Internet economy contributes 2% to South Africa's GDP; forecast to reach 2.5% by 2016

New Report by World Wide Worx provides the first and most comprehensive study of South Africa's quiet economic engine: The Internet

A shiny new sports car may look beautiful, but without the quietly purring engine under the bonnet, it is little more than a stationary lump of metal. So too, South Africa's economy, where flashy sectors like financial services are considered to be key drivers, when in fact it is what's under the hood – in this case the Internet – that is important. A new study has revealed exactly how crucial the Internet economy is to the country's future.

The Internet Economic Impact Study, conducted by World Wide Worx for Google South Africa, has revealed the growing importance the Internet has as an enabling tool for business communications, collaboration and transactions.

Until this report, the size of the contribution made by the Internet to the overall economy has never been quantified. This study goes much further than simply highlighting the impact this has on the economy, however, providing a series of policy recommendations that it is hoped will assist its continued growth and development. Such recommendations are important when one considers that already, the Internet economy contributes some 2% to gross domestic product (GDP).

According to Arthur Goldstuck, MD of World Wide Worx, the study shows that the total spent by consumers, small and medium enterprises (SMEs), and government on products and services via the Internet in 2011, as well as on Internet access and infrastructure, is R59-billion.

"What is interesting here is that the largest contributor to this total is not, as most people would assume, the investment by service providers in infrastructure. While the mobile networks and fibre providers have certainly spent their fair share on infrastructure – a total of R13.5-billion – this pales beside the R29.2-billion spent on Internet presence and access," says Goldstuck.

"The study further indicates that e-commerce is growing at a rate of around 30% a year, and is showing no signs of slowing down. In fact, taking into account the fact that a number of major consumer brands and chains have not yet devised comprehensive online retail strategies, the scope for future growth is even greater."

He points out that certain sectors, notably the airline industry, have already fully embraced e-commerce. Airlines are already comfortable with e-ticketing and are rapidly migrating ticket sales online. This is demonstrated by 2011 sales of nearly R9-billion.

It is a surprise, continues Goldstuck, to learn that government spending on Internet infrastructure and access is comparatively low, coming in at a little more than R1-billion. It must be said, however, that general ICT spending runs into several billion Rand.

Luke Mckend, Google SA Country Manager, adds: "No business, industry or government can ignore the scale of the Internet and the impact it is having. It presents a host of opportunities. Small and medium enterprises (SMEs) have been uneven in their uptake, but they are moving online in increasing numbers and are committed to doing so."

This is clearly demonstrated by primary research conducted by World Wide Worx in the form of its renowned SME Survey, the original representative survey of small and medium enterprises in South Africa. The 2012 edition has highlighted the importance of the Internet to the economic wellbeing of this sector in particular.

"The survey shows that around 410 000 SMEs in South Africa have a website, representing 63% of active, formal SMEs. The full impact of these websites on the economy is placed in perspective by the number of SMEs that would not have survived without one. Approximately 150 000 SMEs in SA would go out of business, were it not for their Web presence. Since SMEs account for some 7.8-million jobs, this means that as many as 1.56-million jobs would be in jeopardy were it not for the Internet," suggests Goldstuck.

He adds that while the impact of the Internet is already significant, it is expected that it will increase even further in the coming years. This will be fuelled by both the growing awareness of the importance of the Internet across business and government, and rapid growth in the number of Internet users.

"Thanks to the smartphone explosion currently taking place in South Africa, access levels and awareness are increasing all the time. In fact, it is the smartphone users who represent the future potential of Internet growth in South Africa. By next year around half of all cellular phones sold in SA will be of the smart variety. Since smartphone users eventually become Internet users, we can expect the Internet user base to grow at an accelerated pace."

However, he cautions that according to the Digital Participation Curve, a model developed by his company, it can take up to five years before new Internet users gain the confidence and experience to become active participants in the Internet economy.

"Consequently, with the number of Internet users having begun accelerating in 2008, the number of experienced users will begin accelerating in 2013, and will continue to do so for the following five years. The result is that an Internet economy worth R59-billion in 2011 and making up 2% of the SA economy could grow to as much as 2.5% of the economy by 2016."

"To put this into perspective, the agricultural sector made up only 2.2% of GDP in the last quarter of 2011. Looked at it another way, it is likely that over the next five years, the Internet economy will begin approaching the size of the construction sector - an estimated R120-billion in 2011, suggesting this is potentially one of the new building blocks of the South African economy," concludes Goldstuck.

A copy of the report can be downloaded at www.internetmatters.co.za

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com)

SME Survey 2012: SME slow to harness Cloud

Despite the clear benefits of Cloud computing, ranging from reduced costs to improved efficiencies, small and medium enterprise (SMEs) have yet to embrace this approach to technology use.

According to the annual SME Survey, South Africa's longest-running survey of competitiveness in small businesses, just 9% of SMEs made use of the Cloud at the end of 2011. Cloud computing generally refers to accessing services and applications via the Internet that would previously have resided on the user's computer or internal network.

Arthur Goldstuck, principal researcher of the survey, says that this is not surprising, as the SME sector tends to follow in the wake of technology adoption among corporations. He adds that around half of all corporates in SA are still not making use of the cloud, so it is no shock to see how few SMEs are doing the same.

"Although the number of corporates expected to be using the Cloud this year will reach 52%, the number of SMEs doing the same will only reach 18%. While this does represent the proportion of SMEs using the cloud doubling this year, it will still mean that by the end of 2012 less than one in five SMEs will be utilising the Cloud," says Goldstuck.

"This means that SMEs are not benefiting from the multiple obvious benefits they stand to gain from cloud adoption. But it is clear why it's not happening, and it is for the same three key reasons that adoption has not been more pervasive among corporations.

Firstly, many of these organisations simply don't understand the concept of the Cloud, due to industry terminology shrouding it in jargon. This in turn means that they fail to see the real advantages it offers. And, as with the corporate hold-outs, many consider it to be unsecure. This is especially ironic, considering that most cloud solutions are more secure than the average SME's PCs."

Broken down by sector, communications (13%); education and financial services (14%) and IT & telecoms (16%) are all well above the overall rate of adoption. However, tourism, transport and healthcare (4% each), and retail (5%) are all sectors that are far below the mean. Goldstuck adds that some of these sectors are potentially the biggest beneficiaries of managing their processes via the cloud.

They could benefit both from driving down the operational and capital costs of IT, and from obtaining richer functionality and better business flexibility.

He points out that the age of the business plays a role in the likelihood of adoption, with only 5% of new businesses indicating that they utilise the cloud. Among all other age categories of SMEs, more than 8% have taken to the Cloud. Goldstuck says that this shows that new businesses are more cautious about adopting cloud services. This is again ironic, since start-ups have the most to gain from the cloud, as, for example, they would not need to invest heavily in infrastructure.

"Furthermore, there is a correlation between profitability and cloud adoption, with 11% of SMEs that are strongly profitable using cloud services. Conversely, of those breaking even or making a loss, only 7.5% utilise the cloud."

"There is certainly evidence that cloud computing offers more benefits than drawbacks to SMEs, yet a lack of understanding of these benefits means uptake continues to be slow. Despite this, there is a clear edge for those who do make use of it; after all, cloud computing is an enormous cost saver to any business, and cutting costs is a key element of profitability," says Goldstuck.

SME Survey is the original representative survey of small, medium and micro enterprises in South Africa. For more information, visit www.smesurvey.co.za

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com)

Google and Partners launch Woza Online to bring thousands of South African SMEs online

"Having an online presence has never been more vital to the long term sustainability of a business, as the general public's access to the Internet continues to accelerate," he said. He pointed out that SMEs have quickly realised the value of having their own website, with some 65% of formal South African SMEs reporting that they have an online presence.

"Even more interesting is the response we have received from a full 20% of those surveyed, who said that their businesses would not have been possible without a website."

"To put this into perspective, Elizabeth Thabethe, Deputy Minister for the  Department of Trade and Industry has stated that around nine million people in South Africa are employed by SMEs. In other words, had these SMEs not had an online presence, a further 1.8 million people would potentially be unemployed."

While many SMEs may have recognised the importance of on online presence, many are still put off by the cost and complexity of building and operating a website. However, a joint initiative by government and the private sector has now been launched with the aim of mitigating these issues. Woza Online is a joint initiative by Google, the Department of Trade and Industry, Vodacom and the Human Resources Development Council.

The project aims to bring thousands of SMEs online by enabling them to create their own websites and develop an online presence, at no cost, in under an hour. It is hoped that this project will stimulate the SME sector, accelerating the ability of SMEs to effectively reach their audience.

Speaking at the Woza Online launch event, Goldstuck, who is also the MD of research firm World Wide Worx, said that the project was a fantastic opportunity for SMEs.

"The interim results of the 2012 SME Survey have already indicated that there is a strong link between being online and being competitive, profitable and sustainable. Some 79% of SMEs with a website reported profitability, whereas only 59% of SMEs without a website reported the same," explains Goldstuck.

"Clearly these findings highlight the benefits of being online for SMEs. Now Woza Online means that small businesses across the country can join the digital revolution, at no expense. Interim results of the survey have also shown that a company website, as well as the use of cloud computing, is closely correlated with being highly competitive and strongly profitable."

He adds that those SMEs in business for 10 years or longer are far more likely (72%) to have websites than relatively new businesses, indicating that the survey shows that of those operating for less than three years, just 46% are online.

"Since it is the older businesses that tend to have the websites, it seems obvious that for a new SME to obtain the same advantages, it is crucial for it to build an online presence as quickly as possible. Also, since the majority of those online are saying they are very profitable, SMEs should take advantage of the opportunity presented by Woza Online. After all, there is little doubt that an effective online presence is the key to a successful business. Such success will, in turn, have a positive impact on the SA economy as a whole," he concludes.

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com)

Google and Partners launch Woza Online to bring thousands of South African SMEs online

Woza Online, in partnership with the Department of Trade & Industry (DTI), Vodacom and the Human Resources Development Council (HRDC), hopes to transform the South African SME landscape, and drive economic growth and job creation. This project is also supported by Lead SA, the Primedia Broadcasting and Independent Group of Newspapers initiative that aims to mobilise change among South Africans for the benefit of the country.

According to the interim results of the latest SME survey conducted by World Wide Worx (January 2012), there is a strong link between being online and being competitive, profitable and sustainable. 79% of SMEs with a website reported profitability, whereas only 59% of SMEs without a website reported the same.

• Businesses participating in the initiative get:
• a free easy-to-build professional website
• a free sub-domain name and hosting
• an automatic listing on Google Places which reflects in Google Maps
• access to training material and workshops
• free online support available via Google Chat and email
• 1 year free top-level .co.za domain name for first 10,000 applicants

Commenting on the initiative, Elizabeth Thabethe, Deputy Minister for the Department of Trade and Industry, said, "The more small businesses are online the more customers they will be able to reach. We often hear entrepreneurs or business owners describing the challenges of building an online presence. With Woza Online removing those obstacles, SMEs are empowered to take that first bold step towards getting online."

'The HRDC has partnered with Google to provide entrepreneurs with free websites," said Dr. Blade Nzimande, Minister of Higher Education and Training. "Today having a website is as important as having a telephone, yet over a third of SMEs are not online, and businesses with a website are 4 times more profitable than those without one.  Many businesses think that having a website is expensive or complicated. The HRDC is a platform where social partners can jointly seek solutions to identified blockages and the provision of websites to entrepreneurs will provide them with a head start by making it quick and easy for them to have an online presence. Through initiatives such as this, the internet will help create jobs and foster economic growth and development in SA'.

Sipho Maseko, Managing Director at Vodacom said, "Being connected is essential to business growth  and possibly the most cost-effective means of marketing for most  SMEs.  This is a step towards economic freedom and growth for many who previously were denied due to cost, technology know-how and access. We look forward to seeing the creativity of South Africans as they embrace the technology and realise how it can develop and grow their businesses.

Also present at the launch event was Arthur Goldstuck, World Wide Worx, who said, "Woza Online presents a fantastic opportunity for SMEs across the country to join the digital revolution, at no expense.  Research has shown that a company website, as well as the use of cloud computing, are closely correlated with being highly competitive and strongly profitable.  We have also seen that, under tough conditions, many SMEs have only survived thanks to their online presence."

"We believe that the power of the Internet will help small businesses in South Africa to grow, and will help entrepreneurs thrive, by bringing more local information online and making it accessible," says Luke Mckend, Country Manager for Google South Africa. "The Woza Online process is simple and business owners can be online in less than an hour - whether you sell transport services, cakes, crafts or electronics, locally or internationally."

Carla de Freitas, co-founder of a grow-your-own-mushrooms kit business said "Having a website means that customers can find your business easily and quickly online, and that you can reach a much larger customer base.  Our business has grown thanks to the Internet, and we can receive queries and orders around the clock, even when we're not on duty."

The announcement was made at the Innovation Hub in Tshwane and was followed by demonstrations where small business owners - ranging from a Johannesburg cake business to a Soweto bird-watching company -  created their own websites.

Google has launched similar initiatives in 23 other countries around the world from Great Britain, Canada, and Australia to Brazil, Indonesia, France, and Poland, bringing 400,000 businesses online over 2 years.  In Africa, the programme was launched in Kenya and Nigeria last year, with these countries seeing over 20,000 businesses going online within the first two months.

For more information visit: www.wozaonline.co.za

-ENDS-

Notes to Editors

YouTube Clips: Examples of South African SMEs OnlineNote: these are examples of businesses that have benefited from having an online presence, but did not necessarily create their websites using Woza OnlineStreetwires: http://youtu.be/M_A4gMrD09o

Mushroom Factory: http://youtu.be/viHSSaauZRY

African Dream Marimba Band: http://youtu.be/A3bPbyiFWyY

Township Guitars: http://youtu.be/ztqRUksXgu8

Compilation of 4 SMEs (Streetwires, Mushroom Factory, Marimba Band, Township Guitars): http://youtu.be/B-_N1UkxtzM

About Woza Online

Woza Online is a joint initiative by Google, the Department of Trade and Industry, Vodacom, & the Human Resources Development Council, and other organizations to help SMEs create their first website and help them make the most of the opportunities offered by the Internet.  The Woza Online initiative has set a target of helping thousands of South African SMEs set up a website easily and for free, over the course of the next year.

Woza Online offers:

• a free easy-to-build professional website
• a free sub-domain name and hosting
• a free listing on Google Places
• the use of Google tools and resources
• access to training material and workshops
• free online support available via Google Chat and email
• 1 year free top-level .co.za domain name for first 10,000 applicants

About Google Inc.

Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe, Africa and Asia. For more information, visit http://www.google.com/africa and our Google Africa Blog: google-africa.blogspot.com.  You can also follow Google's Africa team on Twitter: twitter.com/googleafrica

About the dti

The Department of Trade and Industry (the dti) provides strategic direction in the development of policies and strategies that promote enterprise growth, empowerment and equity in the South African economy. The Department has prioritised entrepreneurship and the advancement of Small, Medium and Micro-sized Enterprises (SMMEs) as the catalyst to achieving economic growth and development. With the assistance of other government departments and institutions, the dti takes the lead in implementing SMME-related policies to ensure that adequate financial and non-financial assistance is awarded to the sector, for its long-term prosperity and that of the country as a whole.

About the Human Resource Development Council

The Human Resource Development Council of South Africa (HRDCSA) is a national multi-tiered and multi-stakeholder advisory body under the leadership and stewardship of the office of the Deputy President of South Africa. It is managed by the Ministry of Higher Education and Training. A number of Government Ministers sit on the Council as well as senior business leaders, trade unionists and representatives from academia and civil society. The HRDCSA,  acknowledges that human resource development is not the domain of Government alone and that all social partners have a role to play in ensuring that we develop highly skilled people that are able to participate meaningfully in the economy. The HRDCSA therefore provides a platform where all social partners can come together and mutually agree on solutions to address the human resource development issues facing South Africa.

About Vodacom

Vodacom Group Limited (Vodacom) is an African mobile communications company providing voice, messaging, data and converged services to over 40 million customers.  From its roots in South Africa, Vodacom has grown its operations to include networks in Tanzania, the Democratic Republic of Congo, Mozambique, and Lesotho and provides carrier and business services to customers in over 40 African countries.  Vodacom is majority owned by Vodafone, one of the world's largest mobile communications companies by revenue, and is listed on the JSE Limited under the symbol VOD.

Vodacom Business Services– Leading convergence in an increasingly connected Africa.

Vodacom Business Services, a division of Vodacom SA, is a leading Next Generation Network provider operating on a single business driver that understands business voice, video and data requirements.

Established in 2008, Vodacom Business Services delivers total communication solutions tailored to the needs of the public sector, large, medium and small companies. Solutions extend from mobile to fixed line access mediums, Virtual Private Networks (VPNs), Voice over IP (VoIP), hosted facilities, cloud computing based hosted services, storage, back up, security and application solutions.

Visit us at vodacom.co.za/business.

About the SME Survey 2012: World Wide Worx

SME Survey 2012 is based on a randomly selected sample of decision-makers at South African small, medium and micro enterprises (SMEs), consisting of companies with from 1 to 200 staff. A total of 2000 SMEs will be included in the survey. At the interim stage, completed on 15 December 2011, 1007 decision-makers had been interviewed.

Interim results show that nearly two thirds of all registered SMEs – 65%– have their own websites, a massive increase since 2008 when just 45% were online presence

Those in business for ten years or longer are far more likely (72%) to have websites than relatively new businesses. Of those operating for less than three years, just 46% are online.

Results found a clear correlation between competitiveness and having a website. 68% of SMEs with a website regard themselves as generally competitive, with 45% regarding themselves as highly competitive. For those without a website, these figures are 59% and 38%.

The majority of SMEs operating in the IT and telecoms sectors have websites (89%). Similarly, a high number (76%) of those in the tourism and transportation sector have websites. Meanwhile, less than half (44%) in the financial services sector have any kind of online presence.

SME Survey is the original representative survey of small, medium and micro enterprises in South Africa. For more information, visit www.smesurvey.co.za

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com)

SME Survey 2012: Competitive businesses are online

These are among the core findings at the halfway stage of SME Survey 2012. Since its inception in 2003, the SME Survey has had the express intention of determining the impact of IT on competitiveness.

Principal analyst Arthur Goldstuck describes the importance of an online presence as a crucial finding. "Those with a website are also more likely to be users of Internet and related technology tools which, when used appropriately, can deliver substantial efficiency benefits," he asserts.

Determining competitiveness is based on four factors. These include a company's ability to grow profits; its ability to grow revenue; its ability to build market share or compete with similar organisations; and its ability to cut costs.

"The latest survey indicated that fewer SMEs today regard themselves as competitive, when compared to previous years. Only 65% of those surveyed considered themselves to be competitive, compared to 75% in the past. This is clearly a consequence of the recent recession and the global financial crisis," Goldstuck says.

However, some 68% of those with a website regard themselves as generally competitive, with 45% regarding themselves as highly competitive. For SMEs without their own websites, these figures were, respectively, 59% and 38%.

When considering profitability rather than perceived competitiveness, the difference is even more dramatic: 79% of SMEs with a website report that they are profitable, while only 59% of those without a website report profitability. And for those reporting 'strong profitability', "Of those with a website, 30% claim to be strongly profitable, compared to just 14% of those without."

Surprisingly, the 7% which reported that they are uncompetitive is in line with previous years' figures. "This suggests that more SMEs are sitting on the fence and view themselves as being neither competitive nor uncompetitive. Again, this is likely due to the current global uncertainty, with many organisations simply waiting to see exactly which way the economic wind blows," Goldstuck explains.

Perhaps more encouraging is that many of those sitting on the fence still view themselves as profitable; almost three quarters of all surveyed reported that their businesses are in the green, with a quarter of these claiming to be strongly profitable. "The likely reason is that many that no longer consider themselves competitive are still making profits, albeit at a lower rate," he says.

Goldstuck says that the contributions of the broader SME sector to the national economy should not be underestimated. As such, reduced overall competitiveness is a worrying finding, particularly against the backdrop of an under-fire economy in a country where rampant unemployment perpetuates economic inequality.

"The interim results indicate that there is indeed a correlation between being online and being successful. One might suggest that an online presence is becoming a necessary but not sufficient condition for doing business, given that more and more consumers than ever before are looking for their needs on the Internet," Goldstuck concludes.

SME Survey is the original representative survey of small, medium and micro enterprises in South Africa. For more information, visit www.smesurvey.co.za

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com )

SME Survey 2012: Small businesses recognise the value of a website

As more and more consumers start their search for products and services on the Internet, and with more companies moving online and reaping the benefit of their web presence, savvy South African SMEs are taking the importance of an online presence to heart.

That's according to Arthur Goldstuck, principal researcher of the annual SME Survey, a unique study which assesses the competitiveness of this sector of the South African economy.

"Interim results show that nearly two thirds of all registered SMEs – 65%– have their own websites, a massive increase since 2008 when just 45% were online presence," he says.

Those in business for ten years or longer are far more likely (72%) to have websites than relatively new businesses. Of those operating for less than three years, just 46% are online. "While one might suggest that a website is something of a necessity which is being overlooked by the start-up, the research does indicate that nearly one in every two start-ups either have a web site when they launch or soon after," Goldstuck notes.

He says another essential finding emerging from this year's research is a clear correlation between competitiveness and having a website. "68% of SMEs with a website regard themselves as generally competitive, with 45% regarding themselves as highly competitive. For those without a website, these figures are 59% and 38%."

Differences are to be expected for various industry sectors; the majority of SMEs operating in the IT and telecoms sectors have websites (89%). Similarly, a high number (76%) of those in the tourism and transportation sector have websites. Meanwhile, less than half (44%) in the financial services sector have any kind of online presence. "SMEs in some vertical markets can be stuck in traditional ways of thinking. For example, those with a largely recurring customer base, such as auditing and accounting companies, may not yet see the value of a website," Goldstuck adds.

However, with the proliferation of smartphones, the number of people using the Internet can only increase. That carries with it an implication that unless your company is online, it may be left out in the cold. "Additionally, given the competition which broadly typifies the SME sector, it may be necessary to consider that a growing base of savvy online South Africans is emerging. As these consumers enjoy more affordable and accessible Internet access, so too will the necessity for an online presence as a necessary component of a competitive business emerge," Goldstuck concludes.

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com )

SME Survey 2011: Web-presence now crucial for the small business

South Africa is about to reach a crucial moment in the evolution of the Internet. Not only is Internet access becoming more affordable, it is also becoming more accessible as people from a variety of economic backgrounds are increasingly accessing the Internet using their mobile phones. "This will have a profound effect on how businesses provide information and services to a growing online savvy user base," says Arthur Goldstuck, MD of World Wide Worx.

Goldstuck, principal analyst for the annual SME Survey in South Africa, points to a coming watershed that will make it all the more crucial for small and medium enterprises (SMEs) to have an effective online presence.

"More than ever, the sustainability and competitiveness of SMEs in South Africa has become a critical component in an economy struggling to create jobs," says Goldstuck. "It is therefore vital to determine those factors that will ensure that SMEs are able to make an effective contribution to job creation, while ensuring their own survival and prosperity."

"Already, many consumers turn to browsers and search engines for assistance in finding the right product or service. This can be expected to increase exponentially as more people access the Internet on their phones. Therefore, those SMEs that are not online, or that have a limited or ineffective presence, could suffer," he reiterates.

Goldstuck intends to put this hypothesis to the test in the 2011 SME Survey, which has contributed original groundbreaking research into the forces shaping small, medium and micro enterprises since 2003. This year, he says, the researchers are interviewing some 2,000 such companies about Internet adoption, the role an online presence plays in increasing their competitiveness; and how that in turn contributes to the economic success of South Africa as a whole.

Other research conducted by World Wide Worx has already pointed to 2013 as a crucial year; Goldstuck says he anticipates a massive intensification in the demand for online services and information. It is a turning point which this survey intends to identify and to some extent, quantify.

"This is borne out by statistics that show that an acceleration of Internet growth began in 2008. This resulted in the number of Internet users in South Africa rising by more than two million in the next two years, from 4.6-million to 6.8-million in 2010. Further, this means that by 2013, there will be 4.6 million experienced users on the Internet, and the experienced user base will see the same acceleration that the overall user base began to see five years earlier. This means that there will be a fast-rising expectation for businesses to be ready for online demand for their services," he says.

Technology and connectivity have always shaped the SME Survey but the 2011 version is to be the most strongly Internet-oriented survey since the first iteration of the research in 2003.

"We are now going back to the core question that we originally asked: What's the impact of IT on the competitiveness of the SME? Only this time, we are focusing specifically on the growing necessity for an online presence – whether that is having a basic website, using social networks or advertising online."

Bearing in mind the importance of SMEs to the crucial macro issue of job creation, the results of this survey may be critical pointers as to how SMEs should conduct business in the future. "There is no doubt that successful small businesses are important to the larger national economy, and it would appear that the successful SMEs of the near future will be those that have an online presence," concludes Goldstuck.

SME Survey is the original representative survey of small, medium and micro enterprises in South Africa. For more information, visit www.smesurvey.co.za

Contacts:

· SME Survey spokesperson: Arthur Goldstuck (contact via e-mail arthur@worldwideworx.com )

· SME Survey media support: Debbie Whittaker (083 273 5337)

· SME Survey project manager: Kelly Conradie (contact via e-mail kellyc@coolcumba.com )

Social media goes mainstream in SA

South Africans have embraced social media as a core pillar of Internet activity in this country, along with e-mail, news and banking.
MXit and Facebook lead the way in user numbers, while Twitter has seen the most dramatic growth in social networking in the past year, and BlackBerry Messenger is the fastest growing network in the second half of 2011.

These are among the key findings of a new study released today by Fuseware and World Wide Worx, entitled South African Social Media Landscape 2011.

"The question of how many South Africans use each of the major social networks comes up so often, it became a priority for us to pin down the numbers," says Michal Wronski, Managing Director of information analysts Fuseware and co-author of the report. "The data was collected through a combination of Fuseware's analysis of social network databases, information provided directly by social networks, and World Wide Worx's consumer market research."

An analysis of Fuseware's extensive database of Twitter usage, in conjunction with World Wide Worx's consumer market research, shows that there were 1,1-million Twitter users in South Africa in mid-2011. This is a 20-fold increase in a little more than a year.
"One of the drivers of growth of Twitter is the media obsession with the network," says report co-author Arthur Goldstuck, managing director of World Wide Worx. "Most radio and TV personalities with large audiences are engaged in intensive campaigns to drive their listeners and viewers to both Twitter and Facebook. The former, coming off a very low base, is therefore seeing the greatest growth."
As in the global environment, not all Twitter users are active users, with only 40% tweeting, but probably as many simply watching, following and using it as a breaking news service.

MXit remains the most popular social network in South Africa, with approximately 10-million active users. Its demographic mix runs counter to the popular media image of MXit as a teen-dominated environment. No less than 76% of the male user base of MXit and 73% of female users are aged 18 or over.

A surprising finding emerged from analysis of Facebook data. Of approximately 4.2-million Facebook users in South Africa by August 2011, only 3.2 million had visited the site in the year-to-date.
"This is partly a factor of many users moving on once the novelty of the site had worn off, as well as a result of the fickle nature of the youth market," says Wronski. "Once BBM picked up significant traction in private schools, for example, many teenagers who had previously flocked to Facebook, opted for BBM's greater immediacy."
While LinkedIn, aimed at professional users, also reached the 1,1-million mark, it came off a far higher base – but still saw 83% growth of South African users from 2010 to 2011. Of these, 112 000 or 10% are business owners.

Consumer research analysed in the report revealed that future intention of usage of most social networks is strongly related to age. The younger the user, the greater the intention of usage.
"This is only one of many micro-trends shaping social networking," says Goldstuck. "MXit, Facebook and BBM statistics illustrate, for example, that as social networks become more mainstream, their penetration within all age ranges deepens. This, in turn, will result in the continual flattening of the age curve as social networks mature."

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Diversify to boost resilience and profitability

According to principal researcher Arthur Goldstuck, SMEs need to diversify more actively if they are to be more sustainable, profitable and resilient to inevitable market changes; when he says ‘diversify’, Goldstuck doesn’t mean the SME should act as a conglomerate, but rather that it should address different customer segments if possible.

“The first recession to hit South Africa in over 17 years was instructive: those companies which didn’t have all their eggs in one basket are the ones which weathered the storm more effectively,” he says.

Goldstuck says it is a reasonable assumption that a level of diversity in who the customer is will have an effect on how a business fares in the face of changes to the economy.

“Those businesses which have a better spread of customers are able to cope with changes. It is unlikely that all customer segments will be affected equally by any economic event, such as the recession. So, it follows that businesses which serve corporations, the ‘man in the street’ and public sector, for example, will do better than the company which only does business with the man in the street.”

More diverse means more competitive, in short. “It goes to the reliability of the income stream and the health of the target market,” Goldstuck comments. “When one sector comes under pressure, it helps to have others to carry the business through tough times. Typically, however, if you serve corporations, you are likely to be more resilient and more profitable.”

Pointing to the research, Goldstuck says that 39% of SMEs in established markets typically have done business with corporate customers; but only 31% of businesses in emerging markets. Meanwhile, in established markets, 43% of businesses typically serve other SMEs, but only 32% in emerging markets.

Wholesale and retail is the one sector which procures the very least from SMEs. Zeroing in, Goldstuck points to the gap between the established SME which enjoys these businesses as customers (31%) and emerging companies (21%).

“This presents an issue, since BEE legislation encourages sourcing from small business and in particular, from emerging small business. That could make a case for more intervention from government in terms of enforcing procurement policy,” he notes.

Andile Lungisa, NYDA Chairperson, encourages corporate South Africa to consider its procurement policies carefully. “Economic development and emancipation is a key challenge of our time. We would like to see continued and accelerated participation from big business in supporting and developing emerging talent to achieve the capacity which is required by the procurement arms.”

To facilitate on a practical level and create procurement opportunities for youth owned enterprises, the NYDA launched the Buy Youth Campaign (BYC) which was initiated to address the challenge of market access faced by most emerging SMEs.

Lungisa adds, “Selected SMEs undergo training in supplier development, presentation skills, and B-BBEE procurement. The BYC is taking advantage of the B-BBEE strategy by enticing large entities to earn points and at the same time receive the value provided by SMEs after being developed. The Campaign is also intended to create a platform for industry buyers and youth owned SMEs to convene, engage and conduct business. Proudly South Africa supports the Campaign which is seen as a competitiveness driver and an activist for South Africa’s National Buy Local Campaign.”

Goldstuck however acknowledges commercial realities which have to be taken into account; wholesale and retail industries have very specific and stringent quality requirements which render it difficult for any supplier to gain approval. And, these organisations tend to procure on a massive scale.

In conclusion, Goldstuck says that it is clear that a diverse target market means not just sustainability, but also the improved likelihood of profitability. “There is a strong difference in diversity between established and emerging SMEs, especially in terms of corporate procurement. That could make a case for gearing policy towards promotion of emerging market businesses.”

SME Survey 2010 is sponsored by the National Youth Development Agency. Visit www.smesurvey.co.za

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SME Survey 2010: The South African SME and the environment - does it care?

For the first time in its eight year history, SME Survey asked how important environmental awareness is to doing business. “Overall, 78% reported that it is indeed important. That’s exceptionally high,” he notes.
Goldstuck says this is almost certainly a consequence of business owners bringing their personal viewpoints of the necessity for environmentally sound practices into the workplace.

Perhaps even more surprising, he continues, is that emerging businesses were slightly more concerned than established companies. “Businesses in established markets came in at 77%, while businesses in emerging markets were at 80%. That’s fascinating and flies in the face of ‘received wisdom’ which assumes that those businesses which are more established and enjoy access to technology and formal communications, might be more concerned about their impact on their surroundings,” Goldstuck says.

And, when asked ‘Do you disagree that the environment is important’, 6% of emerging business said they do disagree, while 20% of established companies said they disagree. “In effect, three times more people in so-called ‘first world’ businesses don’t think the environment is important. This turns on its head the notion that the first world is more concerned with the environment than the emerging world is.”

While the underlying reasons for this are obscure, Goldstuck ventures that a struggling business owner is likely to be focused across all elements of impacts on his organisation, including its place in the community and the environment. However, once more established, company owners tend to narrow the focus to those factors directly linked boosting growth and profitability.

Andile Lungisa, NYDA Chairperson, says that as issues of sustainability elevate in the national consciousness, it is noteworthy – and encouraging – that the small business owner factors the environment into his or her plans. “We have limited natural resources which must be preserved not only for this generation of young people, but the generations which come thereafter. The South African SME owner, and especially the emerging businessman, can therefore take a bow. The great majority know that looking after the environment is the right thing to do is, and they are applying that in their organisations.”

SME Survey 2010 is sponsored by the National Youth Development Agency. Visit www.smesurvey.co.za

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SME Survey 2010: Connectivity is a big issue in the emerging SME market

“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.

SME Survey 2010: Crime and competition the biggest headaches for SMEs

Crime is far and away the most important concern for SME decision-makers. However, a higher proportion of decision-makers at established SMEs have sleepless nights over crime – 50% of these respondents – than those at emerging businesses - still high at 27%. This is probably due to the fact that emerging businesses remain more focused on getting their businesses properly established, while those that are already established make more likely targets for criminals,” he says.

“After crime, the issue that causes the most sleepless nights is that of competition. In the emerging SME sector, 14% of businesses consider competition to be a major headache. The proportion is even greater among established SMEs (18%). This indicates that, in a tight economy, the same businesses appear to be fighting for a smaller piece of the pie.”

He suggests that in previous surveys, competition was not viewed as a major worry, so the current percentages indicate that market conditions are much tighter than before. This is clearly where the recession is biting hard, since there has not been an explosion of new businesses in the SME market.

“Another aspect that worries SMEs is the lack of credit. While it is far less of a worry than crime, it still pops up among 9% of emerging SMEs - but only for 3% of the more established businesses. A more serious issue is fear about cash flow. It affects 12% of emerging businesses and 7% of established SMEs.”

However, one worry that sat in the top five worst problems during the last survey has all but disappeared off the radar. Goldstuck points out two years ago, most SMEs were nervous about the high interest rates. This has now fallen away almost completely and is the one positive impact the recession has had on the SME space.

“This is not to say that there are no other positives. It is significant that most of the issues identified two years ago as being major worries - aside from crime and competition – have been dramatically reduced in 2010. Even crime has fallen back somewhat in comparison to the previous survey. Although the World Cup and the build up to the event may be the reason for this, thanks to an increased police presence, it may also be that SA is slowly turning the tide on crime,” concludes Goldstuck. “If it is the heavier policing surrounding the World Cup that led to this perception, then that in itself suggests the solution.”

SME Survey 2010: World Cup a great success for SA, but not for the SME

That doesn't mean the World Cup wasn't a success or that it didn't bring benefits to South Africa as a whole, Goldstuck hastens to add. "Rather, what is clear is that FIFA locked down the economic benefits, making them available only to selected service providers. In effect, the little guy was frozen out almost completely."

Before the event, SME Survey showed that 86% of small businesses expected the World Cup to boost business in general. However, just 45% anticipated any benefit to their own businesses. This year's research bears that out: 92% believed the event as a whole was a success, while 42% felt that there was adequate support from business advice structures. "The significance of this – that expectations were closely matched to the outcome –is that the South African SME owner understands his or her business and its position in the macro-economy very well. Small business was not swayed by the hype," Goldstuck notes.

"Expectations were based on the kind of support which was accessible to the SME. Those who got support, benefited from it," Goldstuck says. This finding confirms the value of general support, which reinforces the ability of the SME to plug into and provide services to an event of this magnitude.

However, support did not translate into success.

The question which best sums up the massive obstacle represented by FIFA's regulations is that just 14% of SMEs say the World Cup had a material contribution to their success. In other words, just over one in ten small businesses felt the event had any direct impact on their business." What is also abundantly clear, Goldstuck adds, is that those organisations that received support from agencies like the NYDA, benefited more. A higher percentage (19%) of emerging businesses saw some benefit. At the same time, lower proportion of emerging businesses (75%) saw FIFA rules as an obstacle, perhaps because their informal status often meant they could operate a little outside of those strict regulations.

"The fact that entrepreneurs who acquired support benefited more gives us confidence that NYDA business development programmes such as the Business Consultancy Services Voucher Programme which offers young entrepreneurs access to business development support for just R200, are definitely enhancing the entrepreneurs business. In addition, striking partnerships with some of the country's smallest and biggest organisations has enabled us to support more young entrepreneurs. For instance, by partnering with CIPRO we have been able to enhance accessibility of CIPRO products, particularly registration of businesses for young entrepreneurs that the NYDA serves," says Steven Ngubeni, NYDA CEO.

The implication, Goldstuck says, is that government should perhaps pay less lip service to enterprise development and make more practical interventions to share economic benefits – when next an event requiring major business input comes to South African shores.

Drilling down into the vertical sectors and their direct benefits from the World Cup, it was found that specific sectors that expected major benefits but were let down included transportation, manufacturers and engineering firms, where only 10% felt direct benefit, construction, with only 8% benefiting, and retailers (13%). The sector that saw the least benefit was printing and publishing, at a mere 4%. On the other hand, 26% of respondents in the advertising industry, 30% in hospitality and accommodation and 30% in the Government sector said they had benefited – a lot higher, but still less than a third of respondents in those sectors. "This confirms the contention that FIFA had firm control of which businesses could participate in the benefits of the spectacle – and small business was certainly not invited to the party," Goldstuck asserts.

But were small businesses able to position themselves to take advantage of the World Cup? Only 25% say they were. Did the regulations from FIFA have a role to play in that? 81% said yes. "The regulations were designed to control the economic benefits of the event; for example, in the print and publishing industry, 98% of respondents say the rules shut them out," notes Goldstuck.

SME Survey 2010: Was the World Cup all that?

Any numbers in terms of World Cup costs and benefits right now are at best speculative, says Goldstuck, but he notes that as the World Cup drew closer, it became apparent to many SMEs that the optimistically-anticipated benefits might not materialise.

"Short term benefits really are unlikely for SMEs; much of the action was locked down for FIFA and sponsors. However, the sense is certainly that the World Cup will deliver benefits for years to come, in terms of goodwill owing to its success, as well as infrastructure which remains." He says it is obvious that a major positive impact on the country's image and its potential for foreign investors has resulted. Andile Lungisa, NYDA Chairperson, says the work of SME Survey is arguably more important than ever, given the economic challenges faced by the country.

"Many jobs have been lost with the impact of the recession. By understanding how government and the private sector can influence and stimulate the SME sector, there is the potential to elevate performance and grow employment opportunities for more South Africans. SME Survey 2010 will also test the extent to which SMEs have access to sustainable development initiatives – and extent to which they need such structures. Says Goldstuck, "To date, efforts at intervention and support have not focused on sustainable development but rather tended to be one-offs.

We need to unpack the sentiments of SMEs on the necessity for sustained intervention to guide understanding and policy on what will make SMEs more effective." Such interventions, he adds, can come from government, the private sector or a combination of the two in joint initiatives. With environmental awareness elevating in the national consciousness, SME Survey 2010 will gauge whether business owners agree with the need for environmental awareness.

"More than that, we will examine if our SMEs have embraced the concept of doing business in an environmentally friendly manner," says Goldstuck. He does point out, however, that such notions are only likely to become pertinent once a company has established itself and become profitable. "It is worth noting that many environmentally friendly options are tied to efficiency; in the face of escalating prices of energy, that provides some pragmatic forces." In addition to these three new research questions, Goldstuck notes that SME Survey will as usual address a wide range of topics and factors, including IT and connectivity and key issues which keep the business owner awake at night.

"We want to know what makes the SME more sustainable, what keeps it competitive and what it sees as threats and risks in the dynamic South African business environment," he concludes.

PRESS RELEASE

Mtubatuba Poultry Project

NYDA’s poultry project opens doors for rural based youth

The establishment of the Rural Development and Land Affairs Department has reinforced government’s commitment to improving the lives of rural based South Africans. Today, the National Youth Development Agency (NYDA) in collaboration with the Mtubatuba Municipality will launch the Mtubatuba Poultry Project, which is specifically targeted at rural and peri-urban based young South Africans.

The project involves the full value chain of broiler production including a chicken abattoir facility. According to the NYDA Chairperson, Andile Lungisa, working with a number of government departments and agencies, such as Ithala Development Finance Corporation and the Department of Trade and Industry, will ensure that not less than 300 young people in co-operatives businesses benefit from this initiative.

Through this project the NYDA is encouraging young people to collaborate and form co-operatives because this will enable them to use their diverse skills, knowledge and resources to supply large quantities of chicken and its by-products to retail stores, prisons, colleges and mines.

“We hope that more partners will come on board so that similar projects can be rolled out throughout the country because we believe that it is one of the measures that can curb rural migration, promote sustainable development and ensure that rural based young people contribute towards developing their local economies by creating employment,” concludes Lungisa.

For media enquiries please contact:

Refilwe Mphane
National Youth Development Agency
Communications

011 651 7175
084 308 5860

World Cup gap for SMEs

Sponsored by Standard Bank, National Youth Development Agency (NYDA) and Fujitsu, SME Survey is in its seventh year and polls 2,500 SME business decision-makers on the issues they face and how they overcome these to remain competitive and sustainable in the current economic climate.

According to principal researcher Arthur Goldstuck, some 86% of SME owners believe that the World Cup will be positive for the country. “However, whether this benefit to the nation will filter down to the individual SME is more difficult to say. FIFA is known for its zealous protection of the rights of its sponsors to do business in zones surrounding match locations and therefore, to a large extent, works to exclude the participation of ‘outside’ organisations.”

Since sponsorships are far beyond the means of any SME, it does render direct benefit practically impossible. SMEs are well aware of this; just 45% believe the event will benefit their business directly. Goldstuck continues, “Visitors to the event are very likely to do more than just attend matches. That allows for some spill-over of benefits.”

“Even though not as many young people will benefit from 2010 opportunities as we had hoped, an opportunity exists for young people to use their creativity and offer tourists the African experience. Young entrepreneurs can attract tourists to their communities and offer services such as, accommodation, food and beverages and even sell cultural artefacts,” Andile Lungisa, the Chairperson of the NYDA.

An interesting fact that emerged from the research is that those companies that have applied for funding from the National Youth Development Agency (NYDA) tend to be more confident about the impact of the World Cup than the overall sample. Less surprising is that this group also tends to be more positive in terms of its perception of the relevance and effectiveness of Government support programmes for SMEs. Of those that have received support, 73% believe the World Cup will boost their own businesses, against 45% for the overall sample.
“They are also largely positive having seen that NYDA had a working relationship with the Local Organising Committee in terms of identifying and training volunteers for the FIFA Confederations Cup™ and now for the FIFA World Cup™, “said Lungisa.

Interestingly, when considering the impact of the World Cup by region, it emerges that the most confident is Limpopo province. Goldstuck says “The Peter Mokaba Stadium in Polokwane serves as a beacon of hope for many; it is relatively a lot more significant for Limpopo than, for example, the facility in Green Point is to the Western Cape, since it is just one of many tourist attractions in Cape Town.”

In Limpopo province and the Eastern Cape, 88% of respondents are positive about the impact of the World Cup on the country, while in the Western Cape it is 86% and Gauteng 84%. “In Gauteng, people are as aware of the disruptions as they are of the games,” Goldstuck remarks.

Similar figures to that of Gauteng emerges from Mpumalanga and KwaZulu-Natal. “Again, there is a lot of activity in these provinces; the World Cup is a major development for them, but amid ongoing development that is happening regardless.”

Surprisingly, the Free State and North West province come in far lower, at 81% positive. “That is still overwhelmingly enthusiastic, but it would appear that SMEs in these regions are less likely to believe there will be any direct or other benefit from the event,” Goldstuck notes.

In terms of SME turnover relative to  positive expectations of the World Cup, only one sector stands out; among those micro-enterprises with a turnover of less than R150 000 per annum, 93% are positive about the World Cup versus the average of 86%. “Two factors are suggested here; one is that owners of these small enterprises have seen a gap which they will take advantage of, the other is that they have hopes which may be unrealistic,” Goldstuck says.

SME Survey: Beat the recession with business basics

Sponsored by Standard Bank, Umsobomvu Youth Fund (now operating as the National Youth Development Agency) and Fujitsu, SME Survey is in its sixth year and polls 2,500 SME business decision-makers on the issues they face and how they overcome these to remain competitive and sustainable in the current economic climate.

Since getting through the recession is a challenge on the minds of every businessperson, the establishment of a blueprint for survival and prosperity was a key focus of this year’s study. The findings of SME Survey 2009 into the strategies and tactics which companies are employing to weather the storm, serves up advice which is as simple as it is profound: It is business basics which will see you through.

Principal researcher Arthur Goldstuck explains that the Survey asked respondents to rate the importance of strategies they were adopting to get through the downturn. “Based on the responses, we have a very clear picture of what SMEs are doing to keep the wolf from the door in trying times. We believe the results of this specific aspect of the research are the single most important set of findings to date, as it gives business owners practical recommendations to follow,” he says.

Topping the list is Maintaining good cashflow and Sound business administration and financial systems. Each of these two factors was rated by 93% of SMEs as key in supporting their survival. “Cashflow is hardly surprising; it is and always has been at the heart of business viability. A little more surprising is the prominence given to systems; this tells us that business owners know that it is vital to have a finger on the pulse of the business. Managing cashflow goes hand in hand with such systems,” Goldstuck remarks.

It is customers and their custom which results in top line performance. SMEs recognise this with loyal customers rated by 91% of respondents as important to surviving the recession. Winning new business achieved the same weighting, as did good staff. “You have to know how your company makes money and often staff are key to the value proposition,” Goldstuck says. “Meanwhile, high rankings for customer-related factors confirm the old adage that no matter what business you are in, you are in the people business. People buy from people; loyal customers and new customers are obviously essential to consistent income,” Goldstuck notes.

Cutting costs, which may appear to be an obvious tactic to support a better bottom line, was ranked by a somewhat surprisingly lower number of companies as important. “At 83%, this is initially perhaps an anomaly, until one considers it in light of the shocks which SMEs have already suffered through last year, including high fuel prices and interest rates. Those factors mean most SMEs have already cut overheads to the bone and are operating on a lean basis in terms of which further cost cutting may result in loss of value creation,” says Goldstuck.

“It is important for government funded institutions such as NYDA to be involved in initiatives such as SME Survey to help understand what makes SMEs successful and establish their needs. The majority of SME owners are youth and therefore it makes sense for NYDA to align its products and services with SMEs in order to be relevant and to make a lasting impact,” said Malose Kekana, National Youth Development Agency CEO. 

Lower rankings came in for access to finance at 81% and low or no debt at 80%. Location, location, location, a mantra of businesspeople of old holds true, with 79% of respondents indicating that they considered this essential for sustainability.

This contention is further borne out with the finding that good technology is ranked somewhere near the bottom of importance in recession survival, at 76%.

“This recession has forced a lot of companies to look into their operations in a lot greater depth,” says Jane Tully, Channel Manager at Fujitsu. “Of particular importance has been the search for increased efficiency with an emphasis on cutting unnecessary costs. Whilst many companies slashed their costs dramatically over the past two years, they are still looking at all aspects of expenditure very carefully. We are finding an increasing leaning towards incorporating IT Services into the total business solution to ensure that systems efficiency is maintained and also to assess the companies’ investment in technology to optimise utility.”

An indication, says Goldstuck, of the woefully inadequate government efforts to support small business can be seen in the mere 41% of respondents who felt this was a factor in getting through the downturn. “Those who have used government support rate it highly. For all others, it is irrelevant,” he notes.

The good news, Goldstuck stresses, is that survival simply means go right back to business basics. “There is no mystery, no elixir in this blueprint. Just sound business sense.

SMEs have staying power

Of the more than 2 000 SME’s surveyed in the sixth annual SME Survey, of which Standard Bank is a major sponsor, only 5% indicated that they were unprofitable.

The sectors in which a higher than average proportion of SME’s reported that they were strongly profitable were:

Agriculture: Communication: Financial Services: IT Software and services: Wholesaletrade: (with Retail trade tracking the average, at 27%)

40% 38% 41% 31% 36%

“In addition to the above results, SME’s reported that they were very confident in the future despite the current recession in the areas of Advertising (41%); Communications (46%); IT software and services (42%); and Wholesale (44%), with Communications, IT Software and Services, and Wholesale being the healthiest.

“It was significant that only 5% of SME’s reported low or no confidence in their ability to survive the recession, with only 1% saying they are not confident at all. A little over a third are neither pessimistic nor optimistic, which, in the context of a recession, is a positive. However, a massive 60% have high or very high confidence in their ability to survive.”

The SME sector had grasped the reality of recession, and was dealing with it, rather than denying it, and were further displaying their ability to weather the stumbling economy and its impact by working through the recession rather than relying on further loans and advances. This fact being displayed by requests for finance remaining at substantially the same levels as the previous year.

“Most have survived the stresses of the present recession by returning to the basics of business.  They have placed emphasis on tighter control of finances, optimising costs, and marketing and also concentrated on delivering higher standards of service. These are all major factors in ensuring sustainability and survival, van Ravesteyn said, adding that the areas of financial stress experienced in the SME sector is more evident in residential property and related areas (i.e. estate agents, builders, suppliers, and contractors), vehicle dealerships, restaurants and transport.

“The importance of the SME sector to the South African economy can be extrapolated from figures supplied by CIPRO, a division of the Department of Trade and Industry, which indicates that there are more than 2million close corporations registered in South Africa- vastly outnumbering the 3 445 public companies and 455 445 private companies. The fact that most report that they are strongly profitable or surviving the recession augurs well for the country and future employment,” said van Ravesteyn.

Aiding the responsiveness of the SME sector to the present economic conditions was   their size, agility, ability to make faster decisions and the entrepreneurial “ hands on style” and control of all aspects of the business.

Positive market factors which were starting to show signs of support to  the sector were declining interest rates, indications that inflation was being controlled and dropping steadily towards the acceptable level of six percent indicated by the Reserve Bank. These will all influence business confidence, whilst the real benefits will still follow in the months to come as there is a lag effect on the SME market.

“Although there are indications that there will be no further rate reductions in the near future, SME’s have benefitted through reduced rates to date. The reduction of 500 basis points over the last months has reduced the burden of loan repayments, with some of the savings being translated into available liquidity and becoming available for reinvestment.

“In the agricultural environment SME’s were able to out-perform their peers in some of the other sectors.  This is attributed to the fact that food remains a basic human need and demand remained moderately stable.  This relatively better performance of agric SME’s were accomplished through increased focus on cost management; optimal resource allocation and exploiting economies of scale, value addition and appropriate price hedging to ensure sustainability,” van Ravesteyn said.

SME’s with their ability to react faster to market changes than larger companies had also consolidated other aspects of their businesses.

 “The static requests for additional supporting finance have indicated that entrepreneurs are reducing their exposure. They are undoubtedly cutting costs on luxury items such as cars and digging in for the duration of the recession by focusing expenditure on the primary needs of their businesses,” said van Ravesteyn.

SME’s were relocating to cheaper premises, looking towards technologies like the Internet to expand reach and reduce costs, tightening up on financial controls and even offering favourable discounts to customers offering early settlement. 

“Many SMEs have moved swiftly back to business basics. Their ability to do so rapidly and effectively has no doubt contributed to the strong picture we see in a time when larger businesses are facing major challenges. Profitable business opportunities however also still exist, even in a recession and entrepreneurs whom explore these will definitely capitalise once the market improves,” van Ravesteyn concluded. 

SME Survey: Potential financial woes worry SME owners

Sponsored by Standard Bank, Umsobomvu Youth Fund (now operating as the National Youth Development Agency) and Fujitsu, SME Survey is in its sixth year and polls 2,500 business decision-makers on the issues they face and how they overcome these to remain competitive and sustainable in the current economic climate.

According to principal researcher Arthur Goldstuck, a dramatic shift in the issues which keep the SME owner awake at night has emerged from this year’s research. “In 2008, crime was overtaken by electricity problems, high interest rates and the price of petrol as the key causes for concern. However, we’ve seen a dramatic shift to financial issues as a leading worry - but the concern is still not as deep as it was regarding the infrastructure issues which faced them last year.”

Crime returns to the top of the list of challenges to the sustainability of SMEs. “What comes close behind is a set of factors related to the global financial crisis, while interestingly, interest rates are the third most troubling issue for the average business owner,” Goldstuck notes.

While interest rates are presently at a 28-year low following a sustained downward trend, businesses are still experiencing something of a hangover from the rapid upward surge experienced between 2005 and its peak in 2008. “People were hammered so hard that the extent which it has come down has not yet allowed them to recover,” Goldstuck notes. “Meanwhile, the lending policies of the banks have changed quite dramatically; they are keeping lending policies very tight.”

Says Louis Van Ravesteyn, Head of Small and Medium Enterprises at Standard Bank, history has shown that the reduction in interest rates has a longer lag effect on SME’s than on individuals. Individuals are the first to experience the benefits of the reduced funding cost followed by SMEs. Access to finance is a complex issue. When dealing with the issue of granting finance, banks have to manage the challenge of having to balance risk and reward while protecting depositor and shareholder investments.

“The impact of the global financial crisis on consumer appetite has resulted in lower demand for many of the services and products provided by SMEs, impacting trade and resulting in financial distress on many local SMEs. It is however encouraging to note from SME Survey that most SMEs are still showing acceptable levels of profitability, business confidence and resilience to manage their businesses through this economic downturn. Business confidence is a critical aspect for economic growth as it is normally linked to business expansion and capital investment, with the final objective of financial success. We found that many SMEs held back on investment and expansion as demand dried up, however the findings in the survey indicate that SMEs are fairly well positioned to capitalise on opportunities when the economic upturn occurs. At Standard Bank we remain open for business and encourage SMEs to engage with their bankers around their funding needs to enable a win-win scenario.” Concludes Van Ravesteyn.

Despite this rather gloomy outlook, there is remarkable good news. “What is astonishing is the extent to which SMEs remain profitable and confident,” Goldstuck states.

Some 28% of SMEs are strongly profitable, 39% say they are ‘just profitable’, and 24% are breaking even. Just 5% are making a loss, while 4% report that they ‘don’t know’. “The confidence of SME owners correlates with these numbers, with only 5% saying they have low or no confidence in the future of their businesses,” he adds.

“The optimism shown by entrepreneurs during these challenges times is really encouraging. Supporting youth businesses and social enterprises that promote business development, job creation and income generating is in the heart of the NYDA’s mandate. The confidence shown by entrepreneurs, in spite of the prevailing economic climate, motivates the NYDA to focus more and support youth entrepreneurs even more so that they can contribute towards strengthening and expanding the South African economy thus assisting in reducing the unemployment rates. Says Malosa Kekana, CEO of NYDA

The question of confidence in the eye of what looks to be an increasingly deep recession is also telling; again, Goldstuck says the resilience of the SME shines through. “Most people are in no doubt of successfully bringing their company through the recession, with 59% saying they are very confident, with 36% neutral.”

However, he says that if things get worse, there are potentially a large number of businesses (those which are neutral) moving into the arena of low confidence and possible risk of failure. “There are two scenarios here; if the economy moves into recovery, SMEs are very well geared to prosper and continue to create employment and benefits for owners and employees alike. However, if it tilts the other way with rising fuel prices and an upward interest rate cycle, it could get quite grim.”

There are, Goldstuck agrees, always shocks in the system, but South African SMEs have proven their ability to respond saliently to the unexpected. “In our business climate, the unexpected happens all the time. Those companies which can make it through the tough times – and indeed, those which are forged in difficult trading conditions – can handle the shocks and are likely to prosper when the economy improves.”

Compact and energy-efficient FUTRO S100 is a perfect entry to server-based computing and virtual workplace solutions

Increasing numbers of organizations are realizing the benefits of thin clients; particularly call centers, insurance companies, banks, schools, libraries, and other organizations that want to maximize the number of PCs they can purchase on a capped budget. Thin clients are the efficient alternative to desktop PCs since they provide server-centric computing model where application software, data, and processing power are all based on a network server rather than on the desktop.

By switching to thin clients, organizations can save on both energy and maintenance costs. In addition to reduced power consumption, serviceable life is approximately double. Other advantages include high availability and minimal administrative effort. The Fujitsu FUTRO S100 is Fujitsu’s most energy efficient thin client, and is ideal for organizations where end-users are conducting mono-functional tasks, such as database access, call center and data entry work.

The FUTRO S100 is popular for its innovative design as well as its energy saving features. The FUTRO S100 helps to save space with its compact design and its “backpack solution” that allows the desktop unit be mounted behind a monitor. The FUTRO 100 has no moving parts, reducing noise as well as energy consumption.

Ross Olver, Portfolio Manager Business Clients at Fujitsu Technology Solutions says: “Thin clients are already energy efficient, and Fujitsu’s FUTRO S100 raises the bar even higher. It’s our most energy-efficient thin client, and it’s a perfect entry point for server-based computing and virtual workplace solutions. Making the switch to Fujitsu’s thin client line combines the benefits of high availability, near-silent operation and easy manageability with a very low total cost of ownership.”

For organizations that are on the brink of making the switch to server-based computing but have yet to take the plunge, Fujitsu also offers consultancy and cost-benefit analysis. Further details are available online at: http://ts.fujitsu.com/services/index.html.

The Fujitsu FUTRO S100 is compatible with a range of server client infrastructures including Linux-based eLux, and Windows CE 6.0. Powered by VIA Eden 500 and VIA VX800 media system processors, the FUTRO S100 supports 1GB of DDR2 system memory and has two USB 2.0 ports, a VGA port, fast Ethernet network and supports internal compact flash-based storage cards.

Further information is available online at http://ts.fujitsu.com/futro/

Images of the Fujitsu FUTRO S100 are available at: http://mediaserver.ts.fujitsu.com/

Far ahead of legal and market standard in fulfilling material, energy consumption and recycling requirements

Fujitsu has been developing environmentally conscious products and processes for more than 20 years. In November last year it introduced its pioneering new Green IT label, initially covering PCs and notebooks, across EMEA. In March 2009, Fujitsu extended this classification scheme to servers and now it covers the entire scope of the enterprise business in EMEA by including storage systems.

The Green IT label makes it easier for buyers to separate green from less green products by providing a visible “green check” that confirms that the products are designed in line with the company’s far-reaching corporate goals on energy efficiency and sustainability. The criteria for labeling Green IT are so stringent that only few products currently meet the demanding requirements and are awarded the top accolade of three green stars. Fujitsu established these stringent guidelines as a stretch goal to achieve even higher environmental standards for future products while providing product management orientation and direction in the development phase.

The RAID systems ETERNUS DX60 and DX80 as well as the tape systems ETERNUS LT20 / LT40 and LT60 are among the first wave of storage products to receive the Green IT Label and are awarded with two stars, denoting that the products are in the vanguard of today’s Green IT technology.

The Green IT label reflects Fujitsu’s holistic environmental approach to consider materials, energy consumption and recycling. All Green IT labels, starting with the one star accolade, of course, recognize products that exceed current Green IT legislation and market standards.

Bernd Kosch, Head of Environmental Technology at Fujitsu Technology Solutions, explains: “Fujitsu’s Green IT labeling scheme was well received by customers and by the analyst community when it was first introduced and we are now moving on into another key area of the enterprise business by extending this successful label to storage products. Fujitsu’s Green IT label provides buyers with a simple and clear way to compare and understand the energy savings, materials and recycling aspects for the IT equipment they buy. Of course, all our labeling criteria are fully transparent and published on our web-site. Our stringent environmental guidelines underscore Fujitsu’s commitment to environmental contribution and leadership in developing responsible IT-technology and -processes.”

SME Survey 2009: The end of dialup and the continued rise of ADSL

Sponsored by Standard Bank, Umsobomvu Youth Fund and Fujitsu, SME Survey is in its sixth year and polls 2,500 business decision-makers on crucial issues affecting their business.

According to principal researcher Arthur Goldstuck, ADSL had almost precisely replaced dial-up as the primary form of Internet connectivity among SMEs. “ADSL had grown from 3% to 63% penetration of SMEs using the Internet in the period between 2003-2008, while dial-up dropped from 62% to 9.5% by last year. This year’s research shows that dialup has halved again to 4%,” he states.

This confirms the prediction made by SME Survey 2005 that dial-up would disappear as a viable connectivity option for SMEs. “ADSL is finally wiping out dial-up access as an alternative,” Goldstuck adds.

“We have seen a steady decline in the requirement for dial-up modems and on-board modems within our business clients product portfolio,” says Ross Olver, Portfolio Manager Business Clients at Fujitsu. “Interestingly enough, we have seen a substantial increase in the demand for portable mobile devices with built in 3G (UMTS) connectivity as users discover the benefits of high-speed connectivity. This backs up the preliminary findings of the SME survey.”

Wireless broadband has seen more leisurely acceptance, growing from a zero base to 10.5% of SMEs using it as their primary connection by 2008. “With 1 in 10 SMEs using it as a primary connection by 2008, wireless broadband appeared to be destined to compete with ADSL, while ADSL would continue growing,” says Goldstuck.

However, instead of wireless broadband gaining further traction, it fell back for the first time. “All forms of wireless broadband combined, including 3G, iBurst, WiMAX and municipal WiFi, dipped from 10.5% to 8% penetration as a primary form of Internet connectivity among SMEs,” says Goldstuck.

It also demonstrates the need for reasonably priced services. “ADSL simply offers more reliable and cost-effective broadband than any wireless option – and the cost of incremental usage is not as high as for 3G,” explains Goldstuck.

The findings show a clear reversal of wireless broadband growth as a primary form of Internet connectivity. That, says Goldstuck, is an indication that wireless broadband is not meeting the needs of the SMEs to the extent that ADSL does from both a cost and performance perspective.

“Furthermore, the research shows that smaller companies are more likely to use wireless broadband as a factor of the lower entry level cost, while larger ones use ADSL. It can therefore be expected that as companies grow larger, they will move to ADSL,” he notes.

The real opportunity for wireless broadband lies in backup connectivity. A growing trend is emerging where SMEs use a 3G card as a secondary connection when away from the office; from 27% in 2008, Goldstuck says this has grown to 38% this year.

“What is clear is that once businesses start using the Internet, it very quickly becomes an essential service. Those that may have started using a dial-up connection very quickly realised its limitations and seek a faster, more reliable connection, with an increasing number looking for an alternative to keep them connected even when travelling,” Goldstuck concludes.

SME Survey 2009 is sponsored by Standard Bank, Umsobomvu Youth Fund and Fujitsu.

The final results will be released at SME Survey’s Small Company, Big Voice FREE hosted in Johannesburg (14 Oct), Pretoria (15 Oct), Bloemfontein (20 Oct), Cape Town (21 Oct) and Durban (22 Oct).

Visit www.smesurvey.co.za to find out more.