LGSETA | Oct 26, 2022

Exploring the digital skills needs of small and medium-sized enterprises and co-operatives

Small businesses play a pivotal role in contributing to the nation’s gross domestic product (GDP) and employment creation. According to the International Finance Corporation, small businesses contribute about 34 percent of the GDP in South Africa and employ between 50 and 60 percent of the country’s workforce.

In South Africa, it is the small businesses that offer real hope of large-scale job creation. Despite their relevance to the local economy, South African small businesses have maintained a very high failure rate. Chief among the causes of the high failure rate is poor communication with customers. It is disheartening that in the age of digital economies, communication remains a challenge hindering small and medium-sized enterprises (SMEs) growth. Advances in information and communications technology (ICT), the driving force behind 21st-century digital economies, have changed globally the way businesses reach out to their existing and prospective customers.  

Cooperatives and other small businesses appear to be still not utilising ICT in their businesses to its full potential. This means that they can hardly grow in the 21st-century digital economies without some integration of ICT into their day-to-day operations. Against this background, the Local Government Sector Education and Training Authority (LGSETA) commissioned a study which explored the digital skills needs of both the co-operatives and small-medium enterprises.  Among other objectives, the study sought to identify and analyse the digital skills needs of small and emerging enterprises and cooperatives in the local government sector. It used a mixed-methods approach which included both quantitative and qualitative research techniques, with findings being triangulated from different sources. The primary target population for the study were SMEs and cooperatives representatives whose views were collected through an online completed questionnaire, and telephone interviews. 

Key findings
The study discovered several digital skills which are crucial for SMEs and cooperatives to survive and grow in the current business environment. Among the identified digital skills are information technology, digital marketing, e-commerce, and app development, among others. The need to understand and comply with basic laws and ethics of ICT also emerged from secondary research. It is also worth noting that communication and problem-solving were some of the skills that were discovered as categorised under digital skills. The list of digital skills that were identified through secondary research are online advertising, security and safety technology, internet access, coding, problem-solving, information management, understanding basic laws and ethics in ICT, and information technology programming. 

Primary research cemented the importance of these digital skills as they were all selected as relevant by study participants. Some sector-specific skills were also added by study participants, these include installation of digital very small aperture terminals (VSATs) and Set Top Box digital migration, mobile application development and coding. It was also observed during the data collection phase that most cooperatives received support in the context of skills development from different institutions. All cooperatives who participated in the study received support from the Small Enterprise Development Agency (SEDA), however, it must be noted that the support was not exclusively towards digital skills development. Support received included business incubation, how to apply for government funding, business advisory support and training on basic business skills. The support services were provided by institutions such as SEDA, the Department of small business development, non-governmental organisations and provincial governments, among others. However, it was also raised during a focus group discussion that some of the personnel in government departments and other institutions that support SMEs and cooperatives with skills development initiatives do not have practical entrepreneurial know-how hence their advice tends to be more theoretical.   

The study also sought to identify the likely digital skills needs of cooperatives in the near future as influenced by emerging technologies. The responses from interviewed stakeholders show that most of them are concerned with the need for e-commerce, digital communication, basic information technology and economic analysis skills in the immediate future. Also identified are project management, accounting, and software development, among others. 

On the impact of the Covid-19 pandemic on digital skills needs, cooperative stakeholders raised the importance of digital communication (including both written and verbal communication skills) as they grappled with lockdown restrictions on physical contact. They also noted the importance of information technology skills as remote working necessitated the need for virtual communication and networking. In addition, online marketing, purchasing and supply skills were also cited as important because most business deals are now being conducted online. 

Recommendations

  • To enhance the acquisition of digital skills, there is a need to align courses to the skills levels of targeted recipients. LGSETA must entrench its facilitative role between education institutions and SMEs and cooperatives. The finding that some of the respondents were schooled up to national certificate level whilst some went only as far as grade 9 means that there is a need for tailor-made programs by tertiary institutions which will cater for different knowledge levels of SMEs and cooperatives personnel.
  • LGSETA must facilitate the establishment of group skills training support programmes. Group training tends to be cheaper and more affordable for small enterprises and cooperatives. It has been discovered that most of the SMEs and cooperatives are in the lower revenue group of less than R15 000 per annum. This makes it difficult for them to afford individual self-sponsored upskilling programmes.
  • In developing skills training programmes curricula, institutions need to engage other stakeholders including intended beneficiaries like SMEs and cooperatives. This will ensure that the programmes align with what the specific sectors expect and hence improve their uptake and enrolment numbers.
  • One key finding from the study was that most SMEs and cooperatives personnel are not concerned much with specific skills, all they need is how to increase their revenue-earning potential. In light of this, training programmes should be linked or should encompass the aspect of how such skills will increase the earning capacity of beneficiaries. This will encourage more members to enroll for such programmes and upskill themselves.
  • It is important to remember that digital skills are just, but a subset of a broad skill set that is required to operate a profitable and sustainable business. It, therefore, follows that improving the acquisition of digital skills alone is not enough to ensure the growth and sustainability of SMEs and cooperatives. This means that digital skills support programmes should include other important business skills like strategic management, timekeeping, record keeping, financial management and human resource management, among others. This is especially important for SMEs where some have just one employee who is the owner as was established during primary data gathering.
  • It was also raised during the focus group discussions that some of the personnel in government departments and other institutions that support SMEs and cooperatives with skills development initiatives do not have entrepreneurial know-how. It is, therefore, recommended that this personnel be capacitated with entrepreneurship skills so that they appreciate and understand the context within which to engage SMEs and cooperatives.

 

This article is part of a series reporting on research commissioned by the Local Government Sector Education & Training Authority (LGSETA) (Contact: matodzir@lgseta.org.za)

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