A tourism sector report by Xero has revealed that South African small business owners desperately need to invest in digital skills to unlock business success, as more than a third (34%) are still managing finances on spreadsheets and 32% are struggling with tax compliance.
According to Colin Timmis, country manager for Xero South Africa, the primary issue with poor financial literacy is that it hinders the ability of small business owners to make informed business decisions. This could lead to entrepreneurs making risky choices or result in incurring expensive debt without contemplating long-term consequences.
Digital adoption key to driving growth
“As the tourism industry gathered for Africa’s Tourism Indaba in Durban recently, it’s clear the industry must focus on collaboration and innovation to successfully grow the sector. Technology is an enabler, but tourism businesses need support to leverage it. Small businesses especially, need to have access to digital tools that help them get a better understanding of their financial data so they can make better decisions for their business,” says Timmis.
“With many tourism businesses using spreadsheets and desktop accounting software to manage their finances, there is an opportunity to help them leverage cloud tools to run their business more effectively.”
The role of government support
Still grappling with the aftermath of the global pandemic and having to contend with South Africa’s current energy crisis, 96% of the participants have indicated that load shedding has hurt their businesses and more than 77% of businesses have indicated a revenue drop of at least 21% compared to before the pandemic.
Despite this, the South African tourism industry still contributes about 3,7% of the GDP every year, with 26.67% of report participants hoping for increased government efforts to attract more tourists to South Africa. While industry events like Indaba have an important role to play in promoting investment, Timmis says there is more that can be done to help small business owners upskill.
“The number one challenge for small businesses in South Africa is a lack of financial skills,” says Timms. “This lack of knowledge can lead to severe problems, including overspending and difficulty managing cash flow. We need to invest in and promote the benefits of technology and work together to create a more connected support system to encourage innovation and collaboration amongst tourism businesses.
“The government can provide financial education, training, and access to funding and support for digitalisation aiding small businesses to make the most of the right technology.”
Leaning in on digital tools
“It’s pivotal that the country creates an environment that makes it easier for small businesses to grow,” Timms says. “Digitising by using cloud accounting systems makes it possible to have an immediate, always-on view and can help businesses and the accountants that guide them, identify and navigate potential business challenges.
“The right digital tools can lessen the strain of tax filing, managing PAYE, simplify accounting processes and allow for greater, more streamlined collaboration between small businesses and their accountants.”