The study also attempted to assess the level of awareness and usage of ICTs within SMMEs, especially the extent to which the SMMEs relied on advanced technology to do business as well as the degree of conducting e-commerce activities among African SMMEs. The study specifically analysed the use of ICT’s i.e. telephones (fixed and mobile) and fax machines, PCs, connectivity, Internet and e-commerce, by economic sectors and also the policy environment in which SMMEs operated.
The findings indicated that a significant and growing number of SMMEs’ exporters were registering success in conducting business online despite the difficult conditions encountered in these developing countries. It was observed that the use of telephones, both fixed and mobile and fax machines was very popular among SMMEs in the countries surveyed.
Regarding the usage of computers, the survey results showed that most of the companies had computers but they were mostly used for secretarial functions i.e. word processing, accounting and finance and in some cases, for data processing. In most of the countries surveyed, the findings revealed that computers had become an integral part of the operations of SMMEs, however there had been no concerted effort on the part of most SMMEs to acquire e-competency or to use the Internet as a tool to increase or at least maintain international competitiveness. Connectivity to the Internet was viewed as a valuable tool for
communication, especially through emails, but not an essential aspect of enhancing business competitiveness both domestically and internationally.
Very few companies in these countries surveyed had websites as marketing tools with the exception of Egypt and RSA, where a significant number of SMMEs were involved in e-trade. The results of the survey in Ethiopia showed that approximately 67 percent used the Internet for e-mail purposes. The provision of services or product information to suppliers as well as the purchasing of goods and services over the Internet was the least practiced activity by firms on the Internet (See Figure 7.3 above). In Egypt, the results of the survey showed also that the highest percentage of enterprises used the Internet for e-mail communication as compared to providing client services as well as receiving orders in the Egyptian SMMEs (See Figure 7.5 below).
Figure 7.4: Internet usage in Egypt.
In terms of ICT usage in different economic sectors, the results revealed that ICTs were mostly used in the manufacturing, the hospitality industry and the financial services sectors.
The results also indicated that a greater proportion of firms had managers who were computer literate as opposed to general employees.
7.5.1 Major challenges facing these companies
The major challenges being faced most SMMEs in Africa are given an Ethiopian case study as it ecompasses most of the issues raised by SMMEs in the countries covered in this study.
Most SMMES as they commenced their e-commerce activities, they had been facing several challenges. One of the main challenges faced by the companies, in their effort to expand their e-trade initiatives was the incompatibility of the existing legal framework in Ethiopia. The exchange control regulation of the National Bank of Ethiopia (NBE) –Ethiopia’s Central Bank - required that goods and services worth more than $250 USD (local currency equivalent) could be exported only if the full payment of the goods or the services was effected through the Letter of Credit (L/C) System. The exporter had to open an L/C prior to exporting of any product. The export and exchange control system did not have any provision
for electronic payment. This regulation was generally incompatible with the promotion of e-trade where transactions were mostly conducted online through appropriate credit cards and therefore seriously undermined the role of ICT in these companies’ trade.
In addition to the incompatible legal provisions, payment could not be effected through a credit card system since most of these companies did not have special permits to accept credit cards from their clients. These permits were only issued by the Ministry of Trade and Industry56. The absence of an e-payment system in the country, had forced some of the companies’ dealers to employ Credit Card Clearing Companies (CCC), which were located in Europe and Canada to verify the validity of customer credit cards. After checking the authenticity of the credit cards, the Clearing Company transferred the price equivalent amount of the goods that were to be exported to the companies’ local account based on trust that these Ethiopian companies had developed with the clearing companies. However, this procedure was cumbersome and expensive particularly if the transaction involved small amounts of money.
The customs’ clearance requirement was also cited as a major problem in enhancement of e-Trade in Ethiopia. Apart from the lengthy process of the Customs Procedures, it was also required of an exporting firm to provide the Custom’s Authority with an Exchange Control Permit, an Export Control Permit and other documents in order for the firm to obtain export clearance. In addition, an exporting firm was required to complete a declaration form for goods to be exported. In the end these requirements rendered Customs Clearance procedures very expensive, cumbersome and incompatible with the e-commerce environment.
Most of the companies were also not able to use the export incentives provided for firms by the government and did not enjoy duty free privileges such as other companies operating in the traditional trading mode. This was because, while using the electronic means of export, it was not possible to produce traditionally required paper based documents, invoices, signed contracts etc, for one to be entitled for the duty free privileges. This was due to the absence of legal provisions to accept electronic documents and a system to certify the validity of electronic documents through the authentication of electronic signatures. These bottlenecks forced some of the companies to gradually reduce their e-trade activities and resort to the conventional trade format. As a result, most of the companies’ Internet sales had considerably been eroded while the sales through the traditional trading systems of doing businesses had increased.
The other major problem that hindered the companies’ e-trade was the accessing of the companies’ websites as well as their regular update, which was often difficult because of the low access speeds and high cost of Internet connections. Low ICT skills, absence of relevant business information security and privacy protection mechanisms were also among the major problems faced by the SMMEs in Ethiopia. Due to these reasons, most of the companies became less competitive in the global market in respect to e-trade activities.
In addition to the above challenges, it was also observed that there was limited awareness on the part of the policy makers and the general public about the relevance and importance of e-trade, hence there was slow development of the ICT infrastructure and policy framework in the country which was negatively affecting the companies’ e-trade activities. Moreover, these companies had a weak policy influencing position since very few of them were engaged in
56 Some tourist trading shops, travel agents and higher grade hotels are permitted to accept credit card from their clients.
commerce activities in the country, hence they failed to create a critical mass. However, in spite of the above challenges, the companies had been trying to handle various orders within the existing legal framework and attempting to ensure customer satisfaction and profitability.
Finally, in order to expand e-trade in Ethiopia several issues to be addressed were proposed thus:
• A need to improve the export procedures;
• The creation of enabling legal and the regulatory framework for e business - recognition of electronic documents/signatures/e-transactions;
• Export permit and the Customs Clearance procedures need to adapted to ensure compatibility with e-commerce environment;
• Reduction in transmission costs i.e. Internet connection, telecommunication charges;
has to be reduced considerably as well as the cost of computers and their accessories.
• Conducting ICT capacity building activities for SMMEs to expand e-commerce activities.
7.6 CHALLENGES AND CONSTRAINTS BEING FACED BY SMMES IN AFRICA