Nearly one-third of South African SMEs (small and midsize enterprises) will generate 21% to 40% of their revenue globally within the next three years, compared with just 22% today. Over the same period, the number of local companies operating in six or more countries will rise from 16% to 39%.
These are some of the key findings of a global SME survey, “SMEs: Equipped to Compete”, which was commissioned by SAP and conducted in conjunction with Oxford Economics.
The study aims to better understand how SMEs around the world are using technology to boost innovation, strengthen customer relationships, improve agility, and expand their business.
The organisation, which is one of the world’s foremost independent global economic firms, specializing in global quantitative analysis, business and public-policy advice, surveyed 2 100 executives across 21 countries, including South Africa.
Speaking at an SME Forum event in Johannesburg, SAP Africa’s head of ecosystem and channels Desmond Nair said the findings reflect a “quiet but powerful transformation” in the SME sector that is fundamentally changing markets for companies of all sizes in South Africa.
“The survey shows that SMEs around the world and across various industries are making major changes to their business models, products and go-to-market strategies. Globalisation, transformation, and technology will be the hallmarks of successful companies, and, with a commitment to enter new markets and willingness to adopt technology innovations, SMEs have never been better positioned to win,” says Nair.
The findings also overturn some industry stereotypes of smaller companies as local or regional entities that are largely technophobic: 73% of South African SMEs view technology as the heart of their business transformation efforts and, despite economic uncertainty, leading-edge adopters are willing to invest in solutions that help them improve operations and become more efficient to gain a competitive edge in the larger world arena.
Other areas of focus are the expansion of product and service offerings, which was mentioned by 62% of South African SMEs, as well as strengthening customer relationships (59%).
The study also identified major issues affecting South African SMEs. This list is led by a concern of 68% about increased competition from foreign firms, followed by shifting customer expectations and demand (37%), as well as increasing labour costs and greater supply chain flexibility—each cited by 30% of South African SMEs.
Edward Cone, managing editor at Oxford Economics, comments that looking at the survey from a BRICS point of view is an interesting exercise, as growth rates for new business start-ups in these five countries are much faster than in other countries.
“SMEs in the BRICS nations are just as affected by increasing globalisation, fierce competition, more empowered customers in new markets, and fast-changing technologies. They are transforming themselves to compete in the global market, and leveraging technology is clearly the prerequisite to help them do this,” he says.
“Almost 70% agree that technology helps them achieve longevity and sustainable growth, with that percentage rising to 77% in Brazil and India.“