SA eyes becoming net exporter of ICT services, products through SMMEs

23rd March 2015 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

SA eyes becoming net exporter of ICT services, products through SMMEs

The Department of Telecommunications and Postal Services (DTPS) aims to leverage small, medium-sized and microenterprises (SMMEs), cooperatives and township and rural entrepreneurs to reverse South Africa’s status as a net importer of information and communications technology (ICT) products and services.

Addressing delegates at an ICT SMME workshop, in Boksburg on Monday, Telecommunications and Postal Services Minister Dr Siyabonga Cwele said South Africa’s small business sector could contribute significantly to achieving its goal of 5% gross domestic product growth by 2020 – and lead to the nation becoming a net exporter of ICT products, particularly that of electronics.

The ICT sector had the potential to use SMMEs as “business cycle absorbers” and bring about rapid economic recovery, while reducing inequality, creating employment and enabling economic empowerment, transformation and innovation.

However, despite having “pockets of strength”, the ICT sector’s inherent weaknesses heightened the barriers of entry for small business and failed to stimulate a homegrown boom, as much of the required ICT products and services in the $43-billion sector were imported.

However, the ICT electronics sector could be the game changer that could “rekindle” a local manufacturing sector that was riddled with weaknesses.

A discussion paper prepared for the workshop highlighted a weak manufacturing and design base; insufficient skills, particularly qualified engineers; weak and fractured industry associations; dominance of foreign brands in the local market; and a lack of progress in the launch of new pay television by licensees, as an inhibitor creating significant barriers to entry in the sector.

With several identified investment prospects in the electronics manufacturing sector, a number of opportunities had also emerged to provide the SMME sector a competitive edge, particularly as manufacturing remained a capital-intensive business requiring mass volume products to be sustainable.

The paper pointed to potentially attractive manufacturing subsectors such as set-top boxes and low-cost tablets and mobile phones; access control systems and security equipment; systems and software development in the banking and financial services sector; silicone processing for fibre-optics; integrated circuits; solar cells; and electronic security devices and associated services, in addition to software and peripherals.

However, stakeholders needed to join forces to support the manufacturing of low-cost devices, along with relevant mobile-cloud platforms, that could be exported into the rest of Africa and other developing markets.

Further, using the aggregation of public sector demand to create economies of scale for the production and purchase of locally manufactured devices and the use of special economic zones to provide infrastructural needs for emerging enterprises would enhance support and lead to an expanding national electronic manufacturing base.

In line with this, the DTPS aimed to collect information on the sector to assist in channelling more efforts and resources in those areas where SMMEs were more likely to survive, given a failure rate of nine out of ten businesses in the first year of operation, and minimise the risks associated with SMME development.

Despite government’s various support measures over the years, the “broad and blanket” nature of the support, owing to a lack of information about the sector in terms of its size, location, business activities and the specific challenges faced, had not had much success.

The department aimed to launch initiatives around incentives, research and development capabilities, skills and innovation to facilitate entry into the sector, and the information would assist government to track the failures and risks associated with SMMEs in each sector, while allowing government to address specific challenges.

In addition to a request for information, issued last year, the department aimed to obtain insight from the ICT SMME workshop, which was expected to provide an opportunity for the sector to recommend potential solutions to improve its performance. The DTPS expected to compile a comprehensive baseline report on ICT SMMEs.