The ability to adapt to rapidly changing external circumstances and leverage powerful new technologies are key to the growth and success of African small and medium enterprises (SMEs), according to a new report by SAP.
Cameron Beveridge, head of mid-market at SAP MEA South, says SMEs are vital to the continent’s economy, but many face significant hurdles stifling their growth. “Africa is home to a vibrant and diverse SME sector that contributes half its GDP and the majority of employment. However, skills constraints and a lack of technology is constraining growth in this vital sector.”
World Economic Forum data indicates that SMEs account for 95% of all registered businesses in sub-Saharan Africa and contribute about half of the continent’s GDP. In South Africa, 91% of formal businesses are SMEs, providing 60% of all employment in the country.
According to the report, which was developed by SAP and Oxford Economics, more than a third of global SME leaders are prioritising growth through new customers, increased market share and greater revenue over the next two years. Factors such as improved innovation capacity and greater agility also ranked highly.
“Innovation is essential to business growth in the modern age, especially in light of the accelerating pace of change and ongoing disruption in global markets,” says Beveridge. “Small and medium enterprises are leveraging innovation to fulfil and deliver services more efficiently, boost their profitability, and grow their market footprint.
“There is also growing recognition of the role innovation can play in launching new services or business models, creating more personalised customer experiences, and preparing for the next wave of technologies, for example AI.”
About a quarter of companies that formed part of the study said they are currently using AI and machine learning, with half saying they’re planning to adopt these technologies in the coming year.
Beveridge says having the right foundation is key to enjoying the immense productivity, efficiency and innovation gains offered by technologies such as AI. “SMEs that have adopted the cloud reported improved agility, optimised processes, reduced costs, and improvements to customer and employee experiences.”
Cloud adoption also enhances sustainability efforts, with a separate report finding that SMEs that have adopted sustainability software solution reported reduced emissions, greater benchmarking capability, and improved data collection for ESG reporting.
Beveridge says growth-focused SMEs should build innovation strategies and business models that leverage technology and complement existing and future human capital needs.
“SMEs can compete more effectively by investing in four focus areas, namely: defining clear goals and values for the business and mobilising employees in support of the goals; adopting relevant technologies to keep up with trends and competitors; engaging in continuous strategic workforce planning to ensure the business can grow with changes in the market; and fostering a culture of innovation that prizes adaptability and agility and encourages people to think of new ways to do business and deliver value to customers.”
He adds that effective innovation within SMEs requires the entire organisation to mobilise behind new ways of thinking. “SMEs should encourage every employee regardless of their role to actively participate and share ideas for building a culture of innovation that permeates every layer of the organisation. SMEs should also leverage customer insights to ensure their innovation delivers to customer needs.”