South African small and medium-sized enterprises (SMEs) risk not meeting the National Development Plan (NDP) goal to create 90% of employment opportunities by 2030 as they lack the required investments in technology.
So says Ambarish Gupta, founder and CEO of Knowlarity, who notes in business, technology is what helps the "Davids compete against the Goliaths".
"It empowers small business owners to scale operations in a cost-effective manner. It transforms traditional business models and levels the playing field. Innovation must be taken seriously and as Darwin said, it is the ones who are most adaptable to change who will survive," says Gupta.
The NDP has ambitious goals that include the creation of 11 million jobs in SA by 2030. The Endeavor Jobs Calculator, a global tool developed by the International Labour Organisation, National Statistics Agencies and Endeavor Insights, has shown SA needs over 49 000 SMEs growing at a rate of 20% per annum, to meet the NDP target.
Making headway
Gupta believes to make headway to achieving this goal, it would be necessary for SMEs to find innovative ways to establish their businesses with minimal funding. "A good way to do this is by using technology to appear larger and more professional so that resources can rather be focused on sales."
To Gupta, in SA, very few start-ups have the potential to become a big business, as only a few can be classified as innovative.
Describing the challenges local SMEs face in regards to getting finance to invest in technology, Gupta says: "Many people consider start-ups as a high risk investment, and not all countries have an ecosystem where companies get lucky with angel investments or investors who are capable of evaluating young start-ups with high potential."
For example, he explains, when an investor does seed an investment, many times there are no business ideas - they're just investing in people. In the case of an angel investment, the investor is just investing in the prototype but the investor may not know what the final product will be, he points out, adding at this stage, the sales are not happening and the investor is just hoping that the product will lead to some kind of sales.
According to Gupta, traditional banks and investment companies do not have the capability to evaluate these high risk investments or do not have the appetite to invest in them and that is why only few places in the world have developed an ecosystem of people who can evaluate start-ups and invest in them.
"The most significant ones are Silicon Valley in US and Bangalore in India, Israel and China. Singapore is also starting to align with this trend. These areas consist of a critical mass of investment companies which are capable of evaluating and investing in start-ups."
However, he says Africa, as a continent, has woken up slowly to the opportunities of technology. In other emerging markets such as Asia and Latin America, a tech start-up with a smart idea in a booming economy might expect to attract investor interest, especially if competition is slim, he notes.
Investment options
Besides investing in mobile technologies which present a lot of opportunities, Gupta says start-ups can also invest in is vertical software-as-a-service (SaaS), pointing out this type of technology is being used to transform industries, one industry at a time.
Zenefits, a free HR and payroll SaaS in the US, is a great example of how costs can be minimised for smaller businesses by using SaaS.
The second technology start-ups should also invest in is bring-your-own-device. "Nowadays, people prefer to get their own devices in enterprises. The third technology that start-ups should invest in is e-commerce. Example of such start-ups are Alibaba and Flipkart where e-tail is being disrupted by people buying from Internet and getting them delivered at their doorsteps."
Nonetheless, Gupta believes Africa is held back by lower Internet penetration as well as scarcity of early-stage capital and a lack of management expertise.
According to the International Telecommunication Union, only 16% of Africa's one billion people use the Internet, below a global average of 36%. The information and communications technology sector added just 7% to Africa's gross domestic product last year, according to an African Development Bank report, he concludes.
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