Cyber security is the top challenge faced by Small and Medium-sized Enterprises (SMEs) when trying to digitise their operations.
Recent research conducted by the Centre for International Private Enterprise (CIPE) found that cybersecurity stands as the top issue hindering SMEs' efforts to digitise their operations.
The CIPE research study, which targeted 1,280 Micro, Small, and Medium-sized Enterprises (MSMEs), sheds light on the challenges impeding the digital transformation journey.
Awareness campaigns about the advantages of digital technologies emerge as the second most critical factor, followed by financing for adopting digital technologies and engaging in e-commerce. Additionally, the need for technical assistance and support in adopting digital technologies online completes the quartet of challenges faced by MSMEs.
A major revelation from the study is that a majority of MSMEs rank digital training and skills development as the paramount requirement for venturing into the online sphere.
''This underscores the pressing need for comprehensive programmes geared towards equipping businesses with the essential skills necessary for effective digital integration,'' notes the study.
The challenges, however, extend beyond cybersecurity. Competing in the digital arena and the overall cost of doing business are significant hurdles for MSMEs striving to embrace digitisation.
''The post-Covid period has witnessed an escalation in cybersecurity risks due to increased reliance on digital tools for payment and procurement of goods. The associated costs and the imperative need for awareness creation exacerbate the difficulty MSMEs face in combating cyber threats.''
The study highlights that the digital business adoption of MSMEs is influenced by factors such as the size of the business, geographic location, gender, and type of partnerships. Some MSMEs exhibit reluctance to alter their business processes, citing the high costs of digital adoption, lack of awareness about available digital solutions, and concerns regarding privacy and security.
Interestingly, a considerable number of businesses under study remain at the basic level of digital technology adoption, primarily leveraging digital tools for basic communication and operations. Advanced digital technologies, such as online banking and video conferencing, are utilised by only a few businesses.
''For those MSMEs that have embraced digital technology, the perceived benefits are more exposure and increased responsiveness, with reduced operational costs and increased efficiency being considered as lesser advantages,'' the study notes.
The study emphasises that businesses view cybersecurity and competition as more significant challenges compared to issues like return/refund policies and customer/supplier verification when transitioning online.
Social media networking, websites, and company homepages emerge as the preferred digital technologies for future adoption by businesses surveyed. This underscores a strategic focus on establishing an online presence and engaging with customers through widely accessible platforms.
To facilitate the adoption of digital platforms and services, MSMEs express a clear need for training, skill development, and awareness about the benefits of using digital technologies.
However, during a Digital Economy Public Private Dialogue forum by CIPE and the Kenya Private Sector Alliance (KEPSA), Ben Kiragu, the Kenya Country Director for CIPE, pointed out a lack of awareness among small businesses in Kenya about how digital platforms can be effectively utilised.
Kiragu highlighted concerns regarding privacy and security data, noting that ''respondents did not deem certain technologies necessary, particularly among established businesses run by older individuals. Notably, there has been a reverse shift in digital absorption, especially among small-scale vendors such as "mama mbogas," attributed to fears of being scrutinised due to taxation.''
CIPE, a global advocate for private sector development and market-oriented reforms, not only provides insights into the challenges but also offers a series of specific priorities and recommendations. The research study underscores that MSMEs represent a significant portion of the business environment in Kenya but lag behind medium and large enterprises in adopting digital technologies.
Andrew Opiyo, the director of e-Government and Digital Economy, emphasised the need for skills in software development in areas of digitalization.
''There should be a focus on upskilling citizens to access digital services and creating awareness about their security. In line with Kenya's digital economy transformation, the survey advocates for giving MSEs a seat, a voice, and an opportunity to articulate their priorities,'' said Opiyo.
Addressing the digital skills gap and promoting awareness, the survey recommends a Public Private Partnership (PPP) approach over a 60-month period for MSE digital training, skills development, and awareness programmes. Strengthening linkages between MSEs and industry players through Business Associations is also proposed to make digital training accessible and tailored to sector-specific needs.
The study recommends collaboration between academia and MSEs to offer appropriate training, networking opportunities, and research, demystifying access to digital technologies.
It identifies internet and equipment access costs as key barriers hindering MSMEs' digital migration, proposing government intervention through taxation, subsidies, and operational efficiency measures to drive down costs.
The survey recommends innovation in affordable products and services, such as Wi-Fi and cloud storage, to scale access, lower costs, and provide MSE-specific applications. Cybersecurity, a top concern for SMEs, receives recommendations such as fostering cyber hygiene among small businesses and supporting the establishment and growth of startups innovating cybersecurity solutions for MSEs.