Digital transformation key to the success of local SMEs

Our small businesses are set for a doom loop if we can't expand the benefits of digitisation.

More than 50 years on from some of the world's coolest computing milestones and over 50 per cent of African small and medium enterprises (SMEs) are still not using a digital business tool.

In a 2020 study by African Banker and banking platform Backbase, digital transformation is imperative in every aspect of the business - from customer attendance to internal operations.

And for SMEs to be the engines of inclusive growth, we need to rethink their development strategies that put digitisation at the centre of reforms.

Studies show that digital business tools are fundamental to SME growth. They make you more efficient, productive, and innovative.

They are also the only way you can reliably reach a marketplace beyond your hood. The year 1972 was monumental for us techies.

It was the year that saw the launches of the C programming language, floppy disks, the first scientific pocket calculator, the first international advanced Research Projects Agency Network connections and the seminal video game, Pong.

It reminds us that the digital age is entering middle age.

As computing capabilities increased and the Internet came of age, there has been a relentless drive to digitisation. The recent launch of ChatGPT has brought AI into our daily reality, and it's being touted as a game changer to rival the Internet. The Internet of Things (IoT) is no longer science fiction.

Closer home, smartphone penetration in Africa has reached over 64 per cent. That has put a computing device (exponentially more powerful than the guidance computer NASA used for the 1969 Apollo 11 mission) into the hands of most business owners.

We're not celebrating yet at Pesapal. Because most of these small businesses are still in the digital nursery, less than half of them use any sort of digital business service. This is worrying because small firms are the backbone of Africa's economy, making up 40 per cent of the continent's GDP and offering 60 per cent of the employment.

In Kenya, there have been flagship reforms like the Central Bank of Kenya's launch of Stawi in 2019, the one-stop shops for permits and the small claims court. But we can do even more to create an ecosystem that is conducive to digital innovation - beyond our circle of Nairobi tech firms.

This includes investing in infrastructure and regional connectivity, promoting digital skills, and encouraging the adoption of new technologies via standards.

The government can also create favourable regulatory frameworks and policies that support the growth of digital businesses.

The ability to leverage technology opens new growth opportunities. Despite the benefits, many SMEs are hesitant to take advantage of digital technologies due to a lack of understanding and enabling regulations.