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How Is 4IR Affecting SMEs in South Africa?


The 4IR has been a significant change in the way we do business. It’s also caused a lot of disruption, which is why many SMEs are struggling to keep up with it. So what exactly is 4IR, and how has it affected businesses in South Africa? 

How can SMEs adapt their processes to the digital age? Let’s take a look at how 4IR affects SMEs and what they can do about it.

Defining 4IR

Our current period of rapid technological development is known as the Fourth Industrial Revolution (4IR), which has changed the way we live and conduct business. 

With its use of advanced technologies, 4IR blurs the lines between the physical, digital, and biological arenas. Implementing machine learning and artificial intelligence transforms how we do business with more people than ever before, using computers to support our thinking and planning.

On the surface, this appears to be an exciting time – and it can provide excellent opportunities for innovative thinkers to springboard them into a new business venture. However, it is not without its challenges. 

Job Creation

News24 tells us, “In South Africa, beset by record unemployment, stagnating growth, and flip-flopping economic policy, SMEs are nothing short of essential to our future. A report by the International Finance Corporation (IFC) estimates that micro, small and medium enterprises (MSMEs) constitute more than 90% of all formal business in the country, employ 50-60% of the workforce and contribute 34% of GDP.”

The types of jobs created by SMEs are incredibly varied, ranging from retail positions to tech roles and everything in between. This is due to the fact that 4IR is changing not only how we do business but also how we interact with members of our team and our customers.

With new technologies being developed every day and artificial intelligence becoming more advanced, there are certain areas where it makes sense for machines to do some of our work, such as automating repetitious tasks

However, they cannot replace humans completely – which is a good thing! There are still many things that require human interaction and creativity—such as sales—and thus allow us to expand our knowledge base as well as provide valuable input into these processes through collaboration efforts across different industries or sectors within an organisation itself.

Entrepreneurial opportunities

At a high level, the 4IR has created more opportunities for forward-thinking entrepreneurs. It’s also made it easier for them to work independently and remotely, which, in turn, can help to attract and retain great employees. (Without having to pay for office space.) 

As a result, SMEs have been able to rethink their strategies, resulting in better ways to collaborate with other businesses. The shrinking world of commerce also allows budding business owners to partner with like-minded international start-ups, service providers or product manufacturers. 

Adaption and innovation

Necessity is the mother of invention, and 4IR has led to the need for businesses to adapt and innovate, something that South Africans are well-known for. 

The UN notes, “The 4IR technologies that saw the biggest surge in South Africa during the COVID-19 pandemic include AI in medical diagnosis, the Internet of Things (IoT) for consumer goods, and mobile applications for financial transactions, transportation and utility vending. 

“Other important technologies include digital learning platforms used by universities and schools, augmented and virtual reality in teaching and learning, as well as in entertainment, drones for delivering medicine to rural areas, and 3D printing for medical use.”

Being small enough to pivot quickly offers a valuable tool to SMEs who aren’t weighed down by red tape and bureaucracy. 

New skills required

As you can see, the 4IR has had a definite impact on SMEs in South Africa. The need to hire staff with new skills, retrain existing staff, develop new products and services and change business processes suggests that there may be a skills shortage in the country. 

This can negatively impact SME growth as they try to scale their businesses and compete globally.

Get Smarter throws some light on the skill sets that will see a growing demand. “The 2020 ‘Future of Jobs’ report from the World Economic Forum estimates that on average, organizations will require 40 percent of workers to reskill. Additionally, 94 percent of business leaders expect employees to pick up new skills on the job – a sharp rise from 65 percent in 2018.

“In Africa alone, some 230 million jobs will require digital skills by 2030, which equates to 650 training opportunities, creating a $130 billion market. To respond to this demand, higher education institutions will have to reorient their ICT and engineering courses to account for rapidly advancing technologies.”

Therefore, learning and upskilling is an essential part of personal and business development for the foreseeable future.

Not all good news

Of course, revolutions in themselves are great for some but not for everyone. While it’s great to take the positives from the 4IR, there are some bleak statistics to remember. 

The IDG notes one such issue: “The large-scale retrenchments in the banking sector serve as one of the first and major examples of 4IR’s implications on human labour in South Africa. In March 2019, Standard Bank announced a closure of 91 branches nationwide and in June 2019, the number had increased to 104 branches closing and the loss of 1200 jobs. In July, Nedbank announced an estimate of 1500 job redeployments or retrenchments, while Absa is in the process of restructuring its operations processes.”

Statistics like these don’t help our rising unemployment numbers in South Africa, even though they are “business decisions” which make financial sense. 

Businesses must adapt their processes to the digital age

If a business wants to survive in this new era of business, it must adapt its processes accordingly. And that means adapting more than just your marketing strategies or hiring more technology staff—it means completely overhauling the way you do things in order to stay relevant in the digital age.

The digital age has brought many changes to the world of business, but its impact on SMEs in South Africa has been profound. In this article, we looked at how 4IR is affecting SMEs and what they need to do to stay competitive in this new era. It’s clear that businesses must adapt their processes if they want to succeed in today’s digital world—and that’s not always easy! 

But by embracing change and looking out for new opportunities, small firms can compete with large ones and remain successful and relevant. And Omni’s leading accounting software in South Africa is there to help them along the way!