SME Digitalization – This time for Africa!

By  |  January 16, 2023

Digitalisation is the process of integrating technology into all aspects of a business, and it is becoming increasingly important for small and medium-sized enterprises (SMEs) in Africa to embrace it to stay competitive, especially in times of economic downturns. By adopting digital technologies, SMEs can improve efficiency, reduce costs, and increase competitiveness. For instance, digital solutions can be used to automate repetitive tasks, such as accounting and inventory management, which can save time and money, and improve transparency. Such solutions also increase SMEs access to capital due to the increased transparency into the company’s accounting practices.

However, despite the many benefits of digitalisation, many SMEs in Africa face barriers to adoption. These include lack of access to technology, lack of digital skills and knowledge, and lack of funding to invest in digital solutions. SME founders and managers also find it difficult to navigate the fast pace of development in the digital world, making it difficult to identify the solutions suited for their unique needs.

African Governments Role in SME Digitalisation

To overcome these barriers, governments, public, private, and non-government organizations, as well as SMEs themselves, need to collaborate at multiple levels – at local in-country level, across countries on the African continent, and at global levels. African governments, for one, need to play a more active role in boosting SMEs digital transformation. They can do this by deploying digital infrastructure development, especially in remote geographies, setting up regulatory frameworks for data usage, security, middleware, blockchain, digital currencies etc., and supporting the development of digital innovations and digitalisation policies.

The Digital Transformation Strategy for Africa (2020-2030), prepared by the African Union (AU), already provides a broad framework for continent-wide coordinated response to digitalisation. However, African governments can borrow a leaf from initiatives such as Singapore government’s Go Digital programme, Smart Latvia’s SME Digital Maturity Online Recommender Tool (Diginno), and OECD’s D4SME Global Initiative, to also provide direct support to SMEs for their digital transformation.

The Go Digital programme launched by the Infocomm Media Development Authority (IMDA) of Singapore government, for instance, supports SMEs through its CTO-as-a-service platform. This is a one-stop platform that enables SMEs to perform self-assessments of their digital readiness, identify their digitalisation needs and gaps, receive recommendations on digital solutions they can adopt, gain access to a pool of digital consultants, and apply for Productivity Solutions Grant through the Business Grants Portal. Since the programs’ launch in April 2017, over 80,000 SMEs have been supported in the country. If such targeted support is provided to African SMEs, they would be able to reap the benefits of digitalisation much faster, and in turn, boost the economy of the countries they operate in.

The Senegalese government’s recently launched “Employment, Economic Transformation and Recovery” program, is one such initiative that aims to promote the digital transformation of 5000 SMEs within a four-year period. The government of Rwanda’s MSMEs Go Digital project supporting MSMEs in the country to be onboarded to e-commerce platforms to boost their sales and distribution, is another example. More such initiatives are needed for enabling African SMEs to adopt more sophisticated technologies to improve their competitiveness and thrive during economic downturns. 

SMEs need to take charge of their own digitalisation efforts!

Apart from governmental support, African SMEs themselves need to take a lead role in their own digitalisation efforts. They need to get intentional about their digitalisation strategy, align their culture, structure and processes to the strategy, and earmark funds and staff time towards such activities. While this might be overwhelming for the companies embarking on the digitalisation journey for the first time, there are avenues for support that they can look out for.

SMEs can reach out to in-country development programs of the World Bank or development organizations, or directly approach digital solution providers for getting advisory support. IDH’s FarmFit Fund, Mercy Corps Agrifin, and SNV’s CORE Africa projects are some examples of development initiatives that support digital transformation of agriculture SMEs. Odoo and Zoho are examples of cost-effective enterprise-wide solutions that specifically target SMEs and provide consulting services.

In conclusion, considering that SMEs are an engine of economic growth and account for a significant portion of employment and GDP on the African continent, it is important to make them more resilient towards a rapidly changing socio-economic environment. And, going digital is one of the ways that enable SMEs to adapt to such a dynamic environment. Therefore, it is time for all stakeholders involved in digital transformation of SMEs in Africa to become more intentional towards this goal and contribute to the growth of SMEs into an economic powerhouse on the continent.

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