SMEs suffer in 'survivalist mode'

By Damaria Senne, ITWeb senior journalist

Johannesburg, 31 Jul 2007

A Department of Trade Industry (DTI) report on ICT's ability to facilitate trade in SA's SME sector has been slammed.

The research should guide the DTI as to how to enable trade within the sector, but has been declared as flawed, badly written and misleading.

Participants at the Roundtable Discussion on ICT, Trade and Economic Growth held in Pretoria yesterday challenged the study's methodology and findings.

Development Bank of Southern Africa ICT specialist George Finger was critical of the report. He argued the scope of the research was limited, and the data was outdated and inaccurate, with unclear wording. "The report is badly written," he noted.

The scope of the study was limited to Gauteng and the Western Cape, failing to take into consideration other regions where there is ICT activity and export, he added.

Internet Service Providers' Association of SA GM Ant Brooks questioned SMEs' ability to become more engaged in international trade, when the report declares that 87% are "survivalists".

Viola Manuel, executive director of the Cape IT Initiative, said the report did not differentiate between ICT-based SMEs and those that use ICT as an enabler.

Internal condemnation

The DTI is also unimpressed with the report.

"The title is incongruous with the contents of the study and is misleading. It creates the impression that the focus of the document is on the impact of ICT on SMEs," the DTI says in an internal document shown to ITWeb during the presentation.

While acknowledging the criticism, Yusuf Timol, a DTI director of electro-technical industries, says the findings and recommendations provide guidance on the direction that should be followed.

Fighting to stay alive

The "Report on the Economic Impact of ICTs on Trade Among SMMEs in SA" assesses the country's national capacity to utilise ICT services/tools to enable trade and development.

Focus is placed on how government, finance institutions and other structures can support the SME sector to increase its ability to trade internationally.

Presenting the results yesterday, Marcia Socikwa, co-author of the report and newly appointed councillor for the Independent Communications Authority of SA, said while SMEs contributed 7% to the gross domestic product in 2006, 87% of SMEs operated in "survivalist mode".

Socikwa noted SMEs have limited export capabilities, with only 400 registered companies out of 6 000 having the capacity to export. The SME sector is not properly organised and lacks strong leadership to engage government on international trade issues, she added.

Report co-author and consultant Natalie Sunker argued that the existing legal framework does not provide an enabling environment for SMEs to thrive, as laws are too complicated.

The report also says ICT penetration and usage among SMEs is low and the sector lags in the adoption of advanced mobile services.

The roundtable discussion on ICT and trade ends today. Participants will discuss the readiness of South African enterprises for e-business and facilitated trade with a focus on SMEs.