICT is used to improve the
management of business operations
To develop a categorisation of SMMEs based on
their level of computer sophistication
3.3 Research design
This section identifies the main aim of the study
and outlines the means by which this aim was
accomplished.
A descriptive survey research design was chosen
for this study as it was considered to be the most
appropriate to achieve the research aims. The design
suited the type of data to be obtained, namely
demographic profile, business profile, skills, ICT
usage and ICT requirements. Respondents were
selected using simple random sampling and data was
collected using face-to-face structured interviews
were analysed quantitatively using SPSS solution.
3.2.1 Aim
3.3.1 Face-to-face interviewing
The aim of this study is to develop an understanding
of the variables that are relevant in explaining
the adoption rates of computers and other more
sophisticated ICT by small business entities. The
study will also develop some understanding of what
ICT is used by lower-end SMMEs and to what extent
ICT is used to improve the management of various
operational areas within the business.
According to Alwin (1977:17), personal interviews
stimulate
“socially
acceptable”
responses.
Respondents give answers that they feel are more
acceptable to the interviewer and are not necessarily
factual in their answers. Some evidence (Alwin, 1977)
suggests that self-administered questionnaires may
be more accurate as these reduce the number of
socially acceptable answers. Given the variable levels
of literacy and access to technology, using selfadministered questionnaires for the ICT survey was
not however a viable option. Face-to-face structured
interviews were used to collect data. According to
Wilson (edited by Sapsford, 1997), this is where a
standard schedule is used for each respondent, in
which the questions have the same wording and are
asked in the same order. This limits the ability of the
interviewer to vary the wording of the questions or the
order in which the questions are asked. Interviewers
were trained to ask the questions exactly as they
were written. Additional prompts that were considered
necessary for some of the questions were provided
3.2 Research aim and objectives
3.2.2 Objectives
This aim was broken down into the following
objectives, which formed the basis of the research
conducted:
• To develop an understanding of the relevant
•
variables that explain the adoption rates of ICT,
through looking at a variety of SMME characteristics
including demographics, business characteristics,
ICT characteristics and perceptions
To develop an understanding of how familiar
31
2009
for interviewers during training. The highly structured
method ensured that data collected during the
interviews did not depart from the design for data
collection prescribed by the study and reduced the
potential for interviewer bias.
When using an interview schedule it is important
that interviewers are trained to be non-judgemental
and not to lead interviewees to a particular answer.
Every effort was made to ensure the correct quality
of interviewers and to provide sufficient training.
However, using a large group of interviewers increases
the possibility of some of the interviewers being less
successful in collecting data. Interviewers were not
monitored directly during the interviews and may
have introduced bias through verbal or non-verbal
prompting.
3.3.2 Question types
According to Kottler (1997:121) closed questions are
easier to interpret, while open-ended questions
allow respondents to be more flexible in expressing
their opinions. The questionnaire designed for this
study consisted predominantly of closed questions
but included four open-ended questions to allow
for additional information from the respondents.
According to Wilson (1997), open-ended questions
are valuable because they do not constrain the
respondents’ opinions. However, in open-ended
questions the interviewer is relied on to extract the
relevant material from what is being said. The potential
for bias thus increases with the use of open-ended
questions and this data needs to be treated with some
caution. Given the type of data and the population
surveyed, a descriptive survey was selected. Face-toface interviews were found to be the most effective
way of collecting the data.
3.4 ICT study
The study focused on lower-end SMMEs that used
government-funded business support services. The
sample was drawn from client lists provided by the
Small Enterprise Development Agency (SEDA). The
sample was drawn from all 9 provinces. However,
32
given the differences evident from the client lists and
data collected, it is not possible to do a cross-provincial
comparison with any reliability. The data was collected
by means of face-to-face structured interviews
employing an interviewer. The questionnaire designed
for this study consisted predominantly of closed
questions but included four open-ended questions to
allow for additional information from the respondents.
This section discusses the ICT questionnaire, the
sample, selection of respondents, pilot study and data
collection and capture for the study.
3.4.1 Questionnaire design for the ICT study
3.4.1.1
Content and description of the questionnaire
The questionnaire was structured using primarily
dichotomous questions with fixed-response (closeend) alternatives as well as open-ended questions with
no pre-specified response format. The design suited
the type of data to be obtained, namely demographic
profile, business profile, skills, ICT usage and ICT
requirements.
• Outline of each section of the questionnaire: The
questionnaire was divided into five main sections
namely demographic profile, business profile,
skills, ICT usage and ICT requirements.
• Section A: Demographic profile: The questions
•
within the first section were designed to determine
the demographic profile of the respondents: age,
race, gender and level of education.
Section B: Business profile: This section included
questions relating to the location of the business,
the length of its existence, whether the business
operated in an urban or rural setting, turnover,
number of employees and whether or not it was
registered.
• Section C: Skills: This section identified whether or
not the owner/manager of the business believed
that he/ she had the necessary skills to manage the
business successfully. The section also included
questions relating specifically to ICT skills and
familiarity with using various ICT devices.
• Section D: ICT usage: This section examined what
ICT had been adopted within the business and
what exactly the ICT was used for.
• To determine the respondents’ understanding of
•
•
the terms used
To determine the time taken to complete the
questionnaire
To determine the ease of completion of the
questionnaire
• Section E: ICT requirements: This section required The pilot study indicated a few questions that needed
the respondents to identify any areas within their
businesses where ICT solutions could be adopted,
and how great their need was for an ICT solution.
3.4.2 Sample size
A sample of 1 800 SMMEs was drawn from client lists
provided by SEDA. The large sample size facilitates
the collection of valid and reliable data, which can be
analysed with a high level of confidence. Respondents
were drawn from all 9 provinces, Appendix 1 lists the
interviewers per province and indicates the number
of interviews completed, accepted and rejected per
interviewer. Although the sample was drawn from all
9 provinces, given the differences evident from the
client lists and data collected it is not possible to do a
cross-provincial comparison with any reliability.
3.4.3 Pilot study (see Appendix 2)
The first draft of a questionnaire is never perfect
and ready to administer (Bourque & Fielder, 1995).
The questionnaire was therefore piloted prior to the
actual data collection. The pilot study was used to
identify areas in the questionnaire or the interviewing
procedure that needed revision. Given that the study
would be conducted nationally and a large number
of different interviewers would be used, it was of
utmost importance that both the interviewers and the
respondents easily understood the questions and that
there were no ambiguous questions.
rewording. Changes were made to these questions
to enable the questionnaire to provide more usable
data. The type of information about each question
required by interviewers, as well as key prompts, was
identified. This was used to improve the questionnaire
design and interviewer training.
3.4.4 Data collection, coding and capturing
The data was collected using face-to-face interviews
with all the respondents. The fieldwork was
conducted between April and August 2008. In total,
60 fieldworkers were used, and each completed
approximately 30 questionnaires.
The criteria for interviewer selection was Matric as the
minimum level of education.
The questionnaires were rechecked by a CIE coordinator, and coded by the researchers. When all
closed and open-ended questions had been coded
and the data had been cleaned, the questionnaire
responses were captured by a data capturer.
3.5 Conclusion
This chapter outlined the research process involved in
the ICT survey. It provided information about the research
design, the pilot study and the resulting changes to
the questionnaires. It describes how the sample was
selected and how the data was collected and captured.
A number of sub-aims were set for this purpose,
namely:
• To evaluate the clarity of the instructions
• To identify and eliminate the presence of
ambiguous and misleading questions
33
2009
34
CHAPTER 4
RESEARCH FINDINGS:
ICT STUDY
4.1 Introduction
A report prepared by Trigrammic Consulting for the
Presidential National Commission on the Information
Society and Development (PNC on ISAD) (2004:32)
found that the most important need for all types of
business is for information. They indicated that all
business need information about:
•
•
•
•
•
•
current market conditions;
market opportunities;
specific sales prospects;
where and how to improve their technology and skills;
where and how to access finance; and
where and how to access appropriate business
development services.
The report found that ICT is critical in the development,
presentation and dissemination of such information.
This means that service providers themselves
need to be aware of the important role of ICT as
well as know how to advise businesses on the best
way to apply ICT in business and business-related
decisions. The report found that although most
service providers acknowledge the importance of
ICT, many either did not have a clear understanding
of what ICT intervention specific businesses required,
or did not have the skill-set themselves to provide
advice to businesses on the best way to apply
ICT in business and business-related decisions.
In order to be in a position to offer specific ICT
advice to SMMEs, SEDA commissioned an ICT study
that focused on lower-end SMMEs. As mentioned
previously in this report, it is difficult to do direct
comparisons between SMME/SME research as the
definitions of medium, small, very small and micro
businesses differ across countries and sectors.
There is also little indication given in many studies
as to the level or nature of the SMMEs surveyed. The
Trigrammic Consulting Report (2004:2) highlights
an additional difficulty inherent in using the number
of employees as a way of differentiating between
medium, small, very small and micro businesses and
argues that “a micro business could, for example,
refer equally to a hi-tech company or a survivalist
spaza operator, both of which will have very different
needs.” The report proposes that businesses should
be classified according to their needs, as this would
be beneficial in understanding how sophisticated they
are from a business point of view and what particular
assistance they need. The assistance required could
be to maintain their existing position, or the business
may require assistance to move to the next level of
business sophistication.
The businesses in this survey were from client lists
provided by SEDA and the majority of the businesses
surveyed would fall into the traditional small, very
small and micro classifications. It is also likely that
the majority of the businesses would fall into the
survivalist/necessity category or the emerging/
stable category, as defined by Trigrammic Consulting
(Table 2).
35
2009
Table 2: Identifying characteristics of businesses at varying degrees of sophistication
Degree of sophistication
Identifying characteristics
Survivalist /necessity
entrepreneur
This is the least sophisticated category of business. They
characteristically have no market plan, and are predominantly
opportunist. They are driven by the skills and abilities however limited - of the business owner. Most - if not all - such
businesses are informal , and are supported by ad hoc ‘helpers’
drawn from the ranks of friends and family. Much of such
business activity is derived from the fact that the business
person has no alternatives, and so is driven primarily by the
lack of better choices for work. However, a small percentage of
businesses are established and run without input from formal
financial services.
Emerging / stable
These businesses are numerically the most common and
statistically are collectively the largest employer. Some of
these businesses are still part of the informal sector, but are
established in that they have - for example - a trading name,
fixed place of business, identifiable debtors, creditors and stock.
Others have transited to the formal sector, and are registered
business entities. Some will have been started by an opportunity
entrepreneur, driven by the desire to take advantage of an
identified business opportunity. Both provide a regular - if
sometime erratic - income for the owner. The owner-manager
considers him/herself to be ‘in business’. The focus is on
managing cash flow.
Growth orientated
Such businesses are formal and established. They are driven
primarily by a desire/ability to take advantage of an identified
business opportunity. Some may still be at a fairly young stage
of development, but they will be funded and organised to grow
and develop. Management consciously works ‘on the business’
to tune its efficiency and effectiveness. Activity is focused on
capturing a percentage of a market segment characterised by
customer need and geography. The emphasis is on managing
revenue growth.
Globally competitive
Formal, established and structured, these businesses are
capable of competing for business on the conscious basis of
price, quality, flexibility or delivery.
They have systems and processes defined and in place to
manage and report on the key value-adding indicators and
business support activities. These businesses need not
have ‘global’ or even international clients, but are capable of
competing at a word class standard. Management considers
itself to work ‘for the business’. Activity is often focused on
driving efficiency and managing costs. The financial emphasis is
on the balance sheet.
Source: Business Development for SMMEs, Trigrammic Consortium (2004:1)
36
4.2 The study
4.3 The sample
In order to develop an understanding of variables
that are relevant in explaining the adoption rates
of computers and other more sophisticated ICT
adoptions, the study will look at a variety of SMME
characteristics.
These
characteristics
include
demographic characteristics, business characteristics,
ICT characteristics and perceptions (see Table 3 below).
4.3.1 Gender
Table 3: SMME characteristics influencing ICT adoption
Demographic
characteristics
Business
characteristics
ICT
characteristics
Perceptions
•
•
•
•
•
•
•
•
•
Gender
Age of the owner/manager
Education
Race
•
•
•
•
•
•
ICT exposure i.e. training
Competence in ICT skills
What ICT is used
Computer sophistication
Type of computer programmes
used and how they are used in the
business
Computing environment
•
•
Perception of own business skills
Perception of IT skills
Size
Urban/rural based
Formalisation of business entity
Monthly income
Length of business operations
The study will also develop some understanding
of what ICT is used within lower-end SMMEs. An
understanding of both the sophistication of computer
usage i.e. no computer or Internet usage to networked
computers with Internet access, and the familiarity
with various ICT devices i.e. computers, the Internet,
cell phones and PDA will be developed. The study will
then look at how business functions such as recording
cash, paying suppliers, inventory records etc. are
managed within the businesses and whether ICT is
required to improve the management of these areas.
Fifty-nine percent of the sample is male and forty-two
percent female. According to the 2006 South African
GEM Report (Maas and Herrington, 2006:27), more
men than women in South Africa are entrepreneurial.
While the respondents in this survey were either the
owner or manager of the business and can, therefore,
not be compared directly to the distributions in the GEM
survey, it is still of interest that more male respondents
were interviewed in this survey. Businesses were
randomly selected from lists of businesses provided
by SEDA, so this raises the question whether more
male than female entrepreneurs are using the services
provided by such organisations. An alternative
explanation could be that more businesses still have
male managers than female managers. This project
did not look at why respondents were using service
agencies but, if more male than female entrepreneurs
are in fact using these services, determining the
reason for this bias would be of interest both to SEDA
and other service providers.
4.3.2 Racial distribution
Table 4: Racial distribution of sample
Percentage
of sample
South African
demographics*
Asian
2.8%
9.1%
Black African
74.7%
63.6%
Coloured
6.6%
4.9%
White
15.9%
22.4%
*http://www.southafrica.info/sa glance/demographocs/population.htm
The racial distribution (Table 4) of the sample shows
a bias towards Black African and Coloured owned or
managed businesses. The sample was drawn from
SEDA records and the greater number of Black African
37
2009
and Coloured owned businesses respresented in the
sample could be as a result of the perception that
service organisations like SEDA have been set up
primarily to assist previously-disadvantaged business
owners.
4.3.3 Age distribution
4.3.5 How long has the business been
operating?
Table 5: Length of business operation distribution of sample
Forty-four percent of the businesses in the sample
were owned/managed by respondents classified as
the youth (younger that 35 years of age). A further 18%
and 25% of the businesses were owned/managed by
respondents between 35 - 40 years and 41 - 50 years
old respectively, with 12% of the sample being over 50
years old.
4.3.4 From where does the business
operate?
The majority (54.1%) of the businesses surveyed
operated from formal business premises, with a
third (34.9%) of the sample operating from home. The
remainder of the sample operated either from an
industrial park (5.6%) or less formal business premises
(5.4%). The less formal business premises included
RO - 25 000
premises such as street trading, craft markets,
containers or a friend’s home.
R25 001 - 100 000
5%
Less than 1 year
16.0%
Between 1 and 3 years
37.2%
Between 3 and 5years
20.3%
Between 5 and 10 years
15.0%
More than 10 years
11.4%
Table 5 shows that the majority of the businesses had
been in operation for less than five years. In addition, a
number of businesses on the original SEDA lists could
not be interviewed as they had either closed down in
the interim or could not be contacted. GEM research
has also shown that South African start-ups have a
low survival rate relative to other countries. According
to GEM 2008 (Maas and Herrington), 77% of the
businesses had been in existence for less than 3.5
R25 001 - 100 000
above R200 000
7%
23%
65%
Figure 3: Monthly income of the sample
38
years. The sample for this survey did not use the GEM
cut-off months when asking how long the business
had been operating. However, Table 5 shows that 53%
of the sample had been in operation for less than 3
years. While it is not known what proportion of the 3
to 5 year businesses had been in operation for less
than 3.5 years, it is likely that the sample interviewed
a higher proportion of established than newer firms.
4.3.6 Urban/rural split
Respondents were asked to indicate whether they
would describe the area in which they operated
as urban, semi-urban, rural or semi-rural. The
overwhelming majority (89.4%) described their
environment as urban (59.9%) or semi-urban (29.5%).
Only 7.7% of the respondents described their
environment as rural, with a further 2.9% describing it
as semi-rural. In order to facilitate useable data, the
data set has been analysed as urban and rural with
semi-urban and semi-rural collapsing into the urban
and rural populations. Any significant differences
obscured by this choice are discussed in the relevant
section of this report.
4.3.7 Education levels
Table 6: Educational level of sample
Did not attend school
2.6%
Grade 1 to 7
2.3%
Grade 8 to 9
2.8%
Grade 10 to 11
10.0%
Grade 12
37.3%
Tertiary certificate
32.0%
Tertiary degree
13.0%
According to the 2008 Global Competitiveness Report,
94.7% of South African children attend secondary
school, while 15.4% are enrolled for a tertiary degree.
The educational qualifications of the sample are within
the range indicated by the Global Competitiveness
Report, with 92.4% having a secondary schooling
qualification and 13% a tertiary degree (Table 6).
GEM research has shown a consistent association
between higher levels of education and higher levels
of entrepreneurial activity, better firm survival rates
and improved job-creation potential. Entrepreneurs
with higher educational levels also tend to have a
more positive perception of their skills and abilities to
run a business. Eighty-two percent of the sample had
at least a Grade 12 level of schooling, which should
have a positive impact on their ability to become
comfortable with new technologies.
4.3.8 Monthly turnover
Figure 3 shows that the majority (65%) of the
respondents fall into the lowest income category, that
of R0 - R25 000 per month. Businesses were asked to
indicate what their monthly income was, so the figures
provided here have not taken the cost of operations
into account and it is likely that many, if not all of
these businesses would be left with a modest profit
once all costs have been accounted for.
4.4 Do you have and use a computer in your business?
Male respondents are more likely to have and use a
computer in their business, with 62.9% of male and
54.0% of female respondents indicating that they have
and use a computer in their business. Maier and NairReichert (2007:46) indicate that there are a number of
barriers facing women with respect to ICT adoption,
namely lack of ICT training, lack of basic literacy,
inability to converse in the language of the Internet
i.e. English, lack of access to computers and the high
costs of necessary hardware and software. While these
are issues that are not faced exclusively by female
business owners, Maier and Nair-Reichert (2007)
argue that these barriers are compounded by poverty
39
2009
and social structures that see women as inferior.
In addition, women often have different economic
priorities and bear a heavier burden of domestic
responsibilities. Twenty-one percent of UK women
cited family commitments as a reason for becoming
self-employed (UK Department of Trade and Industry,
2005). Given the breakdown of family units and the
devastation caused by HIV in many communities in
South Africa, significantly more women may resort
to self-employment because of family commitments.
While the survey did not specifically address the
reason for starting a business, women with family
commitments may be less able to afford the cost of
hardware and software.
Maier and Nair-Reichert (2007:45-46) provide a
number of positive impacts that the access to and
effective use of ICT have on the economic and social
lives of women in developing countries. These include:
women become more marketable as a result of
developing a greater range of skills that allow them to
generate income; increased confidence, self-esteem
and the ability to assume greater responsibility for
decisions affecting them; improved networking
capacity; improved communication and information
gathering and sharing; and better access to a variety
of educational opportunities. Given the potential for
improving the economic and social lives of women
in developing countries, it is important that larger
numbers of female business owners are encouraged
to become familiar with computer technology.
4.5 Use of various ICTs for business purposes
Tembo et al. (2008:2) highlight the debate surrounding
the definition of ICT. They offer two definitions from
the literature: firstly, that “ICT is an umbrella term
consisting of hardware, software, networks and
media for collection, storage, processing, transmitting
and presenting information” and secondly, that “ICT
is a range of technologies that integrate information
technology devices such as personal computers with
communication technologies such as telephones and
telecommunication networks”. For their study on ICT
usage in agriculture the first definition was used, as the
authors argue that the umbrella term “encompasses
both the new ICT such as e-commerce, websites and
computers and the traditional ICT such as radio and
television”. This study will also adopt the umbrella
definition of ICT as respondents were asked to provide
information regarding traditional ICT usage such as the
fax machine, as well as more sophisticated ICT usage.
4.5.1 Gender
Figure 4 shows that, other than cell phones, male
respondents are more likely to be higher users of all
forms of ICT within their business. Cell phones are
overwhelmingly the most popular form of connectivity
with 94.2% of male and 94.5% of female respondents
respectively indicating that they have used a cell
phone for business purposes. Approximately two-
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
Male
20.00%
Female
10.00%
rc
ha
se
et
s
an fo
d rm
sa a
le rk
s et
in
g
l
In
te
rn
t
rn
e
te
In
In
te
rn
et
fo
r
fo
r
pu
Em
at
io
In
fo
rm
ai
n
x
Fa
r
te
pu
m
Co
lin
nd
La
Ce
ll
Ph
on
e
e
0.00%
Figure 4: Which of the following have you used for business purposes?
40
Figure 5: Do you have and use a computer in your business?
thirds of the respondents used a landline for business
purposes. Fax machines are still a more popular form
of communication than email with 60.3% and 43.5%
of male respondents using fax machines and email
respectively. Just over half the female respondents
used a fax machine as a method of communication
(53.7%) and a third (33.2%) used email. Trigrammic
Consulting (2005) quotes the 2003 SME survey
which found that most respondents used computers,
fax, printers, modems and to a lesser degree (57.4%)
computer networks. Figure 4 shows that, while most
of the respondents used cell phones, less than 60%
of the respondents used a computer or a fax machine.
Although the 2003 SME survey study found that about
80% of the respondents used the Internet and email,
significantly fewer respondents in this survey used
the Internet and email. Findings relating to Internet
and email usage will be discussed in more detail later
in this report.
4.5.2 Race
Figure 5 shows that white business owners are
significantly more likely to have and use a computer
in their business (88.8%) than Black African business
owners (51.8%). This difference can be partially explained
by the fact that almost all of the businesses in this
sample that were rurally-based were black-owned,
and computer usage in rural areas is significantly
lower than in urban areas. Businesses in urban areas
(63.7%) are almost twice as likely to have and use a
computer in their business as rural businesses (35.1%).
No
39%
No
Yes
50%
50%
Yes
61%
16 - 29 year old
Over 60 years of age
Figure 6: Age and has and uses a computer in the business
41
2009
While South Africa has experienced some success in
widening ICT service provision, large sections of rural,
semi-rural and semi-urban regions still lack access to
and participation in modern facilities and technologies.
Only 28.4% of the rural businesses, 46.4% of semirural and half (50.4%) of semi-urban businesses have
and use a computer in their business. This raises the
concern that both the businesses and the populations
living in these areas will become further disadvantaged
as the digital divide (not between countries but
within countries) creates additional obstacles for
businesses already seriously disadvantaged by
virtue of their position within rural South Africa.
4.5.3 Age
The age of the business owner is an important
consideration with respect to ICT usage in SMMEs.
Studies done in Argentina showed that younger
owners are more likely to be aware of the usefulness
of ICT as a business tool (EDLAC 2004). Younger
people are more familiar with new technology and
are therefore more likely to use computers in their
businesses. This study concurs with these findings,
with the number of respondents that have and use a
computer in their business decreasing as the age of
the respondent increases. Figure 6 shows that while
61.2% of respondents in the 16 - 29 year old bracket
had and used a computer, only 50% of those over
60 years of age had and used a computer in their
business. These findings also concur with findings
in a study by Tembo et al. (2008). The study, on the
use of ICT in the agricultural sector in South Africa,
found that young farmers were more likely than older
farmers to use ICT. Tembo et al. (2008) argue that older
farmers had less exposure to ICT at school so would
be more likely to be cautious in their introduction of
ICT into their business.
Table 7 confirms the findings mentioned above in that
older respondents were less likely to indicate that they
had learnt to use a computer at high school (3.0%)
than younger respondents, particularly respondents
between 16 and 29 years of age.
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
.0%
Did not attend school
Grade 11 pr less
Grade 12
ha
se
an - m
s
d. ar
.. k
et
in
g
n
et
rn
In
te
et
-
pu
rc
m
at
io
ai
l
m
rn
te
In
In
te
rn
et
-
in
Ce
fo
r
ll
E-
ph
lin
on
e
e
x
nd
Fa
La
Co
m
pu
te
r
Tertiary certificate
Figure 7: Which of the following have you used for business purposes, with education?
42
Tertiary degree
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
ai
pu
l
rc
ha
f
se
an or
s
m
d. a
.. rk
et
in
g
rn
et
te
te
rn
et
fo
r
Em
Rural
In
In
In
te
rn
et
fo
r
Ce
ll
ph
on
e
Co
m
pu
te
r
La
nd
lin
e
Fa
In
x
fo
rm
at
io
n
Urban
Figure 8: Which of the following have you used for business purposes, with urban/rural split
Table 7: Age and where did you learn to use a computer?
Taught
myself
At high
school
College/
university
16 - 29
32.5%
18.5%
34.4%
30 - 35
32.6%
8.9%
28.3%
36 - 40
40.8%
3.6%
20.0%
41 - 50
47.7%
4.6%
13.4%
over 50
52.3%
3.0%
6.8%
4.5.4 Educational level of SMME owners
Educational levels have no impact on whether a
business owner/manager uses a cell phone for
business purposes (Figure 7) with over 94% of all
respondents, regardless of level of education, using
a cell phone for business purposes. Other than a cell
phone, business owners that have a Grade 11 or less in
formal education as their highest qualification make
less use of all ICT types surveyed. The use of a landline
and fax machine is influenced by the high cost of a fixed
line as well as the likelihood that a number of these
businesses do not have formal business premises.
The high cost and long delivery time for fixed lines,
as well as the mobility afforded by cell phones, would
make cell phone telephony a far more convenient
and more accessible means of communication
for business owners with a Grade 11 education.
Educational levels seem to have the greatest impact
on the use of more sophisticated ICT adoptions.
Wolf (2001), in a study in South Africa, found that
businesses using no ICT or only a telephone had lower
levels of schooling than businesses using a greater
range of ICT. In this survey, 81.8% of respondents with
a tertiary degree use the Internet to access information
for their business, which is in stark contrast to the
8% of respondents with no formal education and 14%
with Grade 11 or less who use the Internet to access
information (see Figure 7). Businesses that have
no Internet access will be excluded both from any
business assistance that is offered over the web as
well as from information relating to a wide variety of
topics linked to local and international markets that is
easily accessible on the web. This trend is also apparent
in the use of email. Frempong (2007:5) argues that
modern ICTs, particularly Internet-based services,
are knowledge intensive and therefore require users
to have a certain level of formal education to be
able to use them effectively in a business situation.
Duncombe and Heeks (2001) indicate that being
comfortable with computers is a prerequisite for the
43
2009
email or Internet. Education is therefore important
in enabling individuals to benefit from these more
sophisticated ICTs.
4.6 Business characteristics
4.6.1 Rural/urban
Konde (2007) indicates in a survey of SMMEs in 14
African countries that the most commonly used
communication tool by SMMEs was the mobile
phone. Figure 8 shows that regardless of whether
the owner considers the business to be operating in
an urban (94.1%) or a rural setting (97.6%), cell phones
are used within the business by almost all of the
respondents. The usage of cell phones is, in fact,
marginally higher in rural businesses than in urbanbased businesses. More urban businesses have a
variety of communication tools at their disposal, with
two-thirds of the urban businesses having a landline
and 60% having access to a fax machine. Although
urban businesses are almost twice as likely to use
email, only 41.7% of businesses made use of this form
of communication.
Farrell et al. (2007), as quoted by Van Hoorkik and
Mweeta (2008), indicate that there is a large disparity
in access to ICT between rural and urban areas. He
argues that an unreliable supply of electricity as well
as a lack of ICT training and competency in rural
areas limited the capacity of rural areas to become
ICT proficient. Additional problems faced by rural
populations include computer illiteracy, no telecom
infrastructure, extremely high costs for limited
bandwidth connections and the difficulty in obtaining
spares or speedy repairs when faced with faulty
computers or connections.
Sahlfeld (2007:25) argues that there are two strategies
that could be employed to increase the capacity of
individuals in developing countries to connect to the
Internet. Firstly, she suggests increasing the number
of cheap PCs or laptops that are made available in
rural areas. However, widespread Internet access will
still depend on the availability of cable or wireless
access. The high cost and slow rollout of fixed lines
44
will reduce the efficiency of projects that rely on
dial-up technology to provide Internet access for
the majority of small rural businesses. The second
strategy would be to piggyback on the proliferation
of mobile phones. Mobile phones, she argues, make
more sense than cheap computers as they have the
additional benefits of being mobile and relatively
inexpensive, the infrastructure to use them already
exists and, as many individuals are already familiar
with the workings of mobile phones, they will require
lower levels of computer literacy to be able to use
the mobile phone to access the Internet. The price of
downloading information to mobile phones is, however,
still prohibitive in many areas and this problem is
particularly severe in rural areas. Sahlfeld (2007:23)
argues that given the poor telecommunication
infrastructure and lack of broadband access, many
areas in developing countries have needed to rely
on dial-up technology using a telephone. Given the
paucity of telephone lines in rural areas, it seems
unlikely that fixed lines will remain the preferred
option for many communities.
Respondents were asked to rate their skills with respect
to certain ICT devices. They rated themselves as having
never used the device, still learning, skilled or an expert
user. Table 8 shows the rating for Smartphone usage.
According to Wikipedia, “a Smartphone is a mobile
phone offering advanced capabilities beyond a typical
mobile phone, often with PC-like functionality. There is
no industry standard definition of a Smartphone. For
some, a Smartphone is a phone that runs complete
operating system software providing a standardised
interface and platform for application developers. For
others, a Smartphone is simply a phone with advanced
features such as e-mail and Internet capabilities, and/
or a full keyboard”. The results in Table 8 below show
that Smartphones have not made a significant entry
into the lower-end SMME sector. Only 14.2% of rural
businesses and a quarter of urban respondents had
used a Smartphone. The lack of familiarity with webenabled devices raises questions about the viability of
being able to piggyback on the proliferation of mobile
phones as a solution to the lack of Internet access
(Sahlfeld 2007).
4.6.2 For how long has the business been operating?
Table 8: Rate your skill in using a Smartphone, with urban/
rural split
Still
learning
Skilled
Never
used
Expert
user
Urban
75.9%
9.4%
10.1%
4.6%
Rural
85.8%
6.6%
4.1%
3.6%
Kelly and Biggs (2007) agree that with Africa moving
more towards mobile telephony (rather than fixed
line options) coverage will expand through wireless
platforms, which will be a far quicker solution than
expanding coverage through fixed-line solutions.
They caution that although Africa will be able to roll
out coverage quickly, the coverage is likely to be
limited primarily to urban areas. The digital divide
within Africa is likely to intensify between urban and
rural areas. The rural/urban divide is exacerbated by
higher tariffs, a lack of capacity within rural areas, and
slow and unreliable connections.
There seems to be a relationship between the length of
time a business has been operating and the likelihood
of the business owner having and using a computer in
the business. Just over half of the businesses (54.1%)
that have been in existence for less than a year have
and use a computer, in contrast to more than two-thirds
(66.7%) of businesses that have been in operation for
more than five years. This pattern is similar for fax
machine usage, landline access, email and Internet
usage. Forty-four percent of businesses that have
been in existence for less than a year have and use
a fax machine while two-thirds (67.2%) of businesses
that have been in operation for more than five years
have and use a fax machine. Businesses within their
first few years of operations will have a large number
of urgent and important demands on their limited
cash resources. The complexity of their business
operations as well as the number of customers and
suppliers are likely, on average, to be lower than
for more established businesses, and the need for
100
90
80
70
60
50
Yes
40
No
30
20
10
0
At home
Industrial
Formal
Park
Building
Other
Figure 9: Where does the business operate from, and has and uses a computer in the business?
45
2009
computerisation would be lower. As businesses
mature and formalise their business operations and
potentially their business premises, there is likely to
be both a greater need for and greater benefit derived
from the computerisation of various facets of the
business. It can also be postulated that more mature
businesses would be willing (and possibly more able)
to invest in ICT as the business is more sustainable
and short-term survival is no longer the primary
concern for the business owner.
4.6.3 Formality of the business
Respondents in the survey were asked to identify
from where their business operated. Businesses
operating from an industrial park or formal building
are considered to be formal businesses. Businesses
operating from home are considered less formal
than the options cited above but more formal than
businesses operating from a container, a friend’s
house, a craft market or street trading. Businesses
were also asked to indicate whether their business
was registered. This registration could have taken the
form of a simple trading licence or the business could
have formalised its business practices sufficiently to
be registered with other authorities, for example tax
payments or unemployment benefits. The level of
formality, for which registration and business premises
were seen as a proxy, influences the likelihood of a
business having and using a computer. Registered
businesses are almost twice as likely (60.5%) to have
and use a computer in the business than businesses
that are not registered (32.2%). The more formal the
business premises (Figure 9) i.e. at home (44.7%),
industrial park (65.1%) or in a formal building (71.7%), the
more likely the business is to have and use a computer.
Only 27.3% of businesses operating from a container, a
friend’s house, a craft market or street trading have or
use a computer in their business. Research has shown
that access to ICT facilities at business premises is
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Male
46
s
st
ic
Lo
gi
ns
pe
ra
O
ke
ar
M
Figure 10: Competency with respect to business skills
tio
tin
g
IT
um
H
Fi
na
nc
e
an
an
re
d
so
Ad
ur
m
in
ce
s
Female
Perceived IT skills
5
4
3
2
1
0
Less than
Grade 10 -
Grade 10
11
Grade 12
Tertiary
Tertiary
Certificate
Degree
Figure 11: Perceived IT skills and education
influenced by the formality of the business. According
to Frempong (2007:6), the use of ICT services such
as fixed line telephone, fax machines and computers
requires a more permanent business structure. These
services would therefore be more prevalent within
formal businesses. Informal operators, transacting
from temporary, mobile business premises, would be
more likely to rely predominantly on mobile phones
as their ICT service of choice. A further reason for
the lack of fixed line telephone, fax machines and
computers within informal businesses would be the
high cost attached to these forms of ICT.
4.7 ICT characteristics
4.7.1 Business skills of owners/ managers
According to Tweed and McGregor (2001:1),
“The management process in small firms is unique
and cannot be considered the same as professional
management in larger organisations practised on
a reduced scale. In small firms, the managerial
roles are likely to be located in one person
whose personality, experiences and knowledge
influence the management process. The core
competencies of the enterprise become virtually
synonymous with the competencies of the manager”.
To be able to manage a small business successfully
requires the business owner to be competent in a
variety of key areas. Respondents were asked to rate
their perceived competence with respect to a variety
of business skills that are considered necessary to
successfully manage the day-to-day operations of
SMMEs. The following business skills were surveyed:
finance and administration, human resources,
information technology, marketing, operations, and
logistics. On a scale of 1 to 5, with 1 being the lowest
and 5 being the highest, respondents were asked to
rate how competent they were with respect to the
above-mentioned skills.
Figure 10 illustrates that male respondents were, on
average, more confident than female respondents
were with respect to their self-assessed competency
ratings for all the business skills surveyed. Both
male and female respondents felt least competent
with respect to IT skills. The United Nations (2004)
quotes an OECD 2003 study that shows that ICT
usage contributes to business performance only if
complemented by the correct organisational changes.
The study also showed that businesses that are
managed poorly or have low skills levels do not benefit
from ICT usage, as they are incapable of effecting the
correct organisational changes within the business.
ICT is one factor among several that can improve
the performance of firms. ICT access should not be
seen in isolation - access to finance, business skills,
managerial skills and infrastructure are at least as
important as ICT in improving the performance of firms.
Rural business owners were particularly negative in
their perceived competence with respect to IT skills
47
2009
(1.88) when compared to urban business owners (2.70).
Businesses with owners that do not believe that they
have the correct IT skills are less likely to invest in ICT
solutions. If these businesses do implement ICT as a
business solution there is a danger that, given their
lack of business skills in general, they will be unable
to effect the required organisational changes within
the business to benefit from the introduction of ICT. In
these cases, the cost of ICT is likely to outweigh any
benefit and the owner may become resistant to any
additional ICT investments. Respondents that had no
computer in their business and had no Internet access
rated their perceived competence with respect to IT
skills at 1.62 while business owners without a computer,
but who accessed the Internet on their phone or at
an Internet cafe, rated their perceived competence
at 2.24. Business owners regarded as sophisticated
computer users, i.e. where the business had more than
five networked computers and accessed the Internet
from the business premises, rated their perceived
competence with respect to IT skills at 3.55.
Education is significant in improving business owners’
perceived competence with respect to the entire range
of business skills reviewed in the survey. Figure 11
shows that there is a progressive increase in perceived
competence of IT skills as educational levels increase,
with respondents with less than Grade 10 rating their
skills at 1.51 and respondents with a tertiary degree
rating their skills at 3.16. Wolf (2001) indicates that
secondary education is a necessity should businesses
wish to successfully adopt ICTs.
Given that SMME business owners are often the
instigators or champions in adopting ICT, it is less
likely that business owners with a lower perception
of their own competence would play an active role in
promoting ICT adoption within their business. They
are also more likely to be hesitant in approaching
consultants for ICT advice, as they would not have
the confidence that they would correctly understand
and interpret advice given by the consultants. Should
these businesses use consultants, they are more likely
to purchase generic ICT solutions or solutions that do
not address their particular ICT needs. This could be
48
due to a lack of ICT knowledge or because they lack
basic business skills and are therefore not able to
determine what the actual needs of their business are
and what is required to solve them.
4.7.2 Have you ever been taught to use a
computer?
Table 9: Have you ever been taught to use a computer?
Do you have and use a
computer in your
business?
Have you ever
been taught to
use a computer?
Yes
No
Yes
79.3%
20.7%
No
8.9%
91.1%
Table 9 above shows that business owners that
have been taught to use a computer are significantly
more likely to have and use a computer in their
business (79.3%). This is in stark contrast to the
8.9% of respondents that had not been taught to
use a computer who had and used a computer in
their business. While it may seem strange that 8.9%
of the respondents that had not been taught to
use a computer indicated that they had and used a
computer in the business, respondents were asked to
indicate whether a computer was used in the business
and not whether they personally used the computer.
This finding concurs with Sundstrom (2006), who
indicates that greater ICT knowledge improves the
likelihood of IT adoption. She argues that owners with
greater ICT knowledge are more likely to have a better
understanding of the both the benefits and the risks
attached to an investment in ICT. This knowledge can
decrease the risk or the uncertainty attached to ICT
adoption. Respondents that have been taught to use
a computer are likely to be more positive with respect
to their own capacity to understand the risks and
benefits attached to ICT adoption and are therefore
more likely to invest in computers.
4.7.2.1 Where were you taught?
The 72% of the respondents to the survey that had
indicated that they had been taught to use the
computer were asked to indicate where they had
been taught. Respondents could indicate more than
one option, as it is understandable that individuals
that initially taught themselves may later decide to
attend a computer course, or that both high school
and college could be a source of learning.
Table 10: Computer education
Taught myself
40.2%
Taught at work
17.3%
Computer course
34.8%
At high school
8.5%
College/university
22.6%
Taught by friends
7.6%
Table 10 shows that secondary education (8.5%)
played only a small part in creating a computer literate
business population. Tertiary education was more
significant in creating a computer literate business
population in that 22.6% of the respondents developed
their computer skills by attending college or university.
Given that only a small percentage of the population
is able to access a tertiary education, it is vital that
secondary schooling acknowledges its critical position
in improving the computer literacy of the population.
In the sample of businesses surveyed, over half of
the respondents (55%) had Grade 12 as their highest
level of education. With only 8.5% of the respondents
developing computer skills at high school, secondary
schooling is clearly failing the population with respect
to computer literacy, with many school leavers
trying to fill this gap through self-study (40.2%) or
by attending a computer course (34.8%). Rae (2006)
indicates that ICT adoption seems to depend on a
single individual driving the project in the business.
His studies show that this individual generally did
not have formal ICT training (i.e. was self-taught) as
computer training was seen to be expensive and too
generic. Duncombe and Heeks (2001) concur with
this finding in their survey of SMMEs in Botswana.
Their study indicates that the majority of SMMEs rely
on learning the required computer knowledge while
running their business. Duncombe and Heeks (2001)
also found that small businesses learned through
experience and experimentation. Experimentation
with respect to ICT adoption could lead to the business
owner making expensive or unnecessary decisions
with respect to ICT. These decisions may make the
owner more conservative with future ICT decisions, or
may mean that the business has an ICT platform that
is not able to offer the functionality actually needed
by the business.
4.7.3 Why don’t you use a computer in your business?
Forty percent of the sample indicated that they did not
have and use a computer in their businesses. These
respondents were asked to indicate, from a list of
options, why they did not have and use a computer
in their business. Respondents could provide more
than one answer to the question. Table 11 below shows
that half of these respondents indicated that they
did not have a computer because they felt it was too
expensive.
Table 11: Why don’t you use a computer in your business?
Too
expensive
Don’t know
how to use a
computer
Too
small to
need it
No electricity
50.2%
40.3%
36.8%
2.1%
This is significantly lower than the 90% of SMMEs in
a study in Botswana, conducted by Duncombe and
Heeks (2001), which indicated that they could not
afford to purchase a computer. Decreasing computer
prices and particularly the influx of cheaper computers
seem to have made computers, from a cost point of
view, more accessible. However, given the generally
scarce resources with which SMMEs often attempt
to start a business, cost considerations still have
a significant impact on each business decision the
owner makes. Lack of computer skills was also a
significant factor influencing whether a business had
49
2009
and used a computer. Forty percent of the business
owners that did not have and use a computer in their
business indicated that a reason for their decision
was that they did not know how to use a computer.
Business owners face much uncertainty in running
a business and it is unlikely that business owners
would willingly increase this uncertainty by investing
in technology that they are unable to operate.
Individuals who do not know how to use a computer
will also have no perception of the potential benefits
that ICT could offer their business. Adult education
and government-funded service organisations
need to consider offering basic computer skills to
SMMEs. This should include becoming familiar with
word processing and spreadsheet programmes, as
these are the basic functionalities used by a large
number of the SMMEs that are computer proficient.
An important role of basic computer education is also
to remove the fear of the unknown. Individuals are
more likely to experiment with technology once they
have a basic understanding of how the technology
operates. Knowing how to use a computer will open
up the opportunity to use the Internet as an additional
tool. Just over a third (36.8%) of the businesses
indicated that they felt that their business was too
small to need a computer. As mentioned previously,
Kotelnikov (2007:6) argues that relatively simple
technology, such as fixed line/mobile phones and
fax machines, allow businesses to communicate
effectively with suppliers, employees and customers.
Small businesses with simple operations or extremely
localised business interests are less likely to see the
benefits of computerisation. These business owners
may have no intention of expanding their operations
or looking for new markets. This survey did not
question why the businesses thought that their
operations were too small to benefit from a computer.
A further research area could be to look at whether
there are tangible benefits that would outweigh the
ICT costs for these businesses. SMMEs are only likely
to invest scarce resources when they can see a strong
likelihood of tangible benefits, and businesses that
have already decided that they are too small to need a
computer are likely to be more resistant to change.
4.7.4 Skills with respect to various ICT devices
Frempong (2007) indicates that although mobile
telephones are used extensively by all three categories
of businesses (formal, semi-formal and informal)
surveyed in his study, it is important to differentiate
between what the businesses use mobile phones for.
Are mobile phones used predominantly for voice and/
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
Never Used
40.0%
Still Learning
Skilled
30.0%
Expert user
20.0%
10.0%
0.0%
Male
Female
Cell phone
Male
Female
Computer
Male
Female
Smart phone
Male
Female
Male
Pocket PC
Figure 12: Rate your skills on the following technological devices, by gender
50
Female
PDA
or SMS communication or are mobile phones used for
more sophisticated ICT services? If mobile phones are
going to play an important role in allowing individuals
and SMMEs to “leapfrog” over the need to progress
from a basic computer to more sophisticated ICT i.e.
the Internet, more people will need to become familiar
with new generation phones. To gauge how familiar
the respondents were with a variety of technological
devices, the survey asked respondents to indicate
whether they had never used, were still learning,
were skilled or expert users of each of the following
devices: cell phone, computer, Smartphone, Pocket
PC and a PDA. Figure 12 shows that the majority of the
male respondents indicated that they were proficient
in the use of both a cell phone and a computer. Fiftytwo percent indicated that they were skilled (40.9%) or
expert users (11%) of a computer and an overwhelming
majority, namely 92.8%, indicated that they were
skilled (62.2%) or expert users (30.6%) of a cell phone.
An overwhelming majority of the female respondents
indicated that they were extremely proficient in the use
of a cell phone, with 66.4% indicating that they were
skilled users and 26.8% considered themselves expert
users. However, the majority of female respondents
did not consider themselves to be skilled or expert at
using a computer (46.2%).
Although the survey did not ask for clarity regarding
the sophistication of the cell phone that respondents
considered themselves expert at using, a significantly
lower number of respondents are familiar with the
more technologically advanced Smartphones. Almost
three-quarters of the male respondents (73.4%) and
over eighty percent (82.2%) of female respondents
had never used a Smartphone. In contrast to the
overwhelming majority that considered themselves
extremely proficient in using a cell phone, only 16.9%
of male and 10% of female respondents considered
themselves either skilled or expert users of a
Smartphone. The difference in cell phone familiarity,
between a cell phone and a Smartphone, seems to
indicate that the majority of phones in use are basic
handsets that allow for voice and short message
services. Familiarity with Pocket PCs and PDAs is
even lower than the familiarity with a Smartphone.
According to Wikipedia, “a Pocket PC is a hardware
specification for a handheld-sized computer (personal
digital assistant) that runs the Microsoft Windows
Mobile operating system. It may have the capability to
run an alternative operating system such as NetBSD,
Linux, Android or others. It has many of the capabilities
of modern desktop PCs”. Wikipedia defines a personal
digital assistant (PDA) as “a handheld computer also
known as a palmtop computer. Newer PDAs also have
both colour screens and audio capabilities, enabling
them to be used as mobile phones, (Smartphones),
web browsers, or portable media players. Many PDAs
can access the Internet, intranets or extranets via WiFi, or Wireless Wide-Area Networks (WWANs). Many
PDAs employ touch screen technology.” According
to Arthur Goldstuck (2005), “the low ranking of new
mobile technologies is an indication of the fact that
SMMEs operate in the here-and-now, with budgets
oriented almost entirely to practical demands, rather
than the nice-to-haves, the unknowns, and the cutting
edge technologies.” Table 12 shows that 23.1% and 10.7%
of the respondents had used a Smartphone and PDA
respectively. The survey did not ask the respondents
to clarify whether they regularly used these devices
in their business. The fact that 14% and 6.2% of the
respondents considered themselves to be proficient
in using Smartphones and PDAs respectively would
seem to be a positive finding. These figures are
comparable to the 2007 SME survey by World Wide
Worx, which found that 16% of their sample of 500
SME decision-makers used PDAs while 14% made use
of Smartphones (quoted in an article on bizcommunity
(2007). The article quotes Arthur Goldstuck, MD of
World Wide Worx, who notes that “the significant
aspect of this finding is not the extent of usage, but the
impact of that usage on competitiveness in that there
is a higher correlation with being highly competitive
among PDA and Smartphone users than with almost
all other hardware options.”
51
2009
Table 12: Rate your skills on the following technological devices
Never
used
Still
learning
Skilled
Expert
user
Smartphone
76.9%
9.1%
9.5%
4.5%
PDAs
89.3%
4.6%
3.7%
2.5%
4.7.5 The use of technology in the processing of day-to-day
operations
4.7.5.1 What methods do you regularly use for placing orders with suppliers?
Sundstrom (2006:1) quotes a number of studies that
show that electronic invoicing reduces administration
costs, speeds up payment times and can improve
supplier and customer relations. However, even
though automating the invoice process has large
savings potential, many SMMEs still use traditional
methods to send invoices i.e. postage and fax. Large
organisations are more likely to introduce e-invoicing,
but SMMEs lag significantly in their adoption of this
form of invoicing. This study asked respondents
to identify, from a list of options, which method or
methods are used regularly in placing orders with
suppliers, receiving payments from customers and
making payments to suppliers. The survey also asked
the respondents that had indicated a need for inventory
control to specify whether their primary method of
inventory control was manual or computerised.
Table 13: What methods do you regularly use for placing orders
with suppliers, with urban/rural split?
Paper
Telephone
Email
Urban
42.5%
59.5%
14.6%
Rural
44.1%
67.2%
4.9%
52
Table 13 show that computerisation in the form of
email communication makes up a relatively small
percentage of the preferred method of placing an order
with suppliers. Urban businesses made greater use
of email to place orders than rural businesses (4.9%).
However, with only 14.6% of urban businesses using
it regularly to place orders, email has not replaced
traditional paper-based fax-reliant methods. Urban
businesses are almost three times as likely to use
a paper-based ordering system and more than four
times as likely to use a telephonic option rather than
an electronic option when ordering. The bias towards
traditional paper and telephonic systems is even more
prevalent in rural businesses, with only 4.9% (Table 13)
of the respondents indicating that they regularly used
email when placing orders with suppliers. A difficulty
faced by many rural businesses, and potentially urban
businesses that trade with other SMMEs, is that the
suppliers themselves may not be email conversant.
Having and being able to use a computer is a precursor
to being able to use sophisticated ICT technology such
as the Internet and email. Given the low number of
rural businesses that have and use a computer or the
Internet in their business (Figure 7), it is unsurprising
that email is not a preferred method. What is more
surprising, however, is the low percentage of urban
businesses that regularly use email to place orders.
4.7.5.2
What methods do you regularly use for receiving payments from
customers or making payments to suppliers?
Both urban and rural businesses are most likely to use
cash as their most regular method, both for receiving
payments from customers and making payments
to suppliers (Tables 14 and 15). 74.3% of urban and
85.3% of rural businesses regularly receive cash from
customers and 67.2% of urban and 81.9% of rural
businesses regularly make cash payments to suppliers.
According to Wikipedia, an EFT transaction “is initiated
by a cardholder when a payment card, such as a debit
card, is used. This may take place at an automated
teller machine (ATM) or point of sale (POS), or when
the card is not present, which covers cards used for
mail order, telephone order and Internet purchases.”
high costs they would have to pay for this service. It is
also less likely that a large number of their customers
would use credit cards as a preferred payment method.
Table 14: What methods do you regularly use for receiving
4.7.5.3What is your primary method of keeping control of your stock levels?
payments from customers, with urban/rural split?
Cash
Cheque
Credit
card
Electronic
(EFT)
Urban
74.3%
28.0%
15.0%
38.2%
Rural
85.3%
19.1%
2.0%
21.1%
Table 15: What methods do you regularly use for making
payments to suppliers, with urban/rural split?
Cash
Cheque
Credit
card
Electronic
(EFT)
Urban
67.2%
24.8%
7.8%
35.4%
Rural
81.9%
20.6%
2.5%
14.7%
EFT payments via the Internet, ATM machines or debit
cards are an area of technology that is becoming
more popular with SMMEs. The survey did not clarify
whether the electronic (EFT) payments made by
the businesses to their suppliers were via Internet
banking or whether the business owners made use of
an ATM machine or debit cards to make the electronic
payments. EFT as a form of receiving payment is the
second most regular payment option used, with over a
third of urban and a fifth of rural businesses regularly
receiving EFT payments. Reasons why electronic
banking is becoming increasingly popular as a form
of transacting include the lower costs attached to
electronic banking and higher levels of crime that
increase the cost of holding cash. Credit cards, both as
a form of receiving or making payments, are the least
popular method for both urban and rural businesses,
with only 15% of urban and 2% of rural businesses
receiving payments and 7.8% of urban and 2.5% of rural
businesses making payments via this method. Rural
businesses are constrained by the lack of telephone
lines required to run credit card machines as well as the
According to Friedland et al. (2008:2), the primary
challenges facing rural businesses with respect to
improved economic development are related to the
small size of the enterprise, and the small size of their
market. These factors mean that businesses generally
make small purchases at any one time. In their study on
spaza shops in Sekhukhune (Friedland et al. 2008:5),
the authors identified the following specific problems
facing rural businesses: low financial liquidity, small
purchasing volumes, inability to negotiate trade
discounts or the ability to purchase on credit, as well
as additional costs such as the extra transport and
time required to complete numerous small purchase
orders. Spaza shops in turn charge high prices that
further erode the small market that they are able to
access. Friedland et al. argue that the problems faced
by spaza shops in rural areas are likely to be similar
to problems faced by a number of other businesses
and sectors.
Table 16: What is your primary method of keeping control of
your stock levels, with urban/rural split?
Manual
Computerised
Other
Urban
71.9%
26.5%
1.6%
Rural
90.7%
7.3%
2%
Table 16 shows that urban businesses (26.5%) are three
and a half times more likely to use a computerised stock
control method than rural businesses (7.3%). Given the
small purchasing volumes, it is less likely that rural
businesses would see the benefit of a computerised
inventory system. In addition, their low liquidity and
cash resources mean that few would be in a position
to consider investing in additional technology.
53
2009
4.7.6 The effect of education on the use of technology in the processing of day-
to-day operations
the EFT payment method removes the need to have
face-to-face contact in order to make payments.
Table 17: What methods do you regularly use for receiving
Sundstrom, J. (2006) quotes Thong and Yap who
argue that innovation and ICT knowledge are
important factors in determining whether SMMEs
adopt new technologies. Research has also shown
that a higher educational level encourages a higher
level of innovation. The Global Entrepreneurship
Monitor recognises the relationship between a higher
education, particularly a tertiary education, and a
greater propensity to engage in entrepreneurial
activity. Individuals with a tertiary degree are also
more likely to start an opportunity versus a necessitymotivated business. Opportunity businesses start
because the individual sees an opportunity in the
market and then chooses to start the business.
Opportunity businesses are more innovative than
necessity businesses, as they are started with the
intention of filling a perceived gap in the market while
necessity businesses are started because the owner
has no other option for work.
4.7.6.1 What methods do you regularly
use for receiving payments from
customers or making payments to suppliers?
Tables 17 and 18 show that for the majority of
business owners, regardless of educational levels,
cash is the preferred regular means of making and
receiving payments. The only exception is business
owners with a tertiary degree. Businesses owned
or managed by an individual with a maximum of a
Grade 11 qualification are overwhelmingly cash-driven
businesses. Ninety percent of these businesses
regularly receive cash payments from customers
(Table 17) and 85.7% regularly make cash payments to
suppliers (Table 18). Almost 65% of business owners
with a tertiary degree regularly use/receive electronic
fund transfers to make and receive payments.
Being able to offer clients the option to pay via an
electronic fund transfer enables the business to
receive payments from clients from further afield, as
54
payments from customers, with education?
Cash
Cheque
Credit
card
Electronic
(EFT)
Grade 11 or
lower
90.5%
23.2%
5.1%
17.9%
Grade 12
84.0%
27.7%
14.8%
29.9%
Tertiary
certificate
71.0%
29.5%
15.4%
42.4%
46.6%
27.5%
18.6%
63.2%
Tertiary
degree
Table 18: What methods do you regularly use for making
payments to suppliers, with education?
Cash
Cheque
Credit
card
Electronic
(EFT)
Grade 11
or lower
85.7%
20.5%
3.0%
12.5%
Grade 12
76.5%
22.4%
8.2%
26.3%
Tertiary
certificate
64.2%
27.2%
7.9%
38.6%
Tertiary
degree
36.4%
30.8%
8.9%
64.8%
Frempong (2007) argues that in the absence of credit
card facilities, EFT payments can facilitate trade with
the Ghanaian diaspora in Europe and America. Given
the low level of credit card facilities (Tables 17 and 18)
amongst all of the businesses surveyed, as well as
the increased extent of the South African diaspora in
Europe, America, Australia and the UK, businesses
with EFT payment facilities would be in a better position
to access this market. A further advantage offered by
EFT payment facilities is that businesses do not need
to hold excessive cash balances, either once they are
paid or when they need to withdraw to pay suppliers.
The option to minimise the amount of cash either
at the business premises or carried by the business
owner decreases the risk of theft. Cash deposit and
withdrawal fees are, in addition, more expensive than
EFT payments so not making use of EFT payment
options increases the banking costs for the business.
Using a credit card as a form of payment or allowing
credit card payments minimises the amount of cash
on hand. However, credit card payments increase the
cost of transacting, as the business will have to pay
a commission to the bank. Internet-based credit card
payments are not regarded as being as secure as EFT
payments, and unless the SMME has secure payment
software it is unlikely that customers would readily
make online credit card payments.
forms, these businesses would incur higher travel and
time costs and it would be extremely difficult for them
to compete on an equal footing. Given that research
indicates that the Internet has numerous positive
benefits for business, Frempong (2007:8) questions
why so few SMMEs have adopted the Internet in their
business. Although the majority of SMME owners in
his study had completed secondary education, he
argues that this does not necessarily mean that they
are computer or Internet literate. Freepong also puts
forward a number of additional barriers to Internet
usage facing SMMEs, namely:
4.8 Access to the Internet
•
•
Forty-two percent of the respondents indicated that
they did not use the Internet for business purposes. In
order for SMMEs to become involved in businesses that
have the potential to become high value businesses,
both the ability to use technology and the access to
technology are important. The Internet is an important
source of business information as well as a source of
potential business ideas. For businesses to become
competitive, develop relationships with customers
and suppliers and have easier access to information
regarding new business opportunities, it is important
that they have access to both communication
methods and technology. Access to technology is
important both in accessing business information
prior to starting a business and in allowing existing
businesses to remain competitive in the market.
These results, namely that 42% of the respondents
do not use the Internet, indicate that Internet-based
business services are likely to be ineffective in
reaching the majority of these businesses, as access
to the requisite technology is extremely limited.
Tenders and other government contracts that require
businesses to access information via websites or
email correspondence will exclude businesses that
do not have access to these technologies. Even if
businesses are able to collect paper-based application
• Products/services not suitable for sale over the
•
Internet
Customers not ready to participate in
e-commerce
Security problems concerning payments
Logistical problems: Internet may allow the
business to find new markets but the business
will still need to be able to supply the product or
service to the customer. If the business is located
in an area with limited transport possibilities,
finding the customer via the Internet will not make
it any easier to supply the product.
A 2004 United Nations study noted that the uptake
of Internet services in South Africa was relatively low
and indicated that reasons for this included high costs,
a lack of high speed connections and security issues
including virus transmission. Given that SMMEs often
have outdated ICT hardware and software, they are
more vulnerable to virus transmission and fraud and
are therefore hesitant to adopt office-based Internet
services. SMME owners are often so involved with
the day-to-day operations of the business that they
do not have time to develop an understanding of the
various technologies that are available. This lack of
knowledge acts as a strong deterrent when deciding
on possible ICT spend. Their own lack of knowledge
is compounded by the lack of qualified IT staff. The
lack of qualified staff and the high cost of consulting
services can also be seen as a major impediment
preventing businesses from moving from a low level
of ICT usage to more sophisticated ICT. SMMEs often
55
2009
feel that that many of their day-to-day operations can
be conducted as efficiently off-line, and this belief
negates the need for more sophisticated ICT.
option. However, when analysing the respondents that
access the Internet via a cell phone it was found these
respondents were almost exclusively urban-based
(93.5%) and the overwhelming majority used a cell
phone to complement, rather than replace, a computer
in their business as 90% of these respondents had
and used a computer in their business. Sixty-seven
percent of the respondents that accessed the Internet
via a cell phone were male. The majority of these
respondents operated from a formal building (62.3%)
with a further 26.9% operating from home.
Table 19: Where do you regularly access the Internet?
Office
computer
Home
computer
Cell phone
Internet
cafe
57.5%
30.8%
22.9%
31.3%
Fifty-eight percent of the respondents indicated that
they had access to the Internet. These respondents
were asked to indicate where they accessed the
Internet, namely an office computer, home computer,
a cell phone or from an Internet cafe. Given that
respondents could use more than one form of Internet
access device, respondents were encouraged to
indicate all the devices that they regularly used.
Table 19 shows that the majority of the respondents
with Internet access accessed the Internet through
an office computer (57.5%). Approximately a third
of the respondents regularly used an Internet cafe
(31.3%) or a home computer (30.8%). With over a fifth
of the respondents (22%) accessing the Internet over
a cell phone, becoming part of the Internet generation
without having to invest in a PC seems to be a plausible
A United Nations (2004) study in four Asian countries
describes businesses as Internet users, prospective
Internet users or traditional businesses (no Internet
usage).
• Internet users: The owners of SMMEs that made
•
relatively extensive use of the Internet tended to
have higher educational qualifications. The study
argues that there is a strong link between the
educational qualifications of the owner/manager
and the effectiveness of the Internet usage in the
business.
Prospective Internet users: These businesses
are still struggling with internal challenges
such as access to finance. Although they
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Yes
No
ol
d
t
id
D
no
at
n
te
o
ch
s
e
G
d
ra
1
to
9
G
r
e
ad
10
to
11
de
ra
e
at
ic
tif
ia
rt
Te
ry
ce
ry
ia
t
er
T
e
re
r
G
Figure 13: Internet access and educational level
56
12
g
de
Figure 13 shows a clear relationship between
educational attainment and Internet usage. Only
14% of business owners with no schooling accessed
the Internet. The percentage of business owners
accessing the Internet increases as their level of
schooling increases. The increase is most noticeable
from Grade 12 onwards. Half of the respondents with
Grade 12, almost three-quarters of the respondents
with a tertiary certificate and 91% of the respondents
with a tertiary degree accessed the Internet. As
indicated in the 2004 United Nations study quoted
above, the majority of the Internet users had a higher
educational qualification. The majority of businesses
owned by respondents with Grade 11 or less are likely
to be traditional businesses and would therefore
lack a real awareness of the potential benefits of ICT.
Figure 7 (pg 65) showed that access to a computer for
businesses owned by respondents with Grade 11 or
less is extremely low.
Both the size of the business i.e. micro, very small
or small and whether the business is urban or rural
based (Table 20) affects access to the Internet. Just
over half the micro businesses (54.7%) have access to
the Internet while three-quarters of small businesses
have access to the Internet (75.8%). Morris (2006)
quotes research by the South African Foundation
that indicates that the cost of Internet access in South
Africa is 400% greater than in 13 other comparable
countries. While Internet costs have been decreasing,
South African charges are still considerably higher
than in many developing countries. The high costs
would most certainly affect rural and micro businesses
more, and may partially explain the lower Internet
usage by rural and micro businesses.
Table 20: Internet access and urban/rural split
Yes
No
Urban
61.5%
38.5%
Rural
30.9%
69.1%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
.0%
Micro
Very small
in
es
s
rs
g
in
Pr
o
m
N
ew
pa
bu
s
rt
ne
ss
ne
N
ew
bu
si
se
a
Re
Ba
n
ki
ng
rc
h
Small
ot
•
have some knowledge of ICT and its
potential benefit, the business has not made
use of technologies such as the Internet.
Traditional businesses: These businesses are
characterised by a lack of awareness about
potential benefits of ICT. They have no access to
ICT technology such as the Internet.
Figure 14: What do you use the Internet for, by business size?
57
2009
4.8.1 For what purpose do businesses use the Internet?
A 2004 United Nations study found that the most
common uses of the Internet by small businesses
were to research new product ideas and to monitor
the market in which they operate. An EDLAC (2004:41)
study of urban SMEs in Latin America found that the
most common uses of the Internet were email (98%),
searching for information (90%), banking (80%),
monitoring the market (54%), communicating with
public authorities (53%) and finding job opportunities
(27%). Trigrammic Consulting (2004) quotes the
2003 SME survey that found that South African
SMEs were using the Internet for the following
purpose: communications with customers (53.7%),
communications with suppliers (44.4%), providing
service and support to customers (44.4%), establishing
a business presence (40.7%), gathering information
on customers (31.4%), selling services (29.6%) and
gathering information on competitors (27.7%). In this
survey, business research (85%) and finding new
business ideas (52.9%) are the most common uses of
the Internet (Table 21). Less than half of the businesses
(47.3%) use the Internet for banking.
Table 21: For what purpose do businesses use the Internet?
Banking
47.3%
Table 22: EFT banking by business size
EFT payments
from customers
EFT payments to
suppliers
Micro
32.2%
27.5%
Very small
43.7%
43.7%
Small
59.2%
62.5%
4.9 Computer sophistication
Business
research
Finding
new
business
ideas
Finding
new
partners
Promoting
the
business
85.0%
52.9%
24.9%
46.3%
Figure 14 shows that all of the businesses,
regardless of whether the business is micro,
very small or small, used the Internet primarily
for business research. Substantially more small
businesses (compared to micro and very small
businesses) use the Internet for banking purposes
with three-quarters of small businesses using the
Internet for banking purposes. This is similar to the
findings of the EDLAC study referred to previously.
58
Frempong (2007:8) found that Internet banking was
used predominantly to check balances and order
cheque books and that little use had been made of
EFT payments for business purposes. He speculates
that issues of security and customer confidence may
be limiting the use of e-banking. The findings in Table
22 raise a question regarding banking usage in small
businesses. Seventy-five percent of small businesses
used the Internet for banking purposes, and 59.5% and
62.5% of small businesses used EFT facilities, both
as a means of receiving and making payments. This
research did not specify whether the EFT payments
made and/or received by the business were via a debit
card, the ATM or the Internet. However, given the large
number of small businesses that regularly make use
of EFT facilities, further research could identify the
type of EFT payments most frequently used.
A report prepared by Trigrammic Consulting (2004:33)
refers to the “business digital divide”. The report
describes this divide as the “divide between those
businesses (generally smaller and less sophisticated)
who do not have access to ICT and those generally
larger and/or more sophisticated businesses that
are able to both afford access and have the skills to
put it to good use.” The report provides a number of
reasons why smaller firms are less sophisticated in
their adoption of ICT (2004:34 - 35), namely cost, riskaverse behaviour, limited resources and a focus on
regional markets. An additional reason could be the
inferior position of SMMEs in many value chains.
• Cost
• Focus on regional market
The cost of introducing ICT into their business, as
a percentage of sales, is considerably higher for
smaller businesses. If small businesses are unable
to quantify the benefits of ICT, they are likely to
conclude that adopting new technology is unlikely
to have a significant impact on their sustainability.
Although more advanced uses of ICT may enhance
productivity, smaller businesses are often not aware
of these benefits and therefore are unable fully to
leverage their ICT investments to obtain the maximum
benefits for the costs incurred.
According to the report by Trigrammic Consulting
(2004: 35), small businesses face a ‘small is beautiful’
growth paradox. Smaller businesses often sell
only to the final consumer, or have clearly defined
regional markets. These businesses may not wish
to expand their business via the Internet. The report
argues that “due to their lack of linguistic skills,
lack of understanding of regulatory and standards
requirements, or the logistical capacity to deliver”,
these businesses may choose not to grow their sales
via the Internet.
• Limited resources
• Smaller companies are often
reliant on legacy systems
Small businesses have limited financial, management
and personnel resources. This limits the time that
businesses have to adapt to new technologies adopted
into the business. Small businesses that purchase
generic ICT solutions can waste large amounts of time
and possibly financial resources trying to understand
or implement programmes that are not applicable
to their business entity or do not complement the
existing business processes. Businesses that have
negative ICT experiences are likely to be more riskaverse when offered further ICT solutions.
Once smaller businesses have invested in a particular
legacy system, the business could be resistant
to changing this system regardless of whether
it is outdated and unable to accommodate new
functionality.
• Inferior position in value-chain
SMMEs often do not see the benefits of working
co-operatively with larger organisations. This is
particularly true when the working relationship
demands that the SMME adopt and integrate various
ICTs into the business processes. The SMMEs perceive
themselves as the smaller partner without the ability
to have an impact in decision-making. SMMEs see
themselves as submissive partners that will have
to accept technological changes forced on them by
larger partners (ECLAC, 2005).
To develop a better understanding of the “business
digital divide”, i.e. whether smaller firms are in fact less
sophisticated in their adoption of ICT, respondents
were asked a number of questions relating to their
computing environment. These questions included: did
the business have and use a computer in the business;
questions regarding connectivity i.e. whether they
connected to the Internet from the business, a cell
phone, at home or at an Internet café; and whether the
business computers were networked i.e. whether the
59
2009
business had a local area network (LAN), a wide area
network (WAN) and/or a virtual private network (VPN).
Businesses were also asked whether the business had
an email address and/or a website. The responses to
the questions indicated above were then reviewed
to determine whether smaller firms are, in fact, less
sophisticated in their adoption of ICT.
4.9.1 No computer or Internet access
A third of the total sample (33.4%) indicated that
they had neither a business computer nor any
access to the Internet. Duncombe and Molla (2006)
classified businesses with respect to their ICT usage
as being in either the foundation state, exploratory
state, graduation state or expert state. According to
Dumcombe and Heeks, businesses in the foundation
state made no use of computers and had no online
capabilities. They found that businesses in this category
lacked core business capabilities, technological
know-how and financial and technological resources.
These businesses were unaware of the benefits of
e-commerce and had, as their primary objective,
business survival. Smaller businesses were more likely
to not have and use a computer with 36% of micro, 27%
of very small and 14% of small businesses indicating
that they had neither a business computer nor any
access to the Internet (Table 23). These businesses
could be classified as businesses in the foundation
state. Any support offered to these businesses would
have to spend a considerable amount of time and
resources on improving the core business capacities,
both from a business resource and a human capacity
point of view. It is unlikely that businesses at this stage
would benefit from the introduction of additional ICT.
While additional ICT adoption would be unwise at
this level, improving the individuals’ technological
capacity is important as it will both enable and
encourage the owners to feel more comfortable with
technology such as the Internet. The majority of micro
businesses use a cell phone for business purposes
60
and for businesses at the foundation state, this level
of ICT usage is sufficient while the business owners
improve their core business skills.
Table 23: Business size and no computer or Internet access
Micro
36.8%
Very small
27.0%
Small
14.4%
A United Nations survey (2004) conducted in
Nigeria found that one-third of micro businesses
(businesses with less than 10 employees) did not
have any ICT at all. The study also showed that
the owners of these businesses had a low level of
educational qualifications. Table 23 above shows
the computer sophistication of micro, very small
and small businesses in the sample. A similar
percentage of micro businesses in this sample had
no access to a computer or the Internet (36.8%).
4.9.2 Internet access
Micro businesses are less likely to have access to
the Internet with 45% of micro businesses having no
Internet access (Table 24) and it is likely that these
businesses would rely on the cell phone, informal
gatherings and personal contacts to collect information.
The survey did not specifically ask why businesses
did not make use of the Internet; however, it may be
useful to question why these businesses make no use
of the Internet. Reasons could include the high cost of
Internet services, language of the Internet or lack of
connectivity. Sahlfeld (2007:26) questions whether,
in developing countries, sufficient local content would
be available to benefit SMMEs. She also raises the
concern that local languages are not accommodated
on the Internet. This would decrease the benefit to
SMMEs, particularly in rural areas and in cases where
the owner/manager has limited schooling.
Table 24: Do you have access to the Internet, by business size?
4.9.4 Local and wide area networks
Yes
No
Micro
54.7%
45.3%
Very small
63.1%
36.9%
Small
75.8%
24.2%
Total
57.8%
42.2%
By contrast, only a quarter of small businesses (24.2%)
had no access to the Internet. As Dumcombe and Heeks
(2001) indicate, the small businesses are more likely
to have a greater need for information and therefore
need to access a variety of information sources.
4.9.3 Where is the Internet accessed?
Twenty-three percent of the total respondents that
accessed the Internet did so from their business
premises. The number of businesses accessing the
Internet from their business premises is lower than
the findings in a study by Frempong (2007:7) on
small enterprises in Ghana. He noted that 33% of
formal businesses had Internet connectivity at their
business premises. He also found that 27% of formal
businesses indicated that they used Internet cafes and
that only 14.3% and 20.4% of informal and semi-formal
businesses indicated that they used the Internet almost exclusively accessed through Internet cafes
(Frempong 2007). This survey found that almost
half of the small businesses (49.2%) with Internet
access accessed the Internet from a computer at
their business premises. Accessing the Internet from
a business computer was not as prevalent amongst
very small businesses (37.1%). With only 17.3% of micro
businesses accessing the Internet from a business
computer, home-based computers or Internet cafes
are far more significant Internet access options for
these businesses.
Respondents that had and used a computer in their
business were asked to indicate which of the following
- namely a local area network, a wide area network or a
virtual private network - formed part of their computing
network. According to Wikipedia, a local area network
(LAN) supplies networking capability to a group of
computers in close proximity to each other such as
in an office building, a school, or a home whereas a
wide area network (WAN) spans a large geographic
area, such as a state, province or country. WANs often
connect multiple smaller networks, such as local area
networks (LANs). A virtual private network uses public
telecommunications networks to conduct private
data communications. Trigrammic Consulting (2005)
quotes the 2003 SME survey which found that most
respondents used computers, fax, printers, modems
and to a lesser degree (57.4%) computer networks.
Thirty percent of the respondents that had and used
a computer in their business had a local area network
with less that 5% indicating that they had a wide area
network (Table 25).
Table 25: Computing environment: LAN, WAN and VPN
LAN
WAN
VPN
30%
4.20%
2.40%
Research has shown (Sundstrom, 2006, United
Nations 2004) that larger SMMEs are more likely to
adopt more sophisticated forms of ICT than smaller
SMMEs, and that the level of adoption of networked
computer environments such as the intranet also
increases with size. A quarter (25.7%) of the micro
businesses that have and use a computer in the
business indicated they had a local area network while
over half (55.8%) of the small businesses that have
and use a computer in the business indicated they
had a local area network. Small businesses (13.3%)
61
2009
are significantly more likely than micro businesses
(2.2%) to have wide area networks in their business.
Duncombe and Heekes (2001) argue that smaller/
survivalist SMMEs have a limited need for technology.
They found that a telephone connection is generally
sufficient as these businesses rely predominantly on
informal information gathering and personal contacts.
However, businesses that are more formal have a
greater need for information from various sources
and ICT can be used to improve business linkages
and networks.
Table 27: Email access
4.9.5 Email and websites
Trigrammic Consulting (2005) quotes the 2003
SME survey which found that about 80% of the
respondents used email. Table 26 below shows that
although less than 40% of small businesses that had
and used a computer in their business had hosted
email facilities, small businesses are more than three
times as likely as micro businesses to have email
facilities. The lack of email facilities means that these
businesses do not have access to an extremely
efficient and cheap method of communication.
SMMEs that do not have an email address should be
encouraged to set up an email facility as, according
to the Trigrammic Consulting Report 2005, the use
of ICT by small business starts with basic ICT usage
such as telephony and email and then progresses to
uses that are more sophisticated such as extensive
use of the Internet. The progression to more extensive
use of the Internet will mean that businesses will be
able to access large amounts of business information
that, without Internet access, would not be as easily
accessible. Duncombe and Molla (2006) describe the
exploratory state as businesses that have access to
email and online information.
Table 26: Computing environment: email and website
Hosted Email
Website
Micro
10.8%
9.9%
Very small
27.5%
21.7%
Small
37.5%
30.8%
62
Table 27 shows that the majority of the businesses
had hosted email addresses. Twenty-four percent
of the respondents had business-specific emails i.e.
janesmith@mybusinessname.co.za. An additional
43% of the respondents with an email address had
generic hosted email addresses i.e. janesmith@mweb.
co.za. Thirty-two percent of the respondents accessed
emails via a browser for example yahoo or gmail.
Only 2% of the sample relied on a hotmail address for
business communication.
Hosted business address
24.2%
Yahoo
21.5%
Telkomsa
17.2%
Webmail
11.3%
Gmail
9.1%
Other
7.5%
Mweb
7.0%
Hotmail
2.2%
Twenty-eight percent of small businesses with a
computer in the business indicated that they had
a business website while just over 10% of micro
businesses had a business website (Table 26).
The survey did not ask whether or not the website
had interactive capacities or whether the website
was purely for informational value, but more small
businesses would at least have the potential marketing
benefit that a website affords the business.
4.10 Software used in the business
Respondents that had and used a computer in their
business were asked to identify which of the following
types of software they use to support their operations:
word processor, spreadsheets, presentation graphics,
accounting package, customer management, payroll
and human resources management. Trigrammic
Consulting (2005) quotes the 2003 SME survey,
which found that the most widely used software
amongst South African SMEs was for accounting,
word processing, databases and spreadsheets. The
report notes that a finding of particular interest was
that the more successful businesses tended to opt
for integrated software, whereas the less successful
businesses tended to purchase stand-alone packages
for their operational activities. The report noted that ICT
is seen as important in improving business efficiencies
through automation of office tasks. ICT was also seen
as a major contributor to customer service, financial
and accounting functions, payroll, communications
and correspondence.
4.10.1 Word processing programmes
Microsoft Word dominated the SMME market, with
all the businesses using word processing software
indicating that they used Microsoft. Windows XP, Ms
Office and Windows Vista were software packages
that a small number of respondents mentioned.
The majority (93%) referred to the software by its
generic term: Microsoft Word. A single respondent
mentioned using Odyssey, a mobile device
management product for the Microsoft Windows
Mobile platform, and five respondents mentioned
using Open Office, an open-source software option.
Table 28 shows that the most common usage for a
word-processing programme is correspondence and
communication. Correspondence included functions
such as application letters, contract letters, general
employee communication, communication with
suppliers and minutes of meetings. Word processing
programmes were also important in producing and
storing invoices, quotes and orders, with a fifth of the
respondents using Word for this purpose. The 2003
SME survey quoted above notes that ICT was a major
contributor to communications and correspondence.
Table 28: For what do you use the word processing software?
Correspondence/communication
40.4%
Capturing and storing business information
21.4%
Invoices, orders, price lists and quotes
21.2%
Administration
5.3%
Business proposals/plans
3.0%
Advertising
2.6%
Client register and information
2.0%
Employee records/salaries
1.8%
Financial information/reports
1.4%
Stock records
0.6%
Debtor information
0.2%
4.10.2 Spreadsheets
Twenty-eight percent of the businesses using
a computer used spreadsheet software and the
overwhelming majority used Microsoft Excel (95%).
Access and Open Office were other software
mentioned. Table 29 shows that the most common
usage of this software is to keep comprehensive
employee records. Almost one-fifth of the respondents
(19.9%) used spreadsheets to keep a record of employee
details, attendance, timesheets, salaries and a record
of casual labour used. Businesses used spreadsheet
software to calculate the cost of products and
services offered by the business. Spreadsheets are
used for a number of bookkeeping functions: 12% use
spreadsheets as a computerised version of a cashbook
or sales record, a further 12% were less specific and
indicated that they used it to keep a record of banking
activities and other financial administration, and
an additional 6% used it as an accounting package.
63
2009
Table 29: For what do you use the spreadsheet software?
Employee records, attendance and salaries,
casual registers, timesheets
19.9%
Costing and financial calculations
16.2%
Keeping record of cash made, payments/
cash flow and daily sales
12.0%
Banking/finance/financial admin
12.0%
Storing business information
11.6%
Invoices, quotations, receipts and price lists
11.6%
Accounting, bookkeeping, financial reports
i.e. balance sheets or monthly reports
6.0%
Stock records, buying and ordering material
4.2%
Client information
3.7%
Other
2.8%
4.10.3 Presentation software
Fifteen percent of the respondents indicated that
they used presentation software. Respondents used
a far greater variety of presentation software, in
comparison to the variety of word processing and
spreadsheet software. While the large majority (85%) of
the respondents used Microsoft PowerPoint, 5.7% and
3% of the respondents indicated that they used Corel
Draw and Photoshop respectively. Other software
identified is included in Table 30, which provides a list
and a brief discussion regarding each type of software
identified by the respondents.
Table 30: Types of presentation software used
Acrobat,
Adobe
Illustrator
CS3,
Adobe Photoshop
Acrobat and Reader are widely used
as a way to present information
with a fixed layout similar to a paper
publication
Auto Cad
Software developed for design,
drafting, modelling and architectural
drawing usa.autodesk.com
Corel Draw
Provider of software for graphics,
illustration, digital media creation
www.corel.com
Derby
Data collection and web-based
decision support solutions for the
electronics manufacturing industry
http://www.derby.com
Mac Pages
Successor of Apple’s multipurpose
office
suite
AppleWorks
en.wikipedia.org/wiki/Pages
Turbocad
CAD software solution for all 2D
and 3D design
www.turbocad.co.uk
Table 31 shows that 58% of the businesses use
presentation software to market their products and
services. Thirty percent indicated that presentation
software allowed them to market new and existing
products and a further 27.7% used the software
to design and create logos for the business. A
quarter of the respondents used the software
to create presentations for delivery to clients.
Table 31: For what do you use the presentation software?
64
Marketing existing and new products,
advertising
30.5%
Developing and creating graphics/graphic
design for logos
27.7%
Presentations to clients and customers
25.0%
Financial analysis and reports
8.3%
Illustrations
2.8%
Training
2.8%
Quotations
2.8%
4.10.4 Accounting software
Proman
Integrated software for manufacturers.
www.proman.com
Eleven percent of the respondents indicated that they
used an accounting package in their business. Fiftyseven percent of the respondents used Pastel, a further
16.9% used Microsoft Excel, 9.8% used Quickbooks
and the remaining 16.4% used a variety of different
packages. Table 32 provides a list and a brief discussion
regarding each type of software identified by the
respondents. The list of accounting software shows
that businesses are using both stand-alone software
packages and ERP solutions. The 2003 SME report
quoted previously noted that businesses that are more
successful tend to use integrated software, whereas
the less successful businesses tend to purchase
stand-alone packages for their operational activities
such as accounting, customer or payroll management.
Point of Sale
(POS)
Software that allows the business
to keep track of all sales, inventory,
finances
Turbo Cash
Unibase /
Unipos
The
Unibase
Point
of
Sale
solution incorporates a full multistore management solution with
integrated modules for Point-of-Sale,
Merchandising, Supplier Management,
Stock Management and an advanced
accounting suite with General Ledger,
Debtors, Creditors, Cash Book and
Banking http://www.unibase.co.za
VIP Softline
Accounting, HR & Payroll, CRM and ERP
software solutions http://www.softline.
co.za/
Vision
A complete financial analysis system
designed to enhance the productivity
of Commercial Lending Officers, Credit
Managers, and Financial Advisors.
http://www.visionsoftwaresolutions.
com/
Table 32: Types of accounting software used
AccPac,
Accounting Pro
ERP solution. AccPac is a vendor of
accounting,
customer
relationship
management
and
business
management software
Brilliant
Open source accounting software
ESP
The Evrite Software Package (ESP) is a
VAT & Non VAT Package that produces
financial transaction reports.
Fincon
POS accounting software
IQ, IQ Plus, IQ
Retail, IQ2000
Software that provides expertise
in complete financial and business
administration solutions http://www.
iqretail.co.za/iqretail/about.php
Mac Pages/
Mac Money
Odyssey
Omni
Accounting
Apple-based software
Mobile device management product for
the Microsoft Windows Mobile platform
http://www.odysseysoftware.com/
An accounting package for small
businesses and entrepreneurs
Free accounting software
4.10.5 Customer management
software
Only 5.5% of respondents that had and used a
computer in their business indicated that they used
customer management software. Of these, 31% used
Microsoft Word or Microsoft Excel as their customer
management software. It is likely that these businesses
do little more than keep customer records and details
in Microsoft Word or Microsoft Excel. Nineteen percent
of the respondents used Cybersmart. According to
Crown (2004), customer relationship management
allows businesses to be aware of their customers’
needs and allows the businesses to react effectively
to these needs. CRM is an integrated business system
that assists businesses in understanding, anticipating
and responding to their customers’ needs.
65
2009
Users and developers of CRM software indicated
that using customer relationship software allows a
business to develop better communication channels
with its customers and to collect and manage important
customer data, such as customer details and order
histories. The information can be used to create
detailed customer profiles that highlight customer
preferences, which can inform the marketing and
sales side of the business.
Respondents also indicated that they used the
following software programmes to manage their
customers: Arch, Cybersmart, EMD - Medical Software,
Ffenics, G-Word for communication, Goldmine, Ikat
63, Instant Invoicing, IQ 2000 and IQ Retail, Mac
Pages, Microsoft Access, Pastel, Quickbooks, Vision
and Wizard for designing.
IQ 2000
Software that provides expertise
in complete financial and business
administration solutions http://www.
iqretail.co.za
Leader
Accounting
Leader Accounting Vision software that
allows control over purchases to stock
control, debtors and creditors control,
pricing control, as well as financial
controls http://www.visionsoft.co.za
Millennium
Time Solution
Range of electronic clocking systems
and software solutions to accommodate
virtually any situation. Fully compatible
with the VIP payroll package. http://
www.vippayroll.co.za
Proman
Integrated software for manufacturers.
www.proman.com
Quick Payroll
Payroll solution designed specifically
for small businesses www.dmcsoftware.
co.uk
Quickbooks
Small business accounting software
quickbooks.intuit.co.uk
Unibase
Unibase Point of Sale solution http://
www.unibase.co.za
VIP
Accounting, HR & Payroll, CRM and ERP
software solutions http://www.softline.
co.za/
Wizpay
Integrated payroll solution http://www.
wiztec
4.10.6 Payroll software
Eight percent of the respondents indicated that they
used payroll software, of which 39.4% indicated that
they used Microsoft Excel as their payroll software.
Thirty-six percent of the respondents used Pastal
Payroll. Nine percent and seven percent respectively
used Quickbooks and VIP software. Table 33 provides
a list and a brief discussion regarding each type of
software identified by the respondents.
Table 33: Types of payroll software used
Easypay
Provider of electronic funds transfer and
bill payment processing services in South
Africa’s retail, petroleum and financial
sectors. http://corporate.easypay.co.za
Ffenics
Ffenics is a database information
management system designed with
business users in mind. Ffenics can
be used for stand-alone applications
or multi-user applications http://www.
ffenics.com/
Finsolve
Easy to use software to simplify the
process of paying employees with a
payroll designed specifically for small
business http://www.finsolve.co.za/
66
4.10.7 Human resource software
Less than five percent (4.5%) of the businesses
indicated that they used human resource software to
manage their employee relationships. Of these, 80%
of the respondents used Microsoft Word or Microsoft
Excel to manage their staffing requirements. Table 34
below shows that the majority of these businesses
use Excel or Word to keep time sheets, contracts,
leave and other staff details, and training information,
as well as to communicate with their employees.
Human resource management software has the
added advantage of allowing a business to manage
and integrate information relating to a business’s
workforce. This could include automating the payroll
process and automatically calculating payment
amounts and various deductions such as income tax
before generating pay checks. HRM software can allow
the business to manage an employee’s participation
in, for example, a pension scheme. Respondents
also indicated that they used the following software
programmes to manage their HR: Finsolve, Mac
Pages, Pastel, Quickbooks and VIP.
Table 34: Businesses application of human resources software
Staffing logistics, timesheets
35.1%
Employee contracts, leave and financial
records
24.3%
Staff details
24.3%
Training records
10.8%
Communicating with employees
5.4%
4.11 Number and type of
computers
4.11.1 Desktop computers and laptops
Respondents that indicated that they had and used a
computer in the business were asked to indicate how
many computers they had and whether the business
used desktop computers and/or laptop or notebook
computers. Figure 15 shows that desktop computers
are still the more popular option, with 95.5% of the
respondents indicating that they had at least one
desktop computer in the business. Five percent of
the respondents relied only on a laptop or notebook
computer. Laptop computers, as part of the computing
environment, have become more popular with 53.1%
of the respondents having at least one laptop or
notebook computer in the business. Eight percent
of the respondents had more than five desktop
computers and 2.2% had more than five laptops as their
computing environment. Arthur Goldstuck (2005), in
an article posted on the Bigchange Webpage, quoted
the 2004 South African SME survey that found that
personal computers are still the most important IT item
purchased by SMMEs in South Africa. Laptops were
90.0
80.0
70.0
60.0
50.0
Desktop computers
40.0
Laptops
30.0
30.0
10.0
.0
None
1 to 5
More than 5
Figure 15: Number of desktop or laptop computers
67
2009
ranked the eighth most important, ahead of only PDAs
(personal digital assistants) and wireless technologies.
The article quoted George du Plessis, SMB Segment
Manager at Hewlett-Packard South Africa, who
indicated that “the findings confirm international
research on the South African market, which shows
PCs outselling laptop computers by a ratio of almost 4
to 1”. An article on Business Wire (2008), looking at the
key findings of the SME survey 2007 in South Africa,
noted that simply using a computer in the business
is directly related to improved competitiveness. The
findings also showed that there is a direct relationship
between the number of computers used and the level
of competitiveness among SMMEs.
Table 35 shows that 14% of the respondents that
have and use a computer in their business make
use of a Smartphone, Pocket PCs or PDAs that are
able to run software programmes. As mentioned
previously in this report, the finding that these
respondents have and use a Smartphone or
PDA as part of their computing environment can
be seen as a positive development, enhancing
the competitive potential of these businesses.
4.12 Business management
and computer programme
requirements
4.12.1 Management of business
4.11.2 Smartphones and PDAs as part activities
of the computing environment
Table 35: Number of Smartphones, Pocket PCs or PDAs able to
run programmes
Smartphones, Pocket PCs or PDAs able to run
programmes
None
86%
1 to 5
14%
Respondents were asked to identify whether they
were coping with the management of a variety of
business activities within the business. For each
activity the respondents were asked to indicate
whether the activity was causing no problem, whether
they were coping, found the activity somewhat
challenging, challenging or extremely challenging.
Table 36 provides a list of the business activities as
well as whether the respondents were coping with the
management of the business activities.
Table 36: Ability to cope with respect to the management of various business activities
No
Problem
Coping
Somewhat
challenging
Challenging
Very
challenging
Opportunities for new business
12.40%
28.80%
16.70%
22.70%
19.50%
Proposals, quotes or tenders
14.90%
28.50%
16.30%
21.00%
19.30%
Client information, sales information
14.50%
36.50%
18.50%
17.90%
12.60%
Money to expand / grow
8.70%
22.70%
15.40%
19.20%
34.00%
Cash to run the business on a day-to-day basis
9.80%
29.10%
15.30%
22.60%
23.20%
Cash received and paid (income and expense)
11.20%
33.30%
17.50%
21.70%
16.40%
How much you sell each month (turnover)
9.90%
33.30%
18.70%
21.80%
16.30%
Who owes you money (debtors)
15.80%
32.00%
18.60%
18.70%
14.90%
Who you owe money to (creditors)
21.30%
34.30%
16.60%
15.90%
12.00%
Sales and marketing
Finance and accounting
68
Bank balances
17.50%
38.00%
15.40%
16.70%
12.50%
Salaries
20.30%
37.40%
14.00%
15.40%
13.00%
Personnel records of all workers
26.90%
38.70%
12.90%
12.10%
9.40%
Leave
27.90%
36.70%
14.10%
10.80%
10.40%
Skills and skills levies
26.90%
32.40%
10.80%
13.20%
12.40%
Training and recruitment
25.10%
31.30%
10.40%
13.90%
13.70%
Buying things your business needs
17.60%
32.70%
16.40%
16.90%
16.40%
Raw materials in your stores
20.10%
29.70%
17.30%
17.60%
15.20%
Finished products in stock
21.70%
33.00%
15.90%
15.10%
14.30%
Manufacturing schedules and processes
23.20%
30.10%
17.50%
14.90%
14.30%
Orders and shipping of goods
21.00%
32.00%
17.40%
14.80%
14.80%
Taxes payable (income, employees, etc)
20.20%
34.00%
15.10%
14.60%
16.10%
Sales or value added taxes, reports and claims
23.60%
31.90%
14.00%
15.50%
15.00%
Reports and claims related to employees’
benefits, pension funds, unemployment funds,
etc.
25.30%
32.10%
12.30%
14.40%
15.90%
Labour regulations and safety regulations
25.20%
31.70%
13.10%
14.00%
16.00%
23.40%
32.60%
14.00%
16.50%
13.70%
25.90%
34.30%
13.10%
13.80%
12.90%
Human resources and administration
Procurement, inventory and production
Compliance
Collaboration
Communication with other businesses to
join forces on a specific activity, such as joint
business proposals
Share information/ opportunities with other
business owners
Just over half of the respondents indicated that, on
average, they found the management of business
activities relating to sales and marketing (54.8%)
and finance and accounting (53.2%) somewhat to
very challenging. More rural businesses than urban
businesses indicated that they found the management
of business activities relating to sales and marketing
(54.8%) and finance and accounting (53.2%) somewhat
to very challenging. Sixty-three percent of rural and
53.7% of urban businesses found sales and marketing
challenging. It is likely that the small markets and
widespread poverty in many rural areas would make
marketing a product and successfully selling the
product more difficult in rural areas. This report has
also shown that rural businesses are significantly
less likely to use the Internet for marketing and
promoting their business than urban businesses.
This is compounded by the fact that a much smaller
number of rural businesses have any Internet access.
Fifty-nine percent of rural businesses and 45% of
69
2009
urban businesses found the management of finance
and accounting somewhat to very challenging. Rural
businesses have, on average, a lower monthly turnover
than urban businesses and, as mentioned previously,
have smaller markets. Access to finance, particularly
in rural areas, has been fraught with difficultly and
the constraints affecting access to finance have
been well documented. It is therefore unsurprising
that rural businesses would find the management of
financial functions more difficult. The difficulties are
likely to be a combination of a lack of business skills
as well as a lack of financial resources due to limited
market reach. The report has also shown that rural
businesses are less likely to use a computer in their
business. These rural businesses would not be able
to store and disseminate financial information in an
easily accessible format.
4.12.2 Computer programme
requirements
Respondents were asked to identify whether they
believed that their business needed a computer
programme to help them manage a variety of
business activities. Business owners/managers
were asked to identify whether they already had a
computer programme, had no need for a computer
programme, or had a need, high need or critical need
for a business programme to help them manage
various business activities. The various business
activities as well as their need for a computer
programme or lack thereof are listed in Table 37.
Table 38 shows that for all 6 categories of business
activities - namely sales and marketing, finance and
accounting, human resources and administration,
procurement, inventory and production, compliance
and collaboration /more respondents expressed
a need for a computer programme than those that
indicated that they found the management of the
business activity somewhat to very challenging.
Although only 55% of the respondents found the
management of sales and marketing somewhat to
very challenging, 62.7% of the respondents indicated
a need for a computer programme to assist in the
management of this business activity. More than
half of the respondents indicated a need to critical
need for all the remaining business activities other
than collaboration (49.5%). It must be highlighted
that the need for a computer programme may in
fact be a manifestation of a lack of business skills
within a certain area A potential problem that may
Table 37: Computer programme needs with respect to the management of various business activities
Have
No need
Need
High
need
Critical
need
Opportunities for new business
18.2%
19.8%
26.2%
18.2%
17.6%
Proposals, quotes or tenders
18.3%
20.6%
25.8%
17.7%
17.7%
Client information, sales information
20.5%
14.5%
30.1%
18.6%
16.2%
Money to expand / grow
16.5%
17.3%
21.6%
19.6%
24.9%
Cash to run the business on a day-to-day basis
18.4%
17.2%
23.8%
20.9%
19.7%
Cash received and paid (income and expense)
19.4%
16.2%
27.9%
19.3%
17.3%
How much you sell each month (turnover)
21.0%
14.7%
27.4%
20.0%
16.9%
Who owes you money (debtors)
20.4%
20.3%
27.6%
17.0%
14.5%
Who you owe money to (creditors)
20.7%
21.8%
28.8%
16.0%
12.8%
Sales and marketing
70
Bank balances
20.8%
18.2%
30.3%
16.9%
13.9%
Salaries
21.5%
18.5%
29.7%
15.4%
14.9%
Personnel records of all workers
18.4%
25.5%
29.9%
14.6%
11.5%
Leave
18.4%
31.2%
26.4%
11.7%
12.3%
17.5%
32.8%
24.7%
12.2%
12.8%
Training and recruitment
16.0%
33.2%
24.8%
12.4%
13.6%
Buying things your business needs
16.2%
26.6%
24.4%
16.6%
16.1%
Raw materials in your stores
14.6%
35.8%
22.4%
12.6%
14.5%
Finished products in stock
15.1%
35.2%
22.8%
13.1%
13.8%
Manufacturing schedules and processes
14.4%
36.9%
22.5%
12.6%
13.5%
Orders and shipping of goods
13.7%
34.4%
24.8%
13.0%
14.0%
Taxes payable (income, employees, etc)
17.5%
23.5%
27.1%
14.4%
17.4%
Sales or value added taxes, reports and claims
18.0%
24.1%
26.0%
14.7%
17.3%
Reports and claims related to employees’ benefits, pension
funds, unemployment funds, etc.
17.2%
25.8%
26.0%
13.7%
17.3%
Labour regulations and safety regulations
16.5%
27.5%
25.9%
13.0%
17.1%
Communication with other businesses to join forces on a
specific activity, such as joint business proposals
15.8%
35.1%
22.3%
13.6%
13.2%
Share information/ opportunities with other business owners
16.2%
33.9%
23.0%
14.2%
12.7%
Compliance
Collaboration
arise, however, is that businesses that are already
struggling to cope with the management of a
particular business activity are the businesses that
may be least likely to benefit from the introduction
of a computer programme. Research, as indicated
previously in the report, has shown that the adoption
of ICT in a business is only likely to have tangible
benefits if it is effectively integrated into the business.
Research has also argued that smaller businesses
often do not see any real benefits from their ICT
investments because the owners do not have the
basic business skills to fully understand their own
business processes. The mere introduction of an ICT
solution would not enable these business owners to
better understand the business issues concerned. The
businesses that would probably benefit most from
ICT interventions are the businesses that indicated
that they were coping with or found the management
of certain business activities somewhat (rather than
very) challenging. These businesses are more likely
to have better business skills and would be able to
integrate the ICT solution into the business – rather
than see the ICT adoption itself as the solution.
Software retailers and service providers need to
understand that computer software does not solve
or reduce the need for business owners to have
sufficient basic business skills. However, ICT can
supplement and complement these business skills.
71
2009
Table 38: Ability to cope with business activities and computer programme requirements
Ability to cope with business
activities Somewhat to very
challenging
Computer programme requirement
Need to critical need
Sales and marketing
54.8%
62.7%
53.2%
62.1%
36.0%
51.7%
47.8%
51.3%
Compliance
44.0%
57.5%
Collaboration
42.0%
49.5%
4.12.3Internet or local computer-based solutions
Respondents were asked to assume situations, where
computer programmes existed that were able to meet
the needs specified in Table 36. In this scenario, they
were asked to indicate whether they would prefer the
programme to be an Internet- based system, with
no software installed on their computer; a software
programme that could be installed and run on a local
computer; or whether they would prefer an external
(expert) service provider to do the work. Table 39
shows that the majority (63.5%) of the businesses
preferred software programmes that could be installed
and run on a local computer. The bias against Internetbased software may be due to a lack of confidence
or knowledge about Internet-based programmes.
However, given that research has shown that small
businesses often learn about new software products
and how to use them from software manufacturers,
this preference could be interpreted as a realisation
that software manufacturers offer additional services.
A further consideration could be a lack of IT knowledge,
which limits the business owner’s confidence in
selecting an appropriate computer package from the
Internet.
72
Table 39: Type of computer programme required to address the
management of various business activities
Internet based
system, with
no software
installed on my
computer
Software
programme that
can be installed
and run on local
computer
I would
prefer an
external(expert)
service provider
to do the work
for me
22.8%
63.5%
13.7%
Respondents were asked, assuming that computer
programmes exist that are able to meet the needs
identified in Table 37, how much they would be prepared
to pay for such a programme. From Table 40 it is clear
that small businesses would be prepared, on average,
to pay more for computer programmes they feel
would help them manage various business functions.
Table 40: How much would you pay for this programme?
Business size
Mean
Std. Deviation
Median
Micro
R3 070
R6 543
R1 500
Very small
R4 956
R11 659
R2 500
Small
R7 135
R20 047
R4 000
4.13 Enterprise Resource
Planning (ERP) software
In order for a software system to be considered ERP, it
must provide an organisation with functionality for two
or more systems. Some ERP packages exist that only
cover two functions for an organisation, for example
QuickBooks which covers payroll and accounting
functions. Many ERP systems cover several functions
and integrate them into one unified database.
Functions such as HR, CRM and accounting software
were all once stand-alone software applications,
whereas they can currently all fit under one umbrella
system - an ERP system. Respondents were asked
whether they were familiar with the term Enterprise
Resource Planning. Figure 16 shows that only a small
percentage of the respondents (5%) indicated that
they were familiar with the term Enterprise Resource
Planning. Only three respondents in the sample
indicated that they already had ERP software and
two provided details, namely Willow Technology POS
Pastel Express and Unibase. Seventy-four percent
of the businesses that were familiar with the term
Enterprise Resource Planning software indicated that
they may have a requirement for such software.
When asked the following question: “Do you think
your business has the need for better combinations
or integration of information contained in various
computer programmes into a more comprehensive
picture?” 31% of the respondents replied in the
affirmative. This seems to indicate that there is
a greater need for ERP software than indicated
previously and that the low response rate was due to
a lack of understanding of the terminology “enterprise
resource planning”. Respondents that indicated yes to
the question mentioned above were asked to elaborate
on their response. Table 41 provides a summary of
the general comments provided by respondents and
Table 42 provides a list of specific integrated computer
requirements provided by respondents.
A number of the comments elaborating on the question
“Do you think your business has the need for better
combinations or integration of information contained
in various computer programmes into a more
comprehensive picture?” showed that respondents
believed that an integration of computer programmes
would lead to more efficient, streamlined information.
Numerous respondents indicated that the system
should be understandable and easy to use – either by
the owner or by employees. Given that perceived IT
skills were lower than any of the other skills ranked
in the survey, simple and easily understandable
programmes aimed at the small business market
are required. Advantages of an integrated system
identified by the respondents included improved
planning, decision making and efficiency. There was,
however, the naive belief that the integrated computer
programme could, in itself, lead to business growth.
It is important that service and software providers
acknowledge and address the misconception that
business owners have of the ability ICT has to transform
a business - rather than complement a business.
Yes
5%
No
95%
Figure 16: Are you familiar with the term Enterprise Resource Planning software?
73
2009
Table 41: General comments relating to the need for better combinations or integration of information
General comments
•
•
•
•
•
•
•
•
The business would expand
To equip my business to be more professional
Changes in technology - need to keep abreast of things
Improve your service, manage your business more easily
Paying for quality service is good, better than paying for cheap stuff
Need to know what products are selling best, so can focus more on them
As long as it will affect my business constructively
Software is expensive, always improving, so access to new upgrades is expensive
Efficiency
•
•
•
•
•
•
•
•
•
•
•
•
•
•
To make things easier and to save time for the business
It will centralise work processes
For systems to run smoothly
To manage various parts of my business
I need an all-in-one solution
It will be much easier to have a system to combine all my business functions
It will be easy to obtain information at a touch of a button
This system must do everything from one platform
A programme that can combine all functions
Keep records in one place
Streamlining of our services and information
To avoid scattered information
Easy access to various types of information
Makes business recording manageable
General requirements of the system
•
•
•
•
•
•
•
•
•
•
The system should be user-friendly
An integrated system means accessibility, simplification
To be able to work on programmes without special training
It could be more user-friendly for less experienced employees
Using two programmes separately at the moment, would prefer one
To be user friendly for all ages and cost-effective
Understandable and simple to use
Understandable and not too expensive
Each component should talk to the other to make sure the system works as one
One comprehensive database
Advantages of an integrated system
•
•
•
•
•
•
•
It will make life easy, save memory of the computer
Easy access and saving time searching for other programmes
It will be easy to access information without switching programmes
Visualisation makes it easy for decision making
It will limit the time of calling various service provides for help
It will improve my planning, help me understand my business better, and save time
This would reduce paperwork and filing
74
Research has shown that ICT development has
tended to view the SMME sector as a smaller version
of corporate clients, therefore much of the software
that has been offered to this sector has been too
complex, too expensive and has not understood the
needs of the SMME market. The business activities
and specific business requirements highlighted by
the respondents in Table 41 show that there is a need
for integrated programmes for the small business
sector. The list implies that small businesses are
either unaware of the programmes that are currently
available, the programmes are too expensive or the
programmes are seen to be geared to the corporate
market. Software providers need to review the list
of specific business requirements listed above and
tailor-make programmes for the SMME market or,
if they currently have programmes aimed at the
SMME market, they should review their marketing
and pricing strategy as well as the use of technical
terminology in the promotion of their products. The
use of technical terminology, for example ERP or CRM,
can lead to a miscommunication between software
providers and their market. As identified earlier in the
report, business owners were less responsive when
Table 42: Specific integrated computer requirements provided by respondents
Specific business activities
•
•
•
•
•
•
•
•
An integration of client information and employee information for easy access
A programme that would make management and admin more efficient
An holistic approach to business management, where HR should be talking to the finance and process management
To help with general management and operations
Multi-purpose programme for stock control, salaries, debtors and creditors
A system to manage day-to-day running of business e.g. finance/admin
Improve on administration and sharing information
This will assist in coming up with a comprehensive company report
Specific business requirements
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Service-orientated software package
Would need a comprehensive programme for profit management
To keep track of all expenses and income properly
Need a website for marketing
Interact in email
It will help finding information for decorations
To improve standard of communication with other construction projects in order to run business properly
To design our own labels and catalogues
For a stock controlling scanner that can automatically control goods
To manage the business remotely
Would like to have better network efficiency
So I can back-up data myself
Package which provides information and a reminder system
To keep track of clients and monthly sales records, and provide access to Internet
An integration of POS system, bookkeeping system and payroll
Small business/home-based system
To keep records of sales and stock together
Combine administration with day-to-day operations and cash in and out reports
We need combinations of financial and statistical information
To make the work easier and as a reminder for payments
75
2009
•
•
•
•
•
•
•
•
•
•
•
•
•
To combine financial statements with progress report
To generate financial and operational reports
Internet, email and payroll
Payroll, stock control, email and Internet
Internet, email, website and tourism package
Integrate production information with salaries/commission
The programme must include debtors’ records/salaries and creditors’ records
Staff (HR), sales and production process
Information on suppliers, creditors, debtors and cash flow
Sales, HR, finances and processing of goods
To buy and pay for all necessary material and be able to calculate the total amount to pay SARS at year end
Programme that can calculate the number of cement bags needed to produce a specific number of bricks
Integrate related training programmes
Current packages
•
•
•
•
•
•
Whatever system must integrate with Pastel
Build smart package links (VIP + Accpac)
Pastel and Excel compatibility
Easy to operate and links to all spreadsheets Pastel + EMD for medical claims (something to upgrade what is
currently in place)
To combine information in MS Word with Excel
Interested in sugar and turba cash - how to integrate?
questioned about ERP. However, when asked about
the necessity for integrated computer programmes,
76
owners were able to provide greater clarity on their
business needs.
4.14 Conclusion
At the lower-end spectrum of SMMEs, ICT usage
is dominated by cell phone usage. However, given
the lack of proficiency with respect to Smartphone
usage it is likely that cell phones are still being
used predominantly for SMS and voice functions.
Fax machines are still a more popular option for
communication than email correspondence. With
just under 40% of the businesses still operating
without a computer, the potential for an increasing
digital divide between ICT-enabled and traditional
businesses is extremely likely. This could further
disadvantage traditional businesses which are seen
to be largely rural based, have lower monthly incomes
and are owned/managed by business owners with
lower educational levels. Educational levels have
a significant impact both on the likelihood that a
business will have and use a computer in the business
as well as the likelihood that the business owner will
use the Internet. Educational levels also influence the
variety of ICT devices that are used in the business
and whether or not the business has Internet access.
Internet access is still significantly higher in urban
areas, which will lead to an increase in the digital
divide within South Africa. Internet access in rural
areas is used predominantly for research purposes
and lags behind urban businesses in being used
for more sophisticated business activities such as
banking. The majority of lower-end SMMEs that have
and use a computer have relatively unsophisticated
software in their business. Microsoft Word and Excel
are the most popular software packages used by
businesses. Microsoft Word was used predominantly
for correspondence/communication, capturing and
storing business information and generating invoices,
orders, price lists and quotes. Microsoft Excel was
used predominantly for employee records, attendance
and salaries, casual registers, timesheets, costing and
financial calculations, and keeping a record of cash
made, payments/cash flow and daily sales. A small
minority of the businesses indicated that they used
customer management or human resource software.
However, when questioned about what specific
package they used, it transpired that 31% and 80% used
Microsoft Word or Microsoft Excel as their customer
management software or human resource software
respectively. Payroll software seems to be the area
in which the greatest variety of software packages is
used with 39.4% using Microsoft Excel and a further
36% using Pastel Payroll. Although these businesses
are using ICT to manage their customers and
employees, the ability to disseminate information as
well as extract maximum benefit from their customer
and employee information is limited. There seems to
be a need for integrated computer programmes that
are tailored to the small business market, affordable
and easily accessible.
77
2009
78
CHAPTER 5
Conclusions and
recommendations
Conclusions
Recommendations
• A male bias exists in the use of ICT devices. Other
• ICT in the past has been traditionally male-orientated. It is
than cell phones, male business owners are more
likely to use a greater variety of ICT devices and
to consider themselves more skilled at using the
various devices than female business owners.
important that women are encouraged to become more
skilled in this respect. ICT, and particularly the ability to
access the Internet, increases flexibility which allows
women to overcome traditional constraints associated
with travelling and balancing domestic and business
responsibilities.
Girls need to be encouraged to pursue scientific and
technology courses - at school and in tertiary studies. Early
introduction to ICT will alleviate the “fear of technology”
which might inhibit their later use of ICT.
•
• Black African business owners still lag in their
adoption of ICT in business.
• Subsidised IT training courses should be provided to
encourage familiarity with IT technology.
• Courses or information road-shows aimed at increasing
the awareness of the benefits linked to a greater use of
technology are important, as the resistance to ICT usage
may be due to ignorance or fear of the unknown.
• Younger business owners are more likely to use
ICT in their businesses.
• Adult basic education needs to ensure that computer
literacy is seen as a key objective in the curricula.
• Courses or information road-shows aimed at increasing
the awareness of the benefits linked to a greater use of
technology are important, as the resistance to ICT usage
may be due to ignorance or fear of the unknown.
• High school, as a means of developing computer
• There is a pressing need to increase the effectiveness
skills, ranked below college and university and
being self-taught.
of technology teaching at school level, both at primary
and secondary level, as well as to improve computer and
Internet access at schools.
Corporate organisations should be encouraged to donate
new computer equipment to schools, especially previously
disadvantaged schools. Access to computers and the
Internet is essential if South Africa intends creating a new
generation that has the requisite IT skills to exploit new
technology and function efficiently in the global knowledge
environment.
•
79
2009
• The cell phone is the most popular ICT device,
• Current cell phone technology allows for a number of
regardless of age, gender, race or urban/rural split.
The proficiency of Smartphone usage is, however,
still extremely low with the large majority of the
businesses indicating that they had never used
Smartphones.
sophisticated operations that could be used effectively by
small business owners.
Courses or information road-shows which focus on how to
use more sophisticated cell phone technology options (e.g.
Internet access) more effectively (as opposed to merely
using cell phones for phone calls and SMS) could benefit
entrepreneurs.
•
•
• Educational levels have an impact on the likelihood
• A number of studies have highlighted the poor quality
that a business will have and use a computer in the
business, the likelihood that the business owner
will use the Internet, and the variety of ICT devices
that are used in the business.
of the educational standards in South Africa. In order for
South Africa to become more effective as an efficiencydriven country, improvements in the quality of education at
many schools in South Africa needs to be addressed with
some urgency.
An improvement in the quality of schooling is also critical
to ensure that South Africa has sufficient employees and
employers that are able to be effective in the knowledgebased global economy.
Business training institutions and service providers must
employ specialist IT people to advise businesses on the
best ICT investments for their business, as well as provide
focused training to ensure the effective use of technology.
Training interventions need to offer business owners the
support that they actually require. This could be basic
computer literacy, English literacy, basic business skills or
more advanced computer literacy.
•
•
•
• Rural businesses make significantly less use of a
• ICT will not, in itself, solve many of the existing problems
computer or the Internet in their businesses. They
also are far less positive with respect to their belief
in their own business and ICT-related skills.
facing small businesses – particularly in rural areas. These
problems include poverty, lack of markets, irregular
electricity supply, transport and other logistical issues.
Policy makers need to recognise and make efforts to
address these issues, rather than see ICT provision as an
end in itself.
Communities are often initially suspicious of ICT usage
within businesses. It is therefore important to educate the
population as a whole about technology use and benefits.
Businesses do not exist in a vacuum and need buy-in from
customers if technology is to be used successfully.
•
• Micro and rural businesses were less confident in
• ICT training must be integrated into general business
their perception of their own general business as
well as specifically ICT skills.
training courses so that the way in which ICT complements
business practices can be demonstrated. If ICT solutions
are to be effective, they need to be integrated into the
existing business processes and form part of the longerterm strategy of the business.
If the ICT requirements of the business are unable to fit into
existing business processes, the business processes may
need to be reviewed.
•
80
• The telephone or paper-based communication i.e.
• Business owners would need to operate in a network of
fax machines are still significantly more popular
as a method of communicating with suppliers and
customers.
business customers and suppliers that are all comfortable
with electronic communication before email becomes the
communication norm.
It is important to include technology in the school curricula
as well as adult education programmes to ensure that the
wider population becomes more familiar with technology.
•
• A large percentage of the SMMEs do not use
• Community-based IT and business centres that provide
the Internet for business purposes. The digital
divide between businesses with access to more
sophisticated ICTs, such as the Internet, is likely to
increase. Businesses that do not access the Internet
are also excluded from a comprehensive source of
business information that is becoming more wide
spread – particularly in urban areas.
access to ICT must be easily accessible and must be staffed
by sufficiently qualified personnel.
Large businesses e.g. cell phone providers should be
encouraged to invest in business centres. An example
of this is the ICT access centre launched in 2008 in
Johannesburg. The initiative was funded by Vodafone and
is specifically targeted at small business owners. It is of
particular importance that these centres provide low-cost,
easy access to technology such as the Internet.
Liberalisation of the telecommunications sector to allow for
increased competition is vital to assist in bringing down the
cost of telecommunication.
Increased competition is also necessary to bring down the
cost of broadband connectivity, as the cost of broadband
connectivity is currently out of reach of many small
businesses.
•
•
•
• The overwhelming majority of respondents that
• If cell phone technology is going to be instrumental in
accessed the Internet from their cell phone were
urban based and had computers in their business.
This brings into question whether cell phones are
likely to be effective in bridging the digital divide
between urban and rural areas.
bridging the urban/rural digital divide, business owners in
rural areas will need to be exposed to Smartphones and
other web-enabled technology. Internet and cell phone
costs will need to be reduced as they are still out of reach of
many small businesses.
• Microsoft Word and Excel are still the software
• These packages are simple, easy to use and affordable.
packages of choice for small business owners.
They are also the packages taught at most high schools
and computer training courses.
• A small minority of businesses with computers
• ICT packages aimed specifically at small businesses need
use software packages other than Microsoft Word
and Excel. One exception to this is Pastel Payroll
software.
to be promoted, as generic packages, often created with
large organisations in mind, are not suitable for small
business needs.
81
2009
• Over half of the respondents found the management
• Tailor-made general business skills courses, particularly in
of business activities relating to sales/marketing
and finance/accounting somewhat to very
challenging.
More rural businesses than urban businesses
indicated that they found the management of
business activities relating to sales/marketing
and finance/accounting somewhat to very
challenging.
marketing and financial management, need to be provided
for SMMEs. These courses need to address the real
concerns faced by small businesses and cannot be generic
small versions of corporate requirements.
Poverty relief in rural areas is critical to ensure that there
is a sufficiently large market to encourage entrepreneurial
behaviour.
The lack of Internet usage by rural businesses to market and
promote their business reduces their visibility. However,
Internet usage by the general population in rural areas
would need to increase before this form of marketing would
be effective.
•
• Businesses do not only see the need for a computer
•
•
• Businesses that are already struggling to cope with the
programme if they are finding a particular business
activity challenging.
•
• There is a need for integrated programmes for the
• ICT development has viewed the SMME sector as a smaller
small business sector.
•
82
management of a particular business activity are least likely
to benefit from the introduction of a computer programme.
Research has shown that the adoption of ICT in a business
is only likely to have tangible benefits if it is integrated into
the business.
The businesses that would most benefit from ICT
interventions are those that indicated that they were
coping with or found the management of certain business
activities somewhat (as opposed to very) challenging.
These businesses have better business skills and are able
to integrate the ICT solution into the business.
version of corporate clients and much of the software
offered to this sector has been too complex, too expensive
and has not understood the needs of the SMME market.
Software providers need to tailor-make programmes for the
SMME market or, if they currently have programmes aimed
at the SMME market, they should review their marketing
and costing strategy.
REFERENCES
1
Adam, R., Chuang, C., Herrington, M., Modibe,
F.S. and Zailingski, M.P. (2009), The extent of
ICT usage by SMEs in emerging economies results of a pilot study of SMEs in Brazil, Russia,
India, China and South Africa, submitted to
publication:
2
Alwin, D. (1987), Making errors in surveys: An
overview in survey design & analysis; current
issues. Beverly Hills, C.A. Sage Publication, Inc.
3
Baard, V.C. and van den Berg, A. (2004),
Interactive information consulting system, South
African Journal of Information Management,
Volum 6 (4) December 2004, www.sajim.co.za
4
Berry, A. and von Blottnitz, A. (2002), The
Economics of SMMEs in South Africa, www.tips.
org.za/node/204
5
Blanke, J. (2007), Assessing Africa’s
Competitiveness in a Global Context, The Global
Competitiveness Report 2008 – 2009, World
Economic Forum, www.weforum.org/en/
initiatives/ gcp/Global%20Competitiveness%20
Report/index.htm
6
7
Bourque, L.B. and Fielder, E.P. (1995), How to
conduct selfadministered and mail surveys.
Thousand Oaks, C.A: Sage
Boyera, S. (2007), The Mobile Web to bridge the
Digital Divide? Published in: IST-Africa 2007
Conference Proceedings, Paul Cunningham and
Miriam Cunningham (Eds), IIMC International
Information Management Corporation, 2007,
ISBN: 1-905824-04-1. http://www.ist-africa.eu/
home /outbox/ ISTAfrica _Paper_ ref_27_doc
_1574.pdf.
8
Burger, V. (16 May 2008), Local SMEs face unique
challenges http://www.itweb.co.za /events/
ictforsmes/2008/default.asp
9
Business Day Management Review of May
2007
10 Business Wire (2007), Key Findings of
the SME survey 2007 in South Africa,
www.reuters.com/article/pressRelease/
idUS72368+19-Aug-2008+BW20080819
11
Centre for Development and Enterprise. (2004)
“From Laggard to world class: reforming maths
and science education in South African schools”,
Science in Africa
12 Cloete, E., (2003). SMEs in South Africa:
Acceptance and Adoption of E-commerce,
London: Idea Group Publishing, www.sacla.org.
za/ SACLA2002/ Proceedings/ Papers/Cloete.
doc
13 Cohen, T. (2009), Growth in Internet usage [roves
the road to failure is paved with good intentions,
Business Day, 9 March 2009
14 Crown (2004), Customer Relationship
Management (CRM) www.is4profit.com/
business-advice/it-telecoms/crm-customerrelationship-management.html
15 Donner, J. (2005), Micro-entrepreneurs and
Mobiles: An exploration of the Uses of Mobile
Phones by Small Business Owners in Rwanda,
The Massachusetts Institute of Technology,
Information Technologies and International
Development, Volume 2, Number 1, Fall 2004,
1 - 21
16 Duncombe, R. and Heeks, R (2001), Information
and Communication Technologies and
Small Enterprises in Africa: Lessons from
Botswana, Institute for Development Policy and
Management, University of Manchester
17 Duncombe, R. and Molla, A (2006), SMEs
and E-commerce in Developing Countries:
Frameworks for Assessing the Role of Change
Agents, Development Informatics, Working Paper
Series, Paper No 26, Institute for Development
Policy and Management, http://www.sed.
manchester.ac.uk/idpm/dig
18 Dutta, S. and Mia, I. (2007), The Global
Competitiveness Report 2008 – 2009, World
Economic Forum, www.weforum.org/en/
initiatives /gcp/ Global% 20 Competitiveness%20
Report/index.htm
19 Economist Intelligence Unit, The 2007 e-readiness
rankings, Raising the bar, a330.g.akamai.
net/7/330/25828/20070420195432/graphics.
eiu.com/files/ad_pdfs/2007Ereadiness_
Ranking_WP.pdf
20 ECLAC (2005), Information Technology for
Development of Small and Medium-sized
Exporters in Latin America and East Asia, www.
eclac.org/comercio/it_sme
83
2009
21 Electronic Communications and Transactions Act
[No. 25 of 2002] Government Gazette Republic of
South Africa Vol. 446 Cape Town 2 August 2002
No. 23708, www.info.gov.za/gazette/acts/2002/
a25-02.pdf
22 Esselaar, S., Stork, C., Ndiwalana, A., DeenSwarray, M., (2007), ICT Usage and Its Impact on
Profitability of SMEs in 13 African Countries, MIT
Press, Volume 4, Number 1, Fall 2007, 87 – 100.
23 Farrell, Glen., Isaacs, Shafika., & Trucano, Michael
(eds.). (2007), Survey of ICT and Education
in Africa (Volume 2): 53 Country Reports.
Washington, DC: infoDev / World Bank.
24 Frempong, G. (2007), (ATDF Journal, Volume
4, Issue 1) Trends in ICT Usage by Small and
Medium Scale Enterprises in Ghana
25 Friedland, C., Merz, C., Van Rensburg, J. (2008),
Networked Micro-Enterprises: The Added Value
of Collaborative Procurement in Rural South
Africa, IST-Africa 2008 Conference Proceedings,
http://www.ist-africa.eu/home/outbox/ISTAfrica_
Paper _ref_87_doc_2089.pdf
26 Goldstuck, A. (2005), The next big boom in the
online world, Posted on April 19th, (2005) http://
thebigchange.com/2005/04/
27 Herrington, M., Kew, J., and Kew, P., (2008),
Global Entrepreurship Monitor, 2008, South
African Executive Report, Graduate School of
Business, University of Cape Town.
28 Jagan, A. Heeks, R. Whalley, J. (2007), Mobile
Telephony and Developing Country MicroEnterprise: A Nigerian Case Study, Development
Informatics, Working Paper Series, Paper
No 29, Institute for Development Policy and
Management, http://www.sed.manchester.ac.uk/
idpm/dig
29 Kapurubandara, M., and Lawson, R., (2006),
Barriers to Adopting ICT and e-commerce with
SMEs in Developing countries: An Exploratory
study in Sri Lanka, www.collecter2006.unisa.edu.
au/Paper%209%20Mahesha%20Kapurubandara.
pdf
30 Kelly, T. and Biggs, P. (2007), Mobile Phones as
the Missing Link in Bridging the Digital Divide in
Africa, ATDF Journal Volume 4, Issue 1
84
31 Konde, V., (2007), What Type of National ICT
Policies Maximise ICT Benefits, ATDF Journal,
Volume 4, Issue 1, 37 - 48
32 Kotelnikov, V., (2007), Small and Medium
Enterprises and ICT, Asia-Pacific Development
Information Programme, http://www.unapcict.org
33 Kotler, P., (1997), Marketing Management, New
Jersey: Prentice – Hall Inc.
34 Kuwayama, M., Ueki, Y., Tsuji, M., (eds.), (2005),
Information Technology for Development of
Small and Medium-sized Exporters in Latin
America and East Asia, United Nations
Publication, United Nations ECLAC, Santiago of
Chile
35 Layton, R. Morrison, P. Simons, V., (2008),
Information & ICT as Enablers for Local Economic
Development in Small-Town, Rural Africa ISTAfrica 2008 Conference Proceedings, http://
www.ist-africa.eu/home/outbox/ISTAfrica
_Paper_ref _127_ doc_2095.pdf
36 Maas, G., and Herrington, M., (2006), Global
Entrepreneurship Monitor, 2006, South African
Executive Report, Graduate School of Business,
University of Cape Town.
37 Maier, S., and Nair-Reichert, U., (2007),
Empowering Women Through ICT-Based
Business Initiatives: An Overview of Best
Practices in E-Commerce/E-Retailing Projects,
The MIT Press, Volume 4, Number 2, Winter
2007, p 43 – 60.
38 Matthews, P., (2007), ICT Assimilation and
SME Expansion, Overseas Development
Institute, University of Manchester, Precinct
Centre, Manchester, Journal of International
Development p. 817-827
39 Mia, I., and Dutta, S., (2007), Connecting the
World to the Networked Economy: A Progress
Report Based on the Findings of the Networked
Readiness Index 2006 – 2007, The Global
Information Technology Report, 2007 World
Economic Forum, http://www.insead.edu/v1/gitr/
wef/main/previous/chapters/GITR2006-2007.
pdf
40 Mhlanga, S., and Temtime, A., (2007), Mission
Report, South African Round Table on ICTs, Trade
and Economic Growth, July 2007, Economic
Commission for Africa
41 Molla, A., (2005), Exploring the Reality of
eCommerce Benefits Among Businesses in a
Developing Country, Development Informatics,
Working Paper Series, Paper No 22, Institute for
Development Policy and Management, http://
www.sed.manchester.ac.uk/idpm/dig
42 Morris, C., (2006), A Comparative Study of
eAdoption Activities in South Africa and
Mozambique, CSIR, AAIICT, Meiring Naude,
Brummeria, Pretoria http://researchspace.
csir.co.za/dspace/bitstream/10204/1059/1/
Morris_2006_D
43 Mutula, S., and Van Brakel, P., (2006),
E-readiness of SMEs in the ICT sector in
Botswana respect to information access, The
electronic Library, Volume 24, No. 3 pp 402 – 417,
Emerald Publishing Group Limited
44 Ntingi, A., (2004), State breathes new life into
SMMEs, 14 Dec 2004 www.busrep.co.za/index.p
hp?fArticleId=2344151&fSectionId=552&nld=200
4-12-14&f=d&t=html 45 Rae, A., (2006) Abandoned Heroes, ICT Adoption
and use in SMEs, WestFocus Project Team
46 Republic of South Africa (RSA), 1995. White Paper
on National Strategy for the Development and
Promotion of Small Business in South Africa.
Government Gazette. Vol. 357.
47 OECD, (2004), ICT, E-Business and SMEs, In.2nd
OECD conference of ministers responsible
for small and medium-sized enterprises
(SMEs).Turkey: OECD www.oecd.org/
dataoecd/6/9/31919255.pdf
52 The Global Competitiveness Report 2008 - 2009,
World Economic Forum, www.weforum.org/en/
initiatives/gcp/Global%20Competitiveness%20
Report/index.htm
53 Tembo, R, Owei, V. And Maumbe, B. (2008)
Towards a Modelling Framework for Information
and Communication Technology Use in
Commercial Agriculture: Significant Factors
in South Africa. IST-Africa 2008 Conference
Proceedings, http://www.ist-africa.eu/home/
outbox/ ISTAfrica Paper_ref_ 6_ doc 2092.pdf
54 Telecommunications Act 103 of 1996, www.info.
gov.za/acts/1996/a103-96.pdf
55 Thomas, R., (1998), An introduction to the study
of small tourism and hospitality firms, in R.
Thomas (Ed), The Management of Small Tourism
and Hospitality Firms, Cassell, London, pp 1-16.
56 Trigrammic Consortium (2005), Business
Development for SMMEs, Report Prepared for:
The Presidential National Commission on the
Information Society and Development, www.
trigrammic.com/cv_jon.htm
57 Tweed, D., and McGregor, J., (2005), Seven Years
and still trading: Exploding the high SME mortality
myth, 5th Hawaii International conference on
Business
58 Tweed, D., and McGregor, J., (2001), Gender and
managerial competence: support for theories of
androgyny?, http://www.emeraldinsight.com/
Insight/ Published/ EmeraldFullTextArticle/
Articles/0530160602.html
48 Sahlfeld, M., (2007), How does ICT Work for
Development? A Review of the Challenges and
Opportunities, ATDF Journal, Volume 4, Issue 1
59 Toure, H., (2007), Competitiveness and
Information and Communication Technologies
(ICTs) in Africa, Africa Competitiveness Report
2007
49 Sapsford, R., and Jupp, V., (Eds). (1966), Data
Collection and Analysis. SAGE Publications LTd.,
London.
60 UK Department of Trade and Industry, (2005),
“Promoting female entrepreneurship”, www.dti.
gov.uk
50 Sundstrom, J., (2006), Adoption of Electronic
Invoicing in SMEs, Master’s Thesis, Lulea
University of Technology
61 UNCTAD (2004), Internet Use Rising among Developing-Countries, but E-Business Lags Behind,
E-commerce and Development Report 2004
51 Taking stock and looking ahead: digital divide
assessment of the City of Cape http://www.
bridges.org/e_readiness_assessment
62 United Nations (2004), E-Commerce and
Development Report 2004, United Nations
Report, South African Round Table on ICTs, Trade
and Economic Growth, July 2007, Economic
Commission for Africa
85
2009
63 Van Hoorik, P., Mweeta, F., (2008), Internet in
Rural Areas of Zambia: A User Study IST-Africa
2008 Conference Proceedings, http://www.istafrica. eu/home /outbox/ISTAfrica_Paper_ref_18_
doc_2096.pdf
64 Weiner, A., and Rumiany, D., (2007), A New Logic
of Reducing the Global Digital Divide in SubSaharan Africa: From Obstacles to Opportunities,
ATDF Journal Volume 4, Issue
65 Wolf, S., (2001), Determinants and Impacts of
ICT use for African SMEs: Implications for Rural
South Africa, 10-12 September 2001 TIPS Annual
Forum http://www.info.gov.za/acts/1996/a10296.pdf
86
87
2009
APPENDIX 1
Provincial list of interview numbers
Province
Name
Total
Accepted
Rejected
GP
Magreth Maropa
102
94
8
GP
Lipson Maropa
4
47
0
GP
Andile Kweyama
9
3
6
GP
David Seakgwe
16
14
2
GP
Mathe Stephan
6
6
0
GP
Sharon Mashiane
24
20
4
GP
Samaboramosa Malebye
4
4
0
GP
Patricia Lebeloane
5
5
0
GP
Portia Magoshoa
6
6
0
GP
Yalezwa
5
5
0
GP
Total
224
204
20
WC
E du Plessis
152
152
0
WC
Fundiswa Pike
72
72
0
WC
Zelda
8
8
0
WC
Natasha Mangco
6
4
2
WC
Glen Visser
40
40
0
WC
Thirloshnee Coopen
6
6
0
WC
Kelly Johnson
2
2
0
WC
Total
286
284
2
NW
Sarah Moloposi
119
106
13
NW
David Lemeke
15
15
0
NW
Fuzile
6
6
0
NW
Tebogo
10
4
6
NW
Total
150
131
19
PE
Lungile
18
15
3
PE
Nolusindiso
10
10
0
PE
Linda Jamula
4
4
0
PE
Mziwethu
15
13
2
PE
Siyanda Mayeza
6
6
0
PE
Sibongile Mthimkhulu
5
5
0
88
PE
Reliban Wessels
14
14
0
PE
Angeline Rensburg
21
21
0
PE
Zingiswa Ngqinambi
7
7
0
PE
C.Beaton
7
7
0
PE
Noluvuyo
1
1
0
PE
Claudete Brown
13
13
0
PE
Desiree van Sensie
5
5
0
PE
Deidre
21
21
0
PE
Total
147
142
5
EL
Mbuyisi Mafutha
25
25
0
EL
Esmeralda
2
2
0
EL
Andiswa
30
22
8
EL
Peggy Majeke
32
31
1
EL
Zanele Vuttha
9
9
0
EL
Siphokazi Mqikeza
5
5
0
EL
Khanya Mashini
32
32
0
EL
Kaya Yoko
10
6
4
EL
Chipo Makombe
16
16
0
EL
Total
161
148
13
KZN
Nokwazi Thwala
15
13
2
KZN
Vuyiswa Mbhele
20
17
3
KZN
Mpume Shange
20
19
1
KZN
Gwen Mabika
16
16
0
KZN
Thulisile Ngcobo
28
28
0
KZN
Duduzile Ngcobo
22
18
4
KZN
Bongmusa Khuzwayo
18
16
2
KZN
Zanele Njisane
6
6
0
KZN
Ndzelu Sakhumzi
10
10
0
KZN
Ntombifuthi Ndaba
41
41
0
KZN
Sibonelo Zondi
25
24
1
KZN
Bongani Madonsela
35
35
0
KZN
Total
256
243
13
89
2009
NC
Gotsemodimo Mocuire
5
5
0
NC
Wayne Sherwood
34
34
0
NC
Patric Lawani
2
2
0
NC
Shedrack Motabogi
20
20
0
NC
Lee Ngongela
41
41
0
NC
Total
102
102
0
MP
Sabelo Hlatshwayo
29
26
3
MP
Mzimba Agripa
10
10
0
MP
Thuli Mazibuko
14
14
0
MP
Benjamin Majaja
14
14
0
MP
Israel Magabe
29
29
0
MP
Selby Ndlovu
8
8
0
MP
Khunqeka Madokwe
17
16
1
MP
Sandile Khumalo
48
48
0
MP
Total
169
165
4
Limpopo
Victor Dolweni
19
17
2
Limpopo
Billy Lesabali
153
137
16
Limpopo
Maemu Vusani
16
9
7
Limpopo
Lesiba Chuene(Isaac Gwebu)
13
10
3
Limpopo
M.C Maitisa
20
17
3
Limpopo
Total
221
190
31
Free State
Mathew Rantso
198
198
0
Consolidated Total Survey
1914
1807
107
90
91
2009
SAP RESEARCH
Pilot study on the use of ICT by SMMEs in the trade, manufacturing,
construction and services sectors in Brazil, Russia, India, China and South Africa
July 2008
The Graduate School of Business, University of Cape Town,
Breakwater Campus, Portswood Road, Green Point 8001
Private Bag, Rondebosch, 7701
(t) +27 21 406 1177, (f) +27 21 406 1456, Cell: 082 2911 365 (e) mikeherr@gsb.uct.ac.za,
92
APPENDIX 2
1. Purpose of the study
The purpose of the pilot study was to get a snapshot understanding of the use of ICT by SMEs in
Brazil, Russia, India, China and South Africa (BRICS
countries). A questionnaire was developed by the
UCT Centre for Innovation and Entrepreneurship (CIE)
in collaboration with Systems Application Products
(Africa) (Pty) Ltd (SAP) and piloted in December 2007
with 41 SMEs in the Western Cape, South Africa.
Contact details in each of the four sectors (trade,
manufacturing, construction and services) were
obtained from the database of the Small Business
Development Agency (SEDA) in the Western Cape.
A random selection of names in each sector was
chosen and telephone interviews conducted with the
owner/manager. The completed questionnaires were
analysed and, based upon the results and discussions
with the interviewers, a revised questionnaire
(Appendix 1) was compiled.
India:
Indian Institute of Technology Kanpur
Department of Industrial and Management Engineering
Runa Sarkar, Assistant Professor
Kanpur 208016
China:
Dalian Maritime University
Sino-European Usability Center
(SEUC)
Zhengjie Liu Professor, Director
Dalian, 116026 P.R. China
South Africa: The University of Cape Town, Centre for Innovation and Entrepreneurship
at the Graduate School of Business
Dr Mike Herrington
All completed questionnaires were returned to SAP to
be captured and analysed by the CIE.
3.Analysis of Questionnaires
2.Research methodology
3.1 Questionnaires
The modified questionnaire was sent to selected
institutions in BRICS requesting that they conduct
approximately 40 interviews (either face-to-face or
telephonically) with SMEs in the four sectors. The
institutes selected were:
A breakdown of the number of interviews conducted,
whether the interview was conducted with the owner
or the manager and what sector of the market the
SMEs represented is given below.
Brazil:
Universidade do Vale do Rio dos Sinos-UNISINOS Unidade Academica de Pesquisa e Pos-Graduacao Profa MS Gabriela Moreira
Russia:
Higher School of Economics, SAP Academic Department GC Univ. Alliances Program RUS
Elena Gorbacheva SAP Academic Competence Centre, CIS
University Alliance Program Director
Dr Victor Taratoukhine
Plekhanov Economic Academy
Country
No. of
interviews
Owners
Managers
Brazil
56
56
0
Russia
41
41
0
India
42
42
0
China
44
44
0
South Africa
41
41
0
93
2009
Country
Trade
Manufacturing
Construction
Services
Brazil
23
10
8
15
Russia
13
6
1
21
India
22
10
1
9
China
10
11
13
10
South Africa
5
7
3
26
3.2 Demographic profiles (Q1&2)
The gender and ages of the owner/managers are given below;
Country
Gender
Ages
Male
Female
16-20
21-29
30-35
36-40
41-50
51-60
>60
Brazil
35
21
1
6
10
6
14
16
3
Russia
30
11
0
6
9
13
8
4
1
India
9
0
0
1
13
6
15
5
7
China
23
21
0
6
10
10
13
5
0
South Africa
20
21
0
9
14
11
6
0
1
The ages of the owner/manager ranged from 16 to over 60 years, with the majority within the 30 to 50 year
bracket. This is in line with the findings of the Global Entrepreneurship Monitor (GEM) report in all the BRICS
countries where this age bracket represents the more economically active centre.
Hence the target market is neither the “young” nor those older than 60 years.
3.3 Business Profile (Q4)
3.3.1 Age, location and products:
The majority of businesses interviewed have been operating for more than 3 years with the exceptions of
South Africa, where businesses tended to be less mature, and India, where 74% of the businesses were older
than 10 years. Most of the businesses operated from a formal business premises (Brazil 29%; Russia 61%; India
79%; China 68% and South Africa 83%) with 50% of the businesses in Brazil being street traders.
The products or services offered in the four sectors ranged widely and varied accordingly to country, especially
in the manufacturing and services sectors.
94
Country
Years of business operating
Less than 1 year
1-3 years
3-5 years
5-10 years
More than 10 years
Brazil
2
5
5
20
24
Russia
3
9
11
14
4
India
0
2
3
6
31
China
4
4
12
13
11
South Africa
3
21
7
9
1
3.3.2 Monthly turnover (Q8)
The range of estimated monthly turnover varied
considerably in each of the countries analysed as well
as within each sector.
Country
Monthly turnover range
Brazil
$400 - $2 million
Russia
$10 000 - $300 000
India
$500 - $ 400 000
China
$1200 - $365 000
South Africa
$500 - $200 000
No conclusions can be drawn from the figures above.
3.3.3 Number of employees (Q13)
The number of employees varied considerably and tends to be related to the size and type of business.
However, in South Africa the average number of permanent employees per organisation is significantly less
than in Brazil, Russia, India and China.
Employees
Brazil
Russia
India
China
South Africa
Permanent
827
859
613
627
133
Full-time Contractor
55
23
44
430
17
Sub-contractor
117
18
256
23
52
Casual Worker
20
25
153
38
30
No. of Questionnaires
56
41
42
44
41
Permanent
14.8
21.0
14.6
14.2
3.2
Full-time Contractor
1.0
0.6
1.0
9.8
0.4
Sub-contractor
2.1
0.4
6.1
0.5
1.3
Casual Worker
0.4
0.6
3.6
0.9
0.7
Average no. of Employees
95
2009
3.4 Skills
3.4.1 Basic competency skills (Q14)
Respondents were asked “on a scale of 1 to 5, with 1 being the lowest and 5 being the highest, rate how
competent you are in respect of the following business skills”. The average rating for each function per BRICS
country is detailed below.
Country
Finance
& admin
HR
IT
Marketing
Operations
Logistics
Brazil
4.1
3.4
3.4
3.6
4.1
3.4
Russia
3.6
3.7
3.8
3.5
4.1
3.0
India
4.2
3.8
2.8
4.3
4.1
4.1
China
3.3
3.1
3.3
3.5
3.5
3.1
South Africa
2.7
2.8
2.0
2.6
2.9
2.9
In all BRICS countries, with the exception of South Africa, owner/managers felt they had the necessary finance
and administrative skill to run their business. South Africa rated lowest in all the categories as compared to the
other countries.
Information technology ranked amongst the lowest levels of skills, but is at an acceptable level.
3.4.2 Basic technology skills (Q15 & 16)
Respondents were asked “to rate your skills” on using the following technologies. They were asked whether
they had never used (1), were still learning (2), were skilled (3) or were an expert user (4) with a computer,
cellphone, Smartphone, PocketPC and PDA.
Country
Owner/manager skills
Computer
Cellphone
Smartphone
PocketPC
PDA
Brazil
3.3
3.8
1.6
2.0
1.6
Russia
3.9
3.9
3.1
2.9
3.0
India
2.8
3.5
1.5
1.4
1.7
China
2.6
3.1
1.8
1.6
1.3
South Africa
2.2
3.2
1.1
1.1
1.1
The results above show that in all countries the respondents believed that they were skilled in the use of
computers and cell phones (particularly Brazil and Russia), but, with the exception of Russia, felt that they had
either never used or were still learning to use Smartphones, PocketPCs and PDAs. This indicates that there is a
reasonable degree of computer capability among the owner/managers.
96
Country
Collective skills
Computer
Cellphone
Smartphone
PocketPC
PDA
Brazil
3.2
3.6
1.4
1.9
1.8
Russia
3.7
3.8
2.9
2.7
2.6
India
2.6
3.1
1.2
1.2
1.3
China
2.6
3.1
1.6
1.4
1.3
South Africa
2.5
3.1
1.0
1.0
1.0
The collective skills in the various categories and for the different countries are not significantly different from
the pattern for owner/managers. Brazil and Russia appeared more competent in computer and cellphone skills.
3.5 UCT Usage
3.5.1 Number of computing devices in the business (Q17)
The average number of computing devices used by the SMEs in the different BRICS countries is shown
below:
Country
Desktop
Computer
Laptops
Networked
terminals
Smartphones
Pocket PCs PDAs
Brazil
2.4
1.5
1.7
1.3
Russia
3.1
2.5
1.6
2.0
India
2.1
1.5
1.1
1.1
China
2.5
1.8
1.2
1.4
South Africa
1.8
1.2
1.0
1.0
The results indicate that most companies have more than one computer (desktop or laptop) so tend to use
ICT for some purpose in the business. This suggests a degree of computer sophistication with the possible
exception of South Africa.
When asked to “indicate which of the following forms part of their computing environment” (Q18), the percentage
of positive responses indicated that Russia and China show a degree of sophistication. The figures for India are
suspect because 100% of all respondents indicated that they used all forms of computer technology.
97
2009
Country
% usage of computing devices
LAN
WAN
VPN
Internet domain
Hosted email
Website
Brazil
53%
43%
21%
45%
53%
47%
Russia
94%
54%
29%
61%
73%
24%
India
100%
100%
100%
100%
100%
100%
China
51%
93%
2%
54%
34%
51%
South Africa
-
-
-
35%
15%
13%
3.5.2 Tools used for business activities (Q19)
Respondents were asked “which of the following tools do you use for business activities”. The figures below
represent the percentage of respondents in each country that use the different tools.
Business Function
Devices
Connection
Methods
Computer
Cellphone
Fax
Wireless
Wired
Internet
Email
Brazil
81%
73%
36%
13%
69%
81%
60%
Russia
100%
68%
63%
10%
49%
85%
90%
India
80%
74%
26%
3%
60%
66%
60%
China
73%
59%
52%
2%
53%
55%
71%
South Africa
2%
36%
-
-
-
39%
10%
Brazil
100%
8%
4%
4%
15%
17%
21%
Russia
100%
27%
-
2%
24%
39%
39%
India
94%
30%
0%
3%
45%
18%
54%
China
81%
43%
9%
2%
26%
28%
48%
South Africa
No information given
Obtaining information
Store information
Doing banking
Brazil
72%
25%
20%
5%
33%
85%
12%
Russia
100%
2%
7%
10%
29%
44%
15%
India
35%
19%
0%
0%
17%
26%
12%
China
43%
25%
8%
10%
2%
21%
15%
South Africa
63%
5%
-
-
-
-
-
Brazil
59%
67%
30%
4%
28%
56%
30%
Russia
99%
41%
44%
5%
36%
85%
56%
India
36%
60%
21%
0%
26%
26%
24%
China
43%
45%
38%
5%
21%
29%
33%
South Africa
-
31%
-
-
-
-
-
Purchasing
98
Marketing
Brazil
80%
44%
20%
2%
44%
58%
54%
Russia
95%
56%
46%
5%
41%
82%
71%
India
45%
45%
29%
0%
31%
17%
31%
China
60%
55%
36%
7%
40%
48%
60%
South Africa
5%
41%
-
-
-
10%
-
Brazil
57%
82%
23%
4%
38%
40%
-
Russia
95%
85%
66%
2%
36%
78%
95%
India
42%
67%
36%
2%
36%
21%
40%
China
54%
69%
48%
-
31%
33%
59%
South Africa
61%
-
-
-
-
41%
2%
Customer Communication
Communication with Peers
Brazil
No information given
Russia
82%
66%
61%
7%
36%
76%
83%
India
21%
57%
21%
5%
17%
14%
29%
China
52%
64%
40%
-
31%
33%
60%
South Africa
-
29%
-
-
-
-
5%
Brazil
53%
61%
15%
5%
28%
51%
41%
Russia
100%
34%
27%
5%
29%
88%
68%
India
9%
21%
7%
0%
5%
9%
7%
China
52%
51%
26%
2%
36%
31%
48%
South Africa
-
20%
-
-
-
-
-
Finding partners locally
Finding partners other countries
Brazil
19%
6%
6%
0%
7%
10%
10%
Russia
85%
29%
17%
2%
27%
73%
59%
India
10%
21%
10%
0%
7%
10%
10%
China
29%
19%
12%
2%
19%
19%
33%
South Africa
-
-
-
-
-
-
-
New business opportunities
Brazil
42%
21%
6%
2%
19%
44%
29%
Russia
90%
37%
20%
5%
27%
78%
54%
India
24%
21%
7%
0%
21%
17%
17%
China
55%
38%
21%
5%
33%
40%
43%
South Africa
78%
-
-
-
-
-
17%
The findings detailed above show:
1.
2.
3.
4.
Computers are the preferred devices used for almost all business activities.
Very few SMEs use wireless connections.
The Internet is the preferred method of use.
SMEs in South Africa have the lowest level of usage of either computers or cellphones for business
activities, which confirms many of the previous findings. Considerable education is necessary.
99
2009
3.5.3 Computer Programmes (Q20)
Respondents were asked to indicate which programmes they used and for what purpose. The figures below
represent the percentage of respondents in each country that used the various programmes.
Programmes used
Office
Admin
HR
Finance
Comm.
Collab.
with
SMEs
Sales
Buying
Salaries
Cust.
Management
Brazil
61%
23%
19%
54%
10%
19%
17%
2%
40%
Russia
73%
41%
36%
41%
58%
49%
19%
5%
49%
India
55%
17%
29%
38%
2%
43%
26%
17%
48%
China
75%
39%
20%
11%
27%
50%
30%
34%
57%
South Africa
55%
2%
-
-
-
-
-
-
-
Brazil
59%
19%
81%
2%
2%
17%
40%
42%
13%
Russia
68%
44%
63%
22%
27%
36%
24%
54%
39%
India
38%
12%
40%
24%
2%
36%
21%
29%
48%
China
50%
23%
20%
7%
14%
32%
20%
25%
41%
South Africa
-
-
-
-
-
-
-
-
-
Brazil
11%
6%
4%
23%
7%
21%
4%
2%
13%
Russia
0%
5%
3%
29%
32%
51%
7%
2%
19%
India
2%
0%
2%
2%
2%
2%
2%
0%
7%
China
7%
2%
2%
2%
11%
30%
2%
-
2%
South Africa
Not enough information
Word Processing
Spreadsheet details
Presentation graphics
Email
Brazil
36%
27%
21%
44%
21%
29%
35%
15%
36%
Russia
15%
24%
7%
54%
46%
41%
34%
12%
68%
India
19%
2%
10%
40%
10%
36%
31%
0%
45%
China
11%
2%
5%
36%
14%
23%
4%
-
20%
South Africa
-
-
2
2
-
2
2
-
-
100
Accounting
Brazil
7%
2%
7%
0%
0%
7%
13%
5%
5%
Russia
12%
12%
49%
2%
12%
20%
27%
44%
12%
India
7%
2%
62%
2%
2%
29%
19%
2%
4%
China
-
-
36%
-
-
2%
2%
-
-
South Africa
Customer Management
Brazil
10%
10%
5%
8%
4%
4%
5%
2%
19%
Russia
10%
5%
10%
7%
10%
15%
10%
7%
22%
India
2%
0%
0%
2%
2%
2%
0%
0%
0%
China
2%
2%
-
-
-
7%
-
-
14%
South Africa
Payroll
Brazil
6%
8%
11%
0%
0%
6%
8%
2%
2%
Russia
15%
20%
12%
2%
5%
5%
7%
41%
5%
India
2%
2%
7%
0%
0%
0%
5%
7%
2%
China
South Africa
Human Resources
Brazil
5%
15%
4%
8%
4%
2%
2%
4%
2%
Russia
14%
15%
7%
0%
2%
7%
7%
10%
5%
India
2%
4%
2%
0%
0%
0%
0%
2%
0%
China
2%
5%
2%
-
-
2%
-
-
2%
South Africa
Respondents were asked to indicate which programmes they used and for what purpose.
• Word processing and spreadsheets were the predominant programmes used across all disciplines of the
•
•
•
business, particularly for office management, HR, customer management and finance, with the main
programmes used being MS Word and Excel.
PowerPoint was used extensively for presentation graphics by SMEs in Brazil and Russia, particularly with
respect to communication, collaboration with other SMEs and sales and marketing.
It seems that not much use was made of computers for other disciplines with the exception of Excel for
accounting.
In many cases the South African respondents did not answer the question, but this would tie in with the low
usage of computerised systems.
101
2009
3.5.4 Future use of computer (Q22)
The majority of SMEs in all the BRICS countries who were currently not using a computer, very positively
indicated that they would do so in the future.
This indicates a positive response to the use of computers and suggests that the majority of SMEs understand
the importance of Information Technology for the future development of their businesses.
3.5.5 Access to Internet (Q23 & 24)
The majority of SMEs in Brazil, Russia, India and China have access to the Internet either via a home or office
computer.
Country
Office Computer
Home computer
Cellphone
Internet Café
Brazil
93%
79%
39%
7%
Russia
98%
76%
51%
5%
India
96%
39%
21%
11%
China
86%
61%
11%
9%
South Africa
24%
0%
0%
34%
However, in South Africa, 41% of the respondents indicated that they did not have access to the Internet.
This suggests a difference in the degree of sophistication of SMEs in South Africa as compared to other BRICS
countries. Either they have no connection to the Internet or they do not perceive any benefit or Internet cafes
are a cheaper and more effective alternative.
3.5.6 Use of the Internet (Q26)
Of those SMEs who indicated that they had access to the Internet, the purpose of using it is given below:
Country
Banking
Research
Find new
businesses
Finding new
partners
Promotion of
business
Other
Brazil
72%
94%
61%
44%
67%
7%
Russia
46%
85%
56%
78%
85%
5%
India
39%
25%
61%
19%
75%
36%
China
43%
63%
70%
73%
80%
30%
South Africa
4%
100%
12%
0%
21%
0%
102
The majority of SMEs first choice for using the Internet was research, although in Russia, China and Brazil it
was also used extensively for banking, finding new businesses and partners as well as for promoting their
business.
In South Africa, the primary use is for research and little else. This confirms the results in section 3.5.4 which
indicate that most South Africa SMEs do not have access to the Internet.
In China, the “other” use includes entertainment and the submission of tax declarations.
3.6 ICT Requirements
3.6.1 Keeping company records (Q27)
Respondents were asked which best describes how they keep records.
The alternatives were;- 1. Not applicable; 2. Do not keep information - no need; 3. Retain paperwork in files; 4.
Record on a computer system; 5. External e.g. accountant, administrative service
The figures below indicate the percentage of respondents who answered positively to the question.
Question 27
Not applicable
Sales and Marketing
B
R
I
C
S
No need
B
R
I
C
S
Paper files
B
R
I
C
S
Computer files
B
R
I
C
S
External
B
R
I
C
S
Opportunities for
business
18
25
5
3
0
4
8
26
5
2
27
10
29
26
34
38
35
17
21
0
0
0
0
21
0
Proposals, quotes or
tenders
4
23
2
3
0
9
8
27
0
2
22
8
27
19
34
47
25
10
22
0
0
0
0
22
0
Client information
2
2
7
3
0
0
0
19
0
2
29
5
31
32
34
50
37
12
22
0
0
0
0
22
0
Sales information
6
0
0
3
0
0
0
0
0
2
21
7
33
33
34
52
44
17
23
0
2
0
0
23
2
Cash to run the
business on a day to
day basis
13
5
0
0
5
2
0
19
5
7
16
10
19
31
32
38
34
24
13
0
7
0
0
13
5
Cash received and
paid by the business
(income and expense)
5
0
0
0
2
2
0
0
5
2
13
7
21
36
32
51
34
26
8
0
9
0
0
8
2
How much you sell
each month (turnover)
9
7
0
0
0
2
0
2
3
0
18
5
21
28
37
45
37
26
10
0
5
2
0
10
0
Who owes you money 5
( debtors)
0
0
0
0
2
0
2
3
0
20
7
29
26
37
55
39
29
13
0
2
5
0
13
0
Who you owe money
to ( creditors)
0
0
0
0
0
0
2
3
0
18
7
29
26
37
58
39
29
13
0
5
5
0
13
0
Finance and
accounting
4
Bank balance
9
5
0
0
0
5
0
5
3
0
13
5
26
32
37
41
35
26
13
0
13
3
0
13
0
Salaries
7
0
0
0
0
2
0
10
5
0
16
5
21
37
37
35
38
21
11
0
15
3
2
11
0
7
0
7
0
2
4
5
21
8
5
22
12
45
51
29
7
32
10
15
0
38
2
2
15
2
4
Human resources and
administration
Personal records of all
workers
Leave
7
5
5
3
2
5
19
29
22 14
15
55
55
24
11
27
5
11
0
39
2
2
11
2
24
27
31
6
30 14 15
29
34
7
25
7
19
40
24
14
22
2
11
0
11
2
2
11
20
Training and
recruitment
21
22
33
8
22
29
25
5
27
10
19
36
24
13
27
2
14
0
8
2
2
14
22
19 15
103
2009
Inventory
Raw materials in your
stores
35
33
34
11
54
6
8
2
0
12
10
10
24
46
22
33
33
5
14
0
0
5
0
14
54
Finished products in
stock
39
31
10
16 56
4
10
8
0
12
6
8
38
41
22
37
33
8
11
0
0
5
0
11
56
Manufacturing
schedules and
processes
51
31
44
14 56
2
13
5
8
12
13
8
26
42
24
26
23
5
11
0
0
3
0
11
56
Orders and receipt of
goods
17
16
5
5
49
2
5
5
3
12
27
3
41
54
22
40
34
5
8
0
2
5
0
8
49
Taxes payable
(income, employees,
etc)
48
0
0
3
0
0
0
2
5
2
14
5
36
25
34
11
41
14
28
0
48
2
2
28
0
Sales or value added
taxes, reports and
claims
16
2
0
14 0
0
2
5
0
2
11
5
31
22
34
11
46
14
24
0
52
5
5
24
0
Reports and claims
related to employees’
benefits, pension
funds, unemployment
funds, etc.
13
5
26
14 0
0
2
21
3
2
7
5
17
30
34
14
46
5
30
0
52
5
2
30 0
29
6
0
0
21
3
5
9
24 21
37
34
9
17
2
9
0
50 2
5
9
Compliance
Labour regulations
20 20
and safety regulations
0
0
The main observations from the results above, in which respondents were asked which best describes how
they keep records, are:
1.
Brazil, Russia, India and China tend to keep records on computer files and to a slightly lesser extent in
paper files for all categories which include sales and marketing, finance and accounting, humanresources
and administration, inventory and compliance.
2. South African SMEs tend not to use computerised systems for keeping records, but prefer the use of paper
files or they contract out their administrative requirements to external service providers.
3.
Most countries tend to keep inventory records in paper files with the exception of Brazil
and Russiaand to a lesser extent China. Again, South African SMEs prefer to use the services
of external service providers. Nonetheless, almosthalf of all the respondents indicated that the
maintenance of inventory records was notapplicable, suggesting that they are either in the service
industry or in some other industry in which record keeping of inventory is probably not required.
4. Most countries tended to keep compliance records in the paper form with the exception of Russia who
preferred computer files and Brazil who went to external service providers.
104
3.6.2 Managing business activities (Q28)
Respondents were asked how challenging and problematic they find managing the following business activities.
The alternatives were: 1. No problem; 2. Coping; 3. Somewhat challenging; 4. Challenging; 5. Very challenging
The figures indicate the percentage of respondents who answered positively to the question.
Question 28
No problem
Sales and
Marketing
B
R
I
C
S
Coping
B
R
I
C
S
Somewhat challenging
B
R
I
C
S
Challenging
B
R
I
C
S
Very challenging
B
R
I
C
S
Opportunities for
new business
7
20
21
18
0
4
25
12
23
48
23
40
29
40
2
38
5
17
18
29
27
10
21
18
0
Proposals,
quotes or
tenders
13
22
29
28
0
5
24
14
23
48
36
24
21
28
2
38
17
24
1
29
18
12
12
21
0
Client
5
13
26
37
2
5
20
24
27
46
27
23
24
24
2
38
28
21
15
29
23
8
5
15
0
Money to
expand/grow
5
35
21
33
2
15
18
17
28
44
11
30
29
25
2
38
10
17
15
31
29
5
17
15
0
Cash to run the
business on dayto-day basis
17
20
40
39
6
20
29
24
41
44
24
24
17
17
2
28
12
12
5
27
9
5
7
5
0
Cash received
and paid (income
and expense)
19
25
45
63
2
11
30
31
30
46
31
22
12
8
4
22
15
5
3
27
13
3
7
3
0
How much you
sell each month
(turnover)
9
23
36
60
2
6
30
12
30
44
31
25
21
10
4
31
20
21
5
29
19
3
10
5
0
Who owes you
money (Debtors)
15
35
36
68
6
19
33
33
20
40
24
15
17
8
2
33
13
14
3
31
7
5
0
3
0
Who you owe
money to
(creditors)
24
38
43
70
10
18
33
29
25
37
27
18
12
8
2
22
8
17
3
31
7
5
0
3
0
Bank balance
15
37
52
74
10
17
29
24
23
37
41
20
7
3
2
20
10
12
3
31
6
5
5
3
0
Salaries
18
32
62
77
10
11
32
19
21
37
38
20
10
5
2
22
15
10
3
31
7
2
0
3
0
Personal records
of all workers
38
46
56
63
8
23
27
31
33
40
23
27
3
8
2
11
7
8
3
25
2
2
3
3
4
Leave
38
46
55
62
4
30
34
30
38
35
17
12
8
3
0
13
5
8
5
23
2
2
0
5
4
Skills and skills
levies
39
48
55
59
2
30
33
24
36
35
15
13
15
8
0
11
5
0
5
23
0
3
3
5
4
Training and
recruitment
46
43
61
62
2
15
30
19
31
35
15
15
6
10
0
20
8
3
5
23
2
5
10
5
4
Buying things
your business
needs
24
46
34
67
4
12
28
27
36
19
33
15
7
3
4
22
10
17
0
13
8
0
15
0
2
Raw materials in
your stores
33
53
41
65
13
18
26
26
41
8
40
13
0
3
0
5
8
12
0
12
3
0
12
0
2
Finished
products in stock
33
35
45
76
13
28
32
27
33
8
31
8
9
0
0
5
5
12
0
12
3
3
6
0
2
Manufacturing
schedules and
processes
32
47
40
65
13
13
24
24
29
8
32
16
16
12
0
18
8
12
3
12
0
5
8
3
2
Orders and
shipping goods
26
45
36
71
13
21
26
26
29
12
36
13
13
6
4
12
13
10
3
12
5
3
15
3
2
Finance and
accounting
Human
resources and
administration
Procurement,
Inventory and
production
105
2009
Compliance
Taxes payable
(income,
employees,etc)
24
53
49
88
6
22
20
24
20
42
14
13
7
0
2
20
10
15
0
21
20
5
5
0
8
Sales or value
addes taxes,
reports and
claims
26
55
53
82
4
24
20
18
27
46
17
13
8
0
0
15
8
13
0
21
17
3
8
0
8
Reports and
claims related
to employees’
benefits,
pension funds,
unemployment
funds, etc.
23
58
40
73
4
29
20
27
33
44
23
13
7
0
2
19
8
20
0
21
6
3
7
0
8
Labour
regulations
and safety
regulations
27
56
36
77
6
29
26
29
26
40
23
10
7
6
2
15
8
18
0
21
6
0
11
0
8
Communication
with other
businesses
to join forces
on a specific
activity, such as
joint business
proposals
20
39
57
6
23
11
20
21
18
24
0
26
8
7
6
23
26
10
7
6
2
Share
information/
opportunities
with other
business owners
15
39
61
7
8
11
20
31
11
28
0
22
3
7
6
23
22
8
11
6
2
Collaboration
The main observations from the results above in which respondents were asked how challenging and
problematic they found a variety of business activities are the following:
1
The range of answers for all countries with regards to sales and marketing and finance and accounting
was almost spread equally across either being no problem at all or they were coping or in varying degrees
of being challenging.
2 With regards to Human Resources and administration most respondents indicated that they were
experiencing either no problem or they were coping adequately with their requirements. The same applied
to procurement, inventory and production.
3
Compliance with regards to taxes and other government regulations did not seem to pose too much of a
problem, except with regards to the completion of tax forms.
3.6.3 Need for a computer programme (Q29)
Respondents were asked whether they have a NEED for a computer programme to help manage their business
activities.
The alternatives were:- 1. Have a computer system already; 2. No need; 3. Need; 4. High need; 5. Critical need.
The figures indicate the percentage of respondents who answered positively to the question.
106
Question 29
Have computer system
No need
Sales and
Marketing
B
R
I
C
S
B
R
I
C
S
Need
B
R
I
C
S
High need
B
R
I
C
S
Critical need
B
R
I
C
S
Opportunities
for new
business
13
28
26
8
37
31
44
38
44
17
28
3
17
51
2
13
0
0
3
17
13
3
2
3
6
Proposals,
quotes or
tenders
25
25
26
16
37
18
45
38
42
13
36
23
19
45
6
11
5
0
3
17
7
3
0
3
6
Client
information
31
43
33
15
37
11
20
26
33
10
28
25
17
58
8
13
10
0
3
19
15
3
5
3
6
Money to
expand/grow
27
25
52
31
35
20
43
21
59
17
22
28
17
13
2
18
0
0
5
17
9
5
5
5
8
Cash to run the
business on
a day-to-day
basis
43
53
57
33
38
11
30
21
56
17
26
13
14
15
0
11
3
0
3
15
6
3
5
3
8
Cash received
and paid by
the business
(income and
expense)
44
55
67
36
38
5
25
14
49
15
29
15
14
21
2
11
3
0
3
15
4
3
5
3
8
How much
you sell
each month
(turnover)
45
58
67
36
37
11
25
14
49
10
22
13
12
23
8
9
3
0
0
17
5
3
5
0
8
Who owes
you money
(debtors)
44
55
64
35
37
13
30
19
48
13
24
10
12
23
6
13
3
0
0
15
2
3
5
0
8
Who you owe
money to
(creditors)
44
55
64
36
38
13
30
19
49
12
24
10
12
23
6
13
3
0
0
15
2
3
5
0
8
Bank balance
35
58
67
35
37
15
25
14
48
8
25
13
12
23
12
13
3
0
3
15
8
3
5
3
8
Salaries
36
56
61
31
35
19
24
22
49
6
28
15
12
26
12
11
2
0
3
15
4
2
5
3
8
Personal
records of all
workers
19
46
20
18
37
50
34
51
43
12
11
20
27
40
8
17
0
0
8
17
2
0
0
8
6
Leave
19
44
17
15
38
50
34
57
49
17
15
22
24
41
0
19
0
2
3
17
2
0
0
3
6
Skills and skills
levies
15
23
12
13
38
54
55
63
53
17
15
23
22
35
0
9
0
2
3
17
4
0
0
3
6
Training and
recruitment
14
23
12
13
38
49
49
67
53
17
18
23
19
40
0
14
0
2
3
17
4
0
0
3
6
Finance and
accounting
Human
resources and
administration
107
2009
Procurement,
Inventory and
Production
Buying things
your business
needs
27
39
22
24
19
17
37
34
32
37
25
24
39
47
2
19
0
2
6
13
6
0
2
6
4
Raw materials
in your store
29
35
28
24
10
29
50
43
30
48
17
15
25
55
4
17
0
3
0
10
5
0
0
0
4
Finished
products in
stock
27
28
32
24
10
27
50
29
30
48
24
13
37
55
4
15
0
0
0
10
5
0
3
0
4
Manufacturing
schedules and
processes
27
36
19
18
10
32
46
47
39
46
17
18
31
32
6
17
0
0
0
10
5
0
0
0
4
Orders and
shipping of
goods
27
40
24
14
10
27
43
32
40
46
25
18
37
54
4
16
0
0
0
10
5
0
2
0
4
Taxes payable
(income,
employees,
etc.)
23
50
34
49
31
38
30
32
46
17
23
20
20
14
8
11
0
2
0
8
6
0
2
0
15
Sales or value
added taxes,
reports and
claims
19
50
34
52
33
46
33
34
42
17
21
18
17
12
6
10
0
2
0
8
4
0
2
0
15
Reports and
claims related
to employees
benefits,
pension funds,
unemployment
funds, etc.
17
43
18
37
31
47
48
58
49
17
21
10
18
20
8
11
0
3
0
8
4
0
3
0
15
Labour
regulations
and safety
regulations
21
38
15
16
33
44
53
68
68
17
25
10
13
22
6
10
0
3
0
8
0
0
3
0
15
Share
information/
opportunities
with other
business
owners
11
41
8
15
15
31
44
62
62
40
33
13
22
32
0
18
0
5
0
13
4
3
3
0
10
Compliance
The main observations related to whether respondents indicated that they had were the need for a computer
program in their business are:
1
The results for this question were somewhat surprising as they seem to conflict with the results of some of
the other questions asked. A large percentage of the respondents indicated that they have no need for
such a system, possibly because the majority of them are already using MS Word for Word Processing,
Excel for spreadsheets, PowerPoint for presentation graphics and Outlook Express for emails. In Russia
the programme of preference for accounting, customer management and payroll was IC.
2. Almost all the respondents indicated that they did not have either a high or critical need for
computer systems, but this may be due to the fact that they are not aware of how an integrated computer
system would be able to help them develop their business.
108
3.6.4 Application of computer
programmes (Q30)
Respondents were asked “assuming computer
programmes exist that are able to meet the needs
you ranked, how would you prefer to apply it in
business?”
1 - I would prefer an Internet based system, with no
software installed on my computer
2 - I would prefer a software programme that can be
installed and run on a local computer
3 - I would prefer an external (expert) service provider
to do the work for me, if not too expensive
4 - Other
The results below indicate the positive response
percentage for each alternative by BRICS country:
Overall the majority of SMEs in all countries preferred
a software programme that could be installed and run
on their own computer. This indicates an enormous
requirement in the market to supply a simple software
system that can be run in-house.
3.6.5 Cost of system (Q32)
The price SMEs were willing to pay varied considerably
amongst the BRICS countries with South Africa
wanting to pay the least.
Country
Range
Average
Brazil
$100 - $15 000
$2 700
Russia
$100 - $10 000
$3 075
India
$100 - $5 000
$2 600
China
$12 - $6 000
$4 560
South Africa
$50 - $8 000
$1 440
Country
Internal
based
system
Installed
system
External
Service
Provider
Other
Pricing of the software will be a difficult decision and
far more research will have to be done before any
recommendations can be made.
Brazil
37%
65%
7%
0%
Russia
23%
83%
18%
0%
3.6.6 Need for better combinations/
integration (Q33)
India
23%
79%
12%
0%
China
26%
80%
0%
0%
South Africa
0%
100%
0%
0%
When asked who would use the system in the business
(Q31), the majority indicated that the staff should use it
according to the roles they fulfil in the organisation.
Brazil
Russia
India
China
South Africa
82%
100%
80%
85%
80%
Respondents were asked whether they think they
have a need for better combinations/integration of
the various bits and pieces of information contained in
their programmes into a more comprehensive picture.
The percentage of positive responses per country was:
Brazil
Russia
India
China
South Africa 54%
56%
85%
86%
0%
However, the response as to whether SMEs are familiar
with the term Enterprise Resource Planning (ERP)
software systems (Q35) showed some strange results.
109
2009
Country
Yes
No
Brazil
2%
98%
Russia
98%
2%
India
31%
69%
China
23%
77%
South Africa
0%
100%
Threats to future survival
Brazil
No conclusion can be drawn except that there is a
need for better computer software packages in all
BRICS countries, especially South Africa.
3.6.7 Threats to future survival (Q38)
Depending on the country the threats to survival
varied considerably and may well be attributed to the
prevailing political and economic environment.
Russia
India
China
South Africa
Competition
√
√
√
√
Market collapse
√
√
Onerous laws
√
√
High taxes
√
√
√
Economic instability
√
√
√
Skilled labour shortages
√
√
√
Lack of funds
√
√
√
Bureaucracy
√
Lack of reliable suppliers
√
Customer awareness
√
Service quality
√
Company espionage
√
√
Foreign exchange rates
√
Economic depression
√
√
√
Lack of innovation
√
Management skills
√
√
Location affecting business
No transport
√
√
√
√
Being situated in a township
Lack of marketing
110
√
√
√
Bad debts
√
√
Rising prices
Price of oil
√
√
√
√
√
3.6.8 Threats to future growth (Q39)
No information has been given on Brazil. The answers to the questionnaires need to be translated into English.
Threats to future survival
Brazil
Russia
India
China
South Africa
Fall in exchange rate
√
√
Lack of qualified personnel
√
√
√
Economic recession and instability
√
√
√
√
Competition
√
√
√
√
Tax policies
√
√
√
Bad debts
√
√
√
Lack of funds
√
√
√
√
Marketing
√
√
√
Access to distribution networks
√
Increasing expenses
√√
√
Employee integration
√
√
Lack of innovation
√
√
√
√
Labour laws
√
Lack of management skills
√
Petrol price increase
√
Crime
√
Lack of marketing skills
√
√
111
2009
4. Conclusions
1
Almost all companies indicated that they had
more than one computer (desktop or laptop)
and that there was a reasonable degree of
computer capability amongst the owner managers.
Basic technology skills in South African SMEs
ranked lowest in all the BRICS countries.
2
The highest technology skills in all countries
was with computers and cellphones. The lowest,
particularly in South Africa, was with Smartphones,
PocketPCs and PDAs suggesting a low level of IT
mobility.
3
Computers are the preferred devices used for
almost all business activities, but they are wired
rather than wireless. Again, this suggests either a
lack of mobility or a low level of IT sophistication.
4
Those SMEs not currently using computers
positively indicated that they would like to do so
in the future. This could well be dependent upon the
economy and the simplicity of the packages offered.
112
5
Almost all SMEs indicated a high degree of access
to the Internet with the exception of South Africa,
and most used it for a variety of purposes including
banking, finding new businesses and advertising/
promotion.
6
Word processing and the use of spreadsheets via
MS Word and Excel respectively are used by most
countries, but it appears that there are no packages
which suit all the needs running across the
spectrum of activities that businesses are involved
in. Emails seem to be used widely in Brazil, Russia
and China and hardly (which is surprising) in South
Africa.
7
The majority of SMEs in all countries preferred a
software programme that could be installed and run
on their own computer, but the cost they were
willing to pay for it varied considerably.
The UCT Centre for Innovation and Entrepreneurship
t: +27 (0)21 406 1177 | f: +27 (0)21 406 1456
e: nicolett@gsb.uct.ac.za | www.gsb.uct.ac.za/cie
Copyright 2009. All rights reserved
Jacqui Kew, Mike Herrington for the UCT Graduate School of Business.

entrepeneurship - Graduate School of Business

Transcription

Similar documents

CYBERJAYA

Polishing the gold in Ajegunle

CR Report 2009

Dr. Jane t Georgeson, Plymouth University

Mathew Hall, Peter Hegedüs, Josip Maras, Marco Mori, Zoltán

JABATAN KEHAKIMAN SYARIAH MALAYSIA

Program Report

Danmarks Eksportråd

Project Elcanet

Content - Promocja zdrowia