SA is the leader in digitalisation across the MEA: Mastercard white paper on SMEs

Small and medium enterprises (SMEs) in SA and across the rest of the Middle East & Africa (MEA) region are recognising that digitalisation is essential to stay competitive in a transformed business and economic environment.

The insight is one of many in a new white paper by payments technology leader Mastercard, which explores the way small businesses are viewing digital payments, online presence and the benefits of an evolving cashless economy.

Titled “The Digital SME: How Are Small and Medium Enterprises in the Middle East and Africa Embracing a Digital Future?”, the white paper is an in-depth follow-on study from the Mastercard MEA SME Confidence Index 2021. This piece of research released findings about the importance of digitalisation and rising confidence levels as SMEs across sectors, products and services in the region adapt to the new and evolving economic landscape. 

Overall, 64% of SA SMEs say they believe e-commerce will have a positive impact on their business. The findings also indicate that SA, by far, is the leader in digitalisation across the MEA region, with more than 90% of companies present on social media and/or having a company website. 

More than three-fourths (79%) of SA SMEs surveyed accept online payments, 48% accept cards and 41% accept mobile payments. More than half (61%) experienced no challenges when accepting digital payments.

When asked about the biggest benefits of a cash-free economy for their business, the majority (90%) of SA SMEs said that “digital solutions provide more efficient transactions and payments across multiple channels” and are “a more convenient way of paying their suppliers and employees”.

Other benefits identified include faster access to revenues (85%) and the ease of not handling or processing cash (79%). 

The white paper also found that digitalisation has progressed globally since 2018 but has seen higher traction among larger corporations and financial institutions than among SMEs.

It accelerated in 2020 and 2021 to enable continuity of business, with the Organisation for Economic Co-operation and Development (OECD) estimating 70% of SMEs globally intensified their use of digital technologies due to Covid-19 restrictions.

According to the Mastercard index, digital payment methods used by MEA SMEs include mobile (59%), online (49%) and cards (48%).

“An empowered SME sector is a growth engine for the economic development of countries across the MEA. But the challenges are many, chief being access to funding and digitalisation, which have emerged as huge needs,” says Gaurang Shah, head of products: MEA at Mastercard.

“The index found that 89% of SMEs in the region see potential in digitalising their business, which is encouraging for everyone within the digital economy,” 

SMEs are recognising the practical benefits of digitalisation in day-to-day operations as opposed to viewing it as a long-term project for the future. There’s a solid case for this when data shows that 41% of SMEs that implemented digitalisation initiatives had stronger revenue growth in 2020 than non-adopters.

Digitalisation of SME operations also brings the benefit of generating data that institutions need to view an SME as a “real” business with potential and make more informed credit decisions. This helps bring small businesses into the financial mainstream. 

Partnerships play a vital role in the digitalisation of SMEs

The white paper also found that partnerships play a vital role in the digitalisation of SMEs. A stable, growing, connected small business can be the key to financial inclusion for the whole community. As a technology company, Mastercard has leveraged the power of partnerships to deliver inclusion by providing financial, technology, product and services support to SMEs across the world. 

“Connecting businesses to one another to help them grow and prosper is a primary objective for Mastercard. For a neighbourhood vendor or store, there are simple solutions to reduce the risk and cost of cash and open up sales to more customers. At Mastercard, we continue to leverage our technology, insights, global expertise and partnership approach to empower every business, especially SMEs, everywhere to grow digitally, become stronger than before, and prosper in a more connected, equal, and inclusive world,” said Amnah Ajmal, executive vice-president of market development: MEA at Mastercard.

SA SMEs plan for growth 

Though challenges related to the Covid-19 pandemic remain, six in 10 business owners in SA say they are proactively planning for expected growth in the next year, guided by need to upskill their staff, better data, digitising business operations and accepting digital payments across multiple channels.

According to the Mastercard index, 88% of SA SMEs say digital and online payments are important to helping them grow their business. Contactless payment technology has also been identified by 86% as a safer and more efficient way to transact, and another 75% SMEs have experienced a rise in customers’ preference for transacting digitally since the pandemic. 

According to the OECD, up to 70% of SMEs globally have intensified their use of digital technologies since the onset of Covid-19. However, the gaps in SME digital adoption have not been filled. The challenges include access to infrastructure, lack of a data culture and digital awareness, and financing gaps for transformation costs.

Access to financing remains an important concern for SMEs worldwide, with the International Finance Corporation estimating an unmet need of $5.2-trillion a year.

Through technology services, cyber assessments, insights, grants, digital training, mentoring platforms and knowledge initiatives, Mastercard will contribute $250m over five years to support small businesses’ financial security globally.

As part of its goal to build a more sustainable and inclusive world, Mastercard has also committed to connect 50-million small businesses, including 25-million women entrepreneurs globally, to the digital economy by 2025. 

This article was paid for by Mastercard SA.