The government’s much-anticipated Digital Economy Master Plan has been finalised and the state is currently engaging various stakeholders to develop its implementation plan.

Research released by the Small Business Institute warns that a Digital Economy Master Plan is not enough to boost small and medium businesses

South Africa has created several sectoral plans to give the economy a much-needed shot in the arm. This plan aims to digitally empower all South Africans to create and participate in tech-enabled opportunities. Communications Minister Stella Ndabeni-Abrahams said in her recent budget speech that the plan would drive inclusiveness, employment and economic transformation across the country.

“… it is envisaged that the implementation of the Digital Economy Masterplan will see the achievement of economic contribution upwards to 4.5% of GDP per annum, creation of one million jobs over the next 10 years (and) create massive opportunities for SMMEs,” she said.

This is likely to be good news for the country’s micro, small and medium businesses, who have in the past accused the state of too much talk, and not enough implementation.

In a research document released by the Small Business Institute (SBI), it states: “Far more strategy development, master plan development, policy drafting, and consultation seems to be under way than any activities that would suggest an urgency to digital transformation.”

The report titled: “Digitalisation – the best hope for South Africa and its small firms” says that even the NPC admits in its “Digital Futures – South Africa’s Digital Readiness for the Fourth Industrial Revolution”, that there have been a range of institutional failures including the botched digital migration over a decade, the debacle over the release of spectrum allocation, and a lack of leadership.

“It also highlights suboptimal policy and regulatory initiatives, fractured and territorial departmental planning (or lack thereof), poor data collection and the lack of investment in research and development,” says the SBI research, which was conducted by the Small Business Project.

It explores how technology can and has transformed SMEs and their chances of surviving, and how it could be an important key to differentiation and unlocking recovery and growth, particularly for small towns and rural areas. It also looks at governance and policy making, and the challenges they present for SMEs and digitalisation.


The government has earmarked SMMEs to create 90% of formal jobs by 2030. But the Covid-19 pandemic alone has seen thousands of small businesses closing their doors – research estimates between 15% and 19%.

“But more than a few of those that survived found ways to adapt and change how they conduct business, what or how they sell, and some intrepid and truly entrepreneurial souls started new businesses during the crisis. The most successful looked to digital tools for salvation,” the document reads.

According to a report compiled on South Africa by Xero, which is a cloud-based accounting software platform for small and medium-sized businesses, prior to the pandemic, small firms struggled to keep up tech adoption and tech solutions to help their businesses.

“In one of Xero’s surveys, 33% of small businesses said they were being left behind because of the pace of technological developments. In another, 45% of small businesses acknowledged they could adopt more technological tools with 52% saying they’re ‘just keeping up’,” reads the SBI document.

Xero also found that two-thirds of South Africa’s small businesses struggled to find, attract and retain tech talent.
With the onset of the pandemic and the resulting lockdown, there has been even more pressure on SMEs, with many of them having to close their doors and customers staying at home.

“To get products and services – even those deemed essential – into those homes required new strategies. ‘We had always planned on going online,’ one business owner said, ‘we just never had time. With Covid-19, we had to make the time’. Many others did the same as the World Bank’s Measuring the Pulse of Firms in South Africa survey revealed: Nearly two-thirds of firms interviewed initiated or increased their reliance of digital solutions,” the report reads.

It says that for surviving SMEs, the smartphone has offered a multitude of opportunities such as services, apps, information, access to markets, education and access to social media platforms to market and now sell products and services, as well as collect data.

While digital technology offers SMEs an opportunity to enhance productivity, use their resources efficiently and organise their business process in a leaner way, for 2020, technology offered more than an opportunity – it was a lifeline, the document reads.

Some South African SMEs that were able to extend their offerings in digital environments included Quro, which designed a wearable ‘hospital-at-home’ service and quickly added biometric Covid-19 monitoring and predictive analytics for rapid response protocols to kick in.

Another e-health company, Signapps, which allows multidisciplinary medical teams
to securely share clinical patient information and facilitates communication, enabled

state hospitals to promote safe practices for healthcare workers at no extra cost. The UK’s NHS recently procured its services. Launched in August 2020, Yethu arranges deliveries to township households and spaza shops using minibus taxis. Customers and taxi drivers register online, download the app, load a payment method, and can immediately place an order.

The report says another advantage of embracing the digital space, is that if the government adopts digitalisation instead of only digitisation, it will reduce the cost of doing business for SMEs and lower its own transaction costs.
The IMF estimates that collectively, by introducing digital systems in the public service, emerging economies can save between $220bn to $300bn annually, or 0.9% to 1.1% of GDP.


According to assessments of the government’s readiness to launch a digital transformation drive, the researchers believe that despite the development of strategies to enable, transform and accelerate participation in the digital economy, South Africa fails in its execution.

“The OECD (Organisation for Economic Co-operation and Development) warns that failure to ensure widespread digital access and effective use risks deepening inequalities and may hinder efforts to emerge stronger from the pandemic.

“And so, if digitalisation is our best chance for recovery, let alone future growth and the inclusiveness both imply, South Africa’s strategies and plans certainly acknowledge that we need to be ready, but are we? Governments make a costly mistake when they confuse ‘digital initiatives’ with ‘digital strategies’ say the compilers of the National Readiness Index,” the document reads.

And although a master plan has been compiled, the researchers warn, as others have including labour and business federations, that the digital economy will be dead in the water without a reliable power supply.

“Bandwidth and spectrum allocation aside, access to the Internet first and foremost requires power. The many services that digital transformation is dependent upon, especially base stations, data warehouses and cloud providers, not to mention the ability to charge a cellphone, cannot operate without a stable, affordable power
supply,” they say.

“Every hour of load-shedding and every tariff increase diminishes South Africa’s prospects for success and increases the costs of doing business.”

While South Africans wait to see what the master plan entails and how it will be implemented, it must not be forgotten that as shown in the World Bank Enterprise Survey 2020, firms overwhelmingly cited electricity as the primary constraint to doing business.

By: Amy Musgrave