The state of small businesses in South Africa in 2019: Ripe and ready for digital transformation

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At Xero, we report on the state of small businesses in South Africa every year. In 2018, our report focused on tech specifically, but this year we’re looking at small businesses as a whole. And by talking to 200 accountants and 400 small business owners, we get a better idea of their challenges, rewards and their mindsets.

If the third annual State of Small Business report shows anything, it’s that these mindsets are significantly affected by instability and uncertainty. Accountants and small businesses know that technology is important, and that their current infrastructure is holding them back, with load shedding and poor internet connections cited.

But South Africa’s small businesses are a determined bunch, they remain optimistic about how technology could still help, and plan to adopt more of it in the future.

Let’s take a look at our findings in more detail.

The barriers to business success in South Africa

Overall, it seems as if access to electricity, internet and the latest technology cause the biggest problems.

Over half (59%) said that scheduled power outages by the national supplier posed a significant challenge. In addition, over two fifths (43%) said that their internet connection was ‘OK but not 100% reliable’. These are significant issues – if you don’t have power, then you can’t get your Wi-Fi working. And if you have power, you should have a steady internet connection, so you can use it properly.

Without power, your business is bound to fall behind – you can’t keep things moving or adopt newer technologies without it. In fact, over half (53%) said they haven’t adopted cloud technology yet, because of connectivity problems. This is despite previous reports suggesting over half (58%) had cloud technology in their plans for 2018.

Other challenges include new technologies entering the market (cited by 29%) and compatibility with customers (45%). Solving the aforementioned internet issues would help address both areas. Having a steady power supply and connection helps small businesses feel more confident in adopting new technologies, and find the right customers.

Adoption, automation, and agility

Most small businesses believe that IT is important, if not essential. And employees’ tech savvy helps, too – nearly half (47%) said employees were ‘very savvy’. That’s why we were surprised to find that over two thirds (67%) don’t intend to allocate budget for training employees to use essential technologies. As a general rule, you can’t rely on people to instinctively know how to use the technology you introduce to your business. Tech is constantly changing, so you need to allocate time to train them up, so you get the best out of both them and the software.

Training aside, when it comes to technology, nearly two fifths (38%) said their IT set up was ahead of the curve. Over half (56%) claimed to make use of basic automation, whether in operational or accounting tasks. A quarter (25%) said they were using Internet of Things (IoT) technology, followed by cloud computing (19%). This widespread willingness to adopt new technology could likely be attributed to the fact that nearly all identified a large increase in profit (98%) and an increase in efficiency (99%) by doing so.

The future of finance and accounting

Over three quarters (79%) of small businesses find accounting software to be ‘very important’. However, this means a significant minority of just over a fifth don’t consider it so important. Disappointing, considering that nearly all respondents already admit that technology improves their business – so why not accounting software?

The perception of accountants is also changing. Over a quarter (29%) want to use accountants to handle finances and consultancy, and 11% want to use them exclusively for consultancy. While 61% suggested they wanted accountants to purely handle finances, that leaves a sizable minority who take a broader view of the profession. Accountants should take note, and change their offering accordingly.

Clearly, South Africa’s small business owners and accountants are becoming more technologically savvy – we can see that from the changes in the responses to our report over the years. But they still have significant hurdles in their way inhibiting their adoption of technologies that could transform their businesses. But if they can fully embrace the technology that is available to them and spend more time training their staff to use the technology to its full potential, they’ll have more time to focus on other areas of the business to help it grow.

If you’d like to read the full report, you can download it here.

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