Western Cape Business News

Send  Share  RSS  Twitter  28 Oct 2010

TECHNOLOGY: Connectivity A Problem In The SME Market


Recent Western Cape Business News

More than a third (37%) of emerging small and medium enterprise (SME) businesses in South Africa have no Internet connectivity whatsoever. This startling statistic has emerged as part of the SME Survey 2010, sponsored by the National Youth Development Agency (NYDA). This is in sharp contrast to the 17% of established SMEs that have no connectivity.

According to principal researcher, Arthur Goldstuck, this alarming statistic jumped out at the researchers, due to the significance of its impact on SME growth. He suggests that this only increases the obligations on government and telco operators to explore ways of bringing affordable Internet access to the emerging SME sector.

From a government perspective, a concerted effort needs to be made by the Universal Services Agency (USA) to judiciously apply the many millions of rands available to it, in order to help solve this problem. The telcos already contribute 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,” says Goldstuck.

The telcos themselves 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 points out that these new statistics have come about through a change in the overall sample used in the survey. By obtaining access to NYDA’s emerging client base, a more thorough picture of the SME sector could be built, by speaking to those emerging SMEs that otherwise would not have appeared on the survey radar.

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,” says Goldstuck

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,” says Steven Ngubeni, NYDA CEO.

He says 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 cell phones, 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,” says Goldstuck.

The one positive that the survey recognises, he points 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.

It could also be viewed as a positive that half (51%) 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,” concludes Goldstuck.

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