17 Jun 2021

How SMMEs can benefit financially from the Fourth Industrial Revolution

The Fourth Industrial Revolution (4IR) refers to the blurring of boundaries between the physical, digital, and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing, and other technologies. This leads to organisational and structural changes, some not so readily welcomed, particularly by SMMEs.

These may include increased spending on technology, considering running costs and maintenance et al.  Could this present an opportunity to restructure expenditure and rotate capital within these small businesses, giving a better chance of success?

Digital is the main reason just over half of the companies on the Fortune 500 have disappeared since the year 2000” (CEO of Accenture, Pierre Nanterme)

With the increased buzz around 4IR in the last year, particularly due to lockdowns and “isolated industrialization”, it’s befitting to zoom-in the lens on how SMMEs (Small, Medium and Micro Enterprises) can better embrace and utilise the new operational technologies migration to their advantage.

Words like Big Data, Internet of Things, Block Chain, Machine Learning etc, tie into 4IR and are some of the buzzwords heard with which we are becoming familiar. Since the lockdowns, companies are being forced to embrace, adapt and adopt these changes more than ever.  But just how far along is the implementation of these technology advancements and how much do they impact SMMEs today? Most importantly, how can your business benefit from these advancements?

The South African Context

President Cyril Ramaphosa has already announced that the government set up what is called “The Presidential Commission on the Fourth Industrial Revolution”. It is a 31-member commission spearheaded by communication minister Stella Ndabeni-Abrahams. It states that it wants SMMEs to benefit from digital migration, as much as financially possible.

Within the preambles and descriptions of the mandate of the commission itself, the state announced that the project was meant to “make recommendations on interventions to enable entrepreneurship and SMMEs to take advantage of the 4IR.”              

Adapt or Die

Stevens Maleka, currently responsible for Strategic Planning & Monitoring at the Department of Communications and Digital Technologies, points out that the nation is at a point where companies have to either swim or sink, because industries have already picked the 4IR direction. He states that there are business opportunities in the transition, as much as there are cost implications – the secret to effectiveness lies somewhere in the median.

“It is important to note that the scale of investment in the 4IR should have a significant return in the form of economic development and this could lead to the increased investment in high growth   technologies/companies, increased expenditure in technologies e.g. tablets, smart watches, and increase in exports of technological services and products to other African countries” he said.

4IR presents business opportunities for SMMEs on the “supply side”

The South African government, through the Presidency’s National Planning Commission,acknowledges that “Although the South African telecommunications market continues to be one of the most developed and advanced on the African continent, there are still gaps on the supply side (encompassing both infrastructural and regulatory issues) that constrain the creation of the affordable backbone and services required to develop a digital economy. To deal with supply-side gaps, ICASA must create a fair, competitive environment for multiple players in the market by publishing the findings of its market review and applying the necessary pro-competitive remedies, in particular with regard to entities enjoying significant market power.”

This in itself presents appealing opportunities for SMMEs as the South African government leans more towards tendering in the public service space.

Impact of 4IR on SMME Staff Complements

4IR has been identified as a potential reason for workforces being drastically reduced. However, the pinch is only measured by the size of the business and the nature of the actual enterprise thus far.

The Small Enterprise Development Agency (SEDA) seems somewhat ambivalent when it comes to the technological impact of the functional switch on workforce within our context, due to the size and gender spread thereof.

It states that “In Sub-Saharan Africa, it is reported that most youth-owned SMMEs have no employees (57.3%), while hardly any (1.5%) have more than six employees and none have more than 20 employees. Interestingly, there is also a gender difference within SMMEs owned by youth. In rural areas, SMMEs owned by youth have slightly lower labour productivity compared to the older age categories; and most youth-run businesses have no employees while hardly any have more than six employees.”

Each SMME’s individual case depends on the factors tabled above, and a blanket approach is not always applicable.

Take professional tailored advice on how your business can benefit from these developments. For more information on how we can assist you with your financial activities, contact your contact partner at MGI Bass Gordon. Send an email to info@bassgordon.co.za or call us on 021 405 8500.

For additional reading:

Read government’s take on the 4IR process and progress, as reported by the National Planning Commission in the Presidency’s most recent report, here.

For more details on the Presidential Commission on Fourth Industrial Revolution, please click here.

For more on the gender and geopolitical make-up of the SMME landscape in South Africa according to SEDA, please click here.

To download Stevens Maleka’s PDF presentation titled “How South Africa Can Leverage on the Fourth industrial Revolution (4IR)”, please click here.

The article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.