(Ecofin Agency) - The report highlights that a significant number of African small and medium-sized enterprises (SMEs) are still lagging behind when it comes to digital adoption. The reasons for this are mainly the high implementation costs, limited internet access, and cybersecurity concerns.

More than four out of five African SMEs, accounting for 81.3%, view cloud computing as the most crucial digital tool to enhance their competitiveness, according to a report released on March 27, 2024, by telecom operators Vodacom Group, Vodafone Group, and Safaricom.

Titled "Levelling the SME playing field: Enabling success and scale through technology," the report is based on a survey of 400 SMEs operating in eight African countries (South Africa, Kenya, Egypt, Ethiopia, Mozambique, Tanzania, Democratic Republic of the Congo, and Lesotho).

When asked to rank digital technologies that contribute the most to bolstering their competitiveness, these companies, employing fewer than 200 people, cited cloud computing ahead of e-commerce platforms (75.2%), automated inventory management tools (68.2%), billing and payment software (58.3%), and the Internet of Things (57.2%). Following closely were data analytics tools (42.1%), remote work tools (42.1%), artificial intelligence and machine learning (41%), and blockchain technology for supply chain (37.6%).

Most of the surveyed companies already acknowledge the positive impact of technology on their operations. The primary benefits cited include accelerating business growth (86.9%), improving business efficiency (79%), enhancing competitiveness (73.1%), and improving the quality of customer service (69%).

The report also reveals that 69.5% of surveyed SMEs have increased their technology investments in the past twelve months, with 67.3% planning to do so in the future. This uptick in investments is more noticeable in companies employing between 50 and 200 people than in smaller entities.

High implementation and modernization costs

When asked about factors considered when investing in technology, African SMEs cited product and service quality as the most important factor (92.6%). Around three-quarters of the surveyed companies mentioned price, after-sales service, supplier reputation, and local support as crucial criteria.

However, companies opting to adopt technology face several challenges, including high costs of application modernization and updates (58.3% of surveyed companies), difficulties in integrating new technologies into existing IT systems (31.5%), limited internet access (30.2%), unreliable electricity supply (28.6%), and lack of employee training in technology usage (28.6%).

Highlighting that SMEs generally generate over 80% of formal employment and about 50% of GDP on the continent, the report also underscores several obstacles still hindering many African SMEs from embracing the latest technological advancements. These include implementation costs (65.9%), limited access to reliable internet connectivity (40.4%), lack of digital skills and knowledge (32%), and cybersecurity concerns (22.7%).