Small enterprises to reap high returns from ICT growth

Small and medium sized enterprises (SMEs) stand to reap the most from investments in information communication technology as new studies say such businesses can enhance their profitability by adopting the internet and mobile telephony.

A survey in 14 African countries, that also involved 277 SMEs in Kenyan, found that investment in ICT had a greater positive impact on labour and profit margins for SMEs compared to larger businesses.

The survey, ICT Usage and Its Impact on Profitability of SMEs, says businesses that had invested in the various ICT platforms significantly boosted their turnover margins because the use of telecommunication and internet facilities greatly enhanced productivity. According to the survey, mobile phones are the most popular for small businesses as 95 per cent of them have adopted the use of cellular phones.

The survey says that only 71 per cent of the small businesses have installed computers in their premises and that the usage of fixed lines has also gained ground with nearly 85 per cent businesses using it. Fax is not commonly used by the small holder firms, the report says.

The use of mobile phones is particularly important to SMEs who use the devices for negotiating, making orders, accessing market information, maintaining customer relationships, and paying and managing employees, the report says.

The fisheries and agricultural sectors in Africa and Asia, in particular, use mobile phones intensively. The report also revealed the relationship between the educational level of proprietors, the formality of businesses they are likely to start, and the level of technology employed.

Entrepreneurs with tertiary education, for instance, owned 63 and 22 per cent of formal and informal businesses respectively compared to 22 and 49 per cent for those with secondary education.

More educated investors have an advantage in deploying high level ICTs like internet computing, giving them an edge over their less educated counterparts. Most formal SMEs have internet connectivity and use computer applications for accounting, among other functions.

Point of contact

They have also developed websites through which they seek to establish an online point of contact. The United Nations Conference on Trade and Development (UNCTAD), in a recent ICT report, says that the use of ICT has a general positive impact on businesses of all types. “Most empirical studies on the impact of ICTs have found a positive correlation between the use of ICTs and corporate performance measured by labour productivity.”

The trade body adds that benefits of ICT use in businesses have not been fully exploited, especially in emerging markets. “In many developing countries, the main purpose of internet access is to send and receive e-mails; few companies use it as a marketing tool or to make banking transactions.

To leverage the internet more effectively, enterprises need to rethink some business and productive processes around new ICT tools and invest in ICT skills development.” Despite the advantages of using ICT to improve business processes, several challenges have held back their spread, more so for small firms. Among the obstacles are infrastructure problems, lack of skills and awareness., and limited finances.

Useful technologies

In the past couple of years, the government has embarked on a policy to boost the development of ICT in the country in a move that could see the spread of useful technologies. The building of ICT parks, digital villages, and exemption of value added tax on computer imports will boost infrastructure, develop skills, and lower costs of acquiring communication technologies.

However, analysts note that apart from mobile telephony, not all ICTs are suitable for all industries and some may thrive without investing in computer networks and the internet.