Despite the increasingly difficult conditions that face small- and medium- sized enterprises (SMEs) in South Africa, it appears that their ambitions remain intact – and are perhaps bigger than ever. According to the findings of a recent global SME study, which surveyed 2 100 executives across 21 countries, South African SMEs now have global ambitions – looking beyond the country’s borders for the allimportant growth. Commissioned by software firm SAP a nd conducted i n conjunction with Oxford Economics, the study ( SMEs: Equipped to Compete) revealed that almost one-third of South African SMEs will generate 21%-40% of their revenue globally within the next three years, compared with 22% today. Over the same period, the number of local SMEs operating in six or more countries will rise from 16% to 39%.
“There has been a significant change in attitude among local SMEs, which are now actively looking outside of the countr y’s borders for new opportunities,” explains Desmond Nair, SAP Africa’s Head of Ecosystem and Channels.
Nair highlighted that in some respects, local SMEs are moving in the opposite direction to their counterparts in other markets, which seem to be turning their focus inwards. While 45% of South African SMEs operate solely within the country today, this will drop to 27% in three years. Interestingly, the percentage of revenues that SMEs generate outside of their home country is projected to decrease by 30% at a global level.
Entering new markets and engaging in international trade bodes well for SMEs, as a study conducted earlier this year by DHL Express and IHS Global ( International Competitiveness of SMEs) illustrated. The study, which surveyed 410 SME directors in G7 countries (Canada, France, Germany, Italy, Japan, UK and US) as well as BRIC economies, showed that SMEs engaged in international markets are twice as likely to be successful as those that only operate domestically. In addition, among the SMEs surveyed, 26% of the companies that were trading internationally significantly outperformed their market, in contrast to only 13% of those with operations only in their home country.
Another significant finding was that 24% of SMEs in emerging countries are ‘ born global’ (trading internationally within the first five years), compared to 13% in developed countries.
“This indicates that developed-world SMEs are lagging behind emerging econ- omy SMEs in terms of internationalisation of their businesses,” noted Hennie Heymans, MD of DHL Express’s South African business division.
One of the key factors driving the push for global expansion amongst local SMEs, according to SAP, is the adoption of new technologies – which are enabling them to compete with their bigger rivals and reach new markets that were previously inaccessible.
“I term it ‘ borderless’ – companies have to start thinking in a borderless fashion,” says SAP’s Nair. “The Internet makes this possible and SMEs are realising that in order to become competitive with larger organisations – and in order to be more innovative – they need technology… it is a must.”
Encouragingly, the survey found that local SMEs are beginning to adopt and leverage new technologies: 73% of SMEs reported that they view technology as the heart of their business transformation efforts and are willing to invest in new solutions. In terms of spending, social media will receive the greatest focus among local SMEs, followed by business management software and business analytics.
“Globalisation, transformation, and technology will be the hallmarks of successful companies going forward,” Nair adds. “With a commitment to enter new markets and willingness to adopt new technology, SMEs have never been better positioned to win.”