Durban — Small businesses and informal traders are losing out on the benefits of the fourth industrial revolution, which could have a major impact on their profit margins.
With South Africa’s unemployment rate sitting at 31.9%, experts say digital skills can go a long way towards boosting business viability.
However, more than half of small businesses are not ready for the digital future, according to the Small Business Digital Progression Index Report.
Christoff Oosthuizen, from the company Digibiz, said their study into digital adoption trends showed most small businesses were not geared for change and only reactively introduced digital tools.
He said Digibiz was set up to promote job creation by helping small businesses to accelerate their growth through the use of technology.
“In the economy we live in, a lot of new initiatives, opportunities and innovation are done by digital technology, so the viewpoint is that using digital tools and digital solutions is the best way to accelerate small business growth.”
The study also found that women were more tech-savvy and better at digital marketing, but men were quicker to adopt digital customer relationship systems. Township, informal or rural-based businesses lagged far behind their city counterparts in terms of technology use. It also emerged that digitally, larger VAT-registered businesses outperformed smaller ones not registered for VAT.
“With informal traders, what’s very important is the ability to take card payments or use all these mobile payment options that are available, and for them it’s about overcoming the fear that the receiver of revenue ‘is going to chase me if I start using a card machine’,” he said.
What was important was to “meet the businesses where they are” and understand how they could benefit by taking the next step in digital progression.
For instance, the first digital step in growing a business could be the use of WhatsApp and even informal traders could benefit from it.
Oosthuizen said for the sophisticated businesses which served a large number of clients but didn’t get repeat requests for service because there wasn’t ongoing communication, a customer relationship management system could send out automated emails to increase their visibility.
He said the size of a business did not matter; and informal traders they worked with had had no idea they could also use technology.
“It’s the stuff we in any case do in our social (personal) lives; we use social media, even online banking, people use it personally but they don’t think they can do it for their business. When they take that step it’s demystified and it’s easier than they thought it would be.”
He said one of the entrepreneurs they worked with dealt with a lot of contracts and didn’t know she could use an email signature. Instead she used to drive to a shop where she could print the documents, then sign and scan them so they could be emailed to the client.
Oosthuizen said informal traders who sold fruit and vegetables could use apps to search for the best available prices to increase their profit margins and even gain access to group buying.
According to the latest results of the Quarterly Labour Force Survey, the number of people with jobs increased by 399 000 to 16.7 million in the third quarter of 2023, while those without jobs decreased by 72 000 to 7.8 million.
South Africa has an estimated 2.2 million informal traders and they are definitely not gaining from the current digital revolution, according to Rosheda Muller, chairperson of the National Informal Traders Alliance of South Africa.
Muller said their members, including table-top traders, hawkers, spaza shop owners and home-based operators, lagged far behind in terms of digital skills and often lost out on sales because most of them only accepted cash.
She said usually card machines were too costly for informal traders, while they also needed money for data and even places to charge their payment devices or cellphones.
“Informal traders are the unemployed, the retrenched and most of them are forced to eke out a survival in the open public spaces enduring inclement weather and they are extremely resilient.
“Digital skills development is a necessity and a priority but it’s not reaching informal traders en masse.”
Muller said generally informal traders started their day at 4am so they could buy their stock at markets before going to their trading spots. She said given that most of them were women, at the end of the business day they still had domestic chores at home, were exhausted and “didn’t have much time to be trained or upskilled”.
She said previously, payment devices were free or cost very little, but now they were too expensive for informal traders. Another challenge was that many of them did not have smartphones.
“The main technology they have is WhatsApp. People at the markets are still buying with cash. It’s going to change slowly because I’ve been in the sector for 30-odd years and I haven’t seen a big jump.”
Muller said apart from the lack of training accessible to traders, the timing was also important. Last month, 10 traders in the Western Cape were invited to attend a workshop but it was at the wrong time.
“December is not the time to send informal traders for training. December is the month to play catch-up for the losses of the whole year,” said Muller.
Jeremy Lang, the chief investment officer at Business Partners, said small businesses should use technology for greater efficiency. He said feedback posted on social media was essentially the new “word-of-mouth marketing”, and small businesses must leverage free platforms like WhatsApp that had the potential to produce good returns without breaking the bank.
He added that generative artificial intelligence (AI) also offered businesses the potential for increased productivity.
Referring to Sage’s survey, “Small Business, Big Opportunity”, Lang said businesses which showed positive changes in efficiency and productivity linked it to the use of technology.
“Much of this rise in productivity can be linked to the more ubiquitous use of technological tools and digital platforms to automate certain tasks, speed up the pace of work and provide accurate resolutions to common problems.
“But, as Xero’s Future Focus AI research found, small business owners remain concerned that the rate of growth in AI tools is outpacing regulation,” said Lang.
However, despite the benefits of AI he said it could not replace people, whether it was used to generate content, conduct research, manage customer relations, write code or spot errors.
“Business owners need to remember that AI cannot replace human capital. As a tool, it can dramatically improve operational efficiencies, but we still need human cognitive abilities and oversight for fact-checking and to solve problems,” said Lang.
Generally, though, he said small businesses headed into the new year with positive expectations and hoped to recover from the losses caused by Covid-19.
Lang said load shedding last year resulted in losses for 59% of businesses countrywide, while small and medium enterprises in the retail, import and export industries were also adversely affected by the slow movement of goods in and out of the Durban and Richards Bay ports.