Tackling SME disconnectivity

The SA government, through the Universal Services and Access Agency of SA, needs to put a concerted effort to judiciously apply the many millions of rands available to it in order to help solve the problem of lack connectivity that is inhibiting growth of the SME sector. So said World Wide Worx principal researcher, Arthur Goldstuck, presenting the findings of the 2010 SME Survey at the Sandton Convention Centre yesterday.

The survey discovered that the South African SME sector is finding it difficult to breakthrough into profitability because it lacks connectivity. Goldstuck said it only make sense for government to give back to the SME sector because telcos were already contributing money to the agency. “What is required is for the agency to be given direction on where best to spend it – and that is clearly in connecting the unconnected,” he said.

“The digital divide is not always the divide between the 'haves' and the 'have-nots' in the consumer market, but connectivity also plays a pivotal role in business, especially for the emerging businesses,” Goldstuck said.
He blamed Telkom's 15-year monopoly in the telecommunication sector for the widening gap between emerging businesses and their established counterparts.

Alarming statistics
The survey found out that more than a third (37%) of emerging SMEs in SA do not have Internet connectivity at all. According to Goldstuck, this alarming statistic jumped out at the researchers due to the significance of its impact on SME growth. He suggested that this only increases the obligations on government and telco operators to explore ways of bringing affordable Internet access to the emerging SME sector.

He added that the telcos also need to put more effort into rolling out services in these underprivileged areas.
“Everyone harps on about the fact that the cost of data has come down dramatically, but this is of no use if the infrastructure does not exist. And if anything, infrastructure costs have gone up as operators try to deliver services to a wider geographic area.”

Goldstuck also pointed out that these new statistics have come about through a change in the overall sample used in the survey. “By gaining insight into the emerging SME market, we have been able to get a far better sense of the differences between this segment and the more established SMEs. The comparison between these two shows that the digital divide exists among small businesses as much as it exists among the general public,” he noted.

The survey found out that of those that are connected, double the proportion of emerging SMEs (6%) as established ones (3%) use 3G as their primary means of connectivity. A further 2% in each of these categories uses their cellphones, in the form of GPRS connectivity, as their primary form of access.
“ADSL has long been accepted as being the most cost-effective and efficient form of access for the SME sector. It is here that we once again see enormous discrepancies between the two sides of the SME market.
“Of the established SMEs, 74% are using ADSL, while only 51% of the emerging market does the same,” said Goldstuck.

Death of dial-up
The one positive that the survey recognises, he pointed out, is the fact that the death of dial-up – predicted already four years ago in previous editions of the survey – has all but become a reality.
Only around 2% of the emerging sector and 1% of the established market still utilise this means of connectivity, the survey determined.

“It could also be viewed as a positive that half of the emerging SME market makes use of ADSL. However, the fact that half still do not have access to ADSL signifies just how much work remains to be done.”
“While the cost benefits for SMEs using ADSL are well understood, there remains a clear lack of penetration for fixed-line and ADSL in many disadvantaged areas,” concluded Goldstuck.

Speaking during the same event, Steven Ngubeni CEO of the National Youth Development Agency (NYDA), who sponsored the survey, concurred with Goldstuck, saying there is also a direct correlation between connectivity and profitability because businesses that have connectivity are able to respond much quicker to business opportunities.

“The NYDA has, therefore, recognised the need to pursue partnerships with telecommunications organisations in order to complement the existing business support vouchers and provide a complete solution,” said Ngubeni.