High data costs continue to hamper SME growth

It is imperative to reduce the cost of data in South Africa to contribute to minimising the cost of running a small and medium enterprise (SME) and improve growth. 

Internet connectivity has become an indispensable business tool for most entrepreneurs and business owners. However, the high cost of data in the country is severely impacting the profitability and productivity of many SMEs and start-up businesses and can be a notable prohibitor when it comes to accelerating SME growth.

The cost of data in South Africa has been the source of much debate in recent years, with a new survey by research consultancy BDRC Continental, on the competitiveness of broadband data costs, ranking South Africa at 97^th place on a list of 196 countries. In terms of competitive pricing, South Africa ranks below a number of other emerging economies, including Guatemala (72), Morocco (59), and Tunisia (15). Furthermore, mobile data in South Africa is the most expensive out of the continent’s six leading economies.

Data connectivity and digitisation are vital in levelling the playing field for SMEs, allowing them to compete with larger, more established companies in their industry. Depending on the nature of the business, online digital technology has a role in increasing turnover, reducing operating costs, increasing turnaround times, increasing capacity, increasing scalability and keeping the company relevant among its competitors.

Among the vital benefits that data connectivity and digitisation offer SMEs is improved accessibility. An online presence greatly advances the way in which businesses interact with their customers. It is increasingly becoming a trend for potential customers to find online reviews before engaging with a business. At the same time, more people are leaving their comments on peer-to-peer review sites. It is therefore vital for businesses to have an online and social media presence in order to know what is being said about them, and to respond to customer comments and reviews. It also allows the entrepreneur to identify how the business is positioned in terms of quality, pricing and service relative to competitors.

SMEs are capable of marketing to much larger audiences. It is not like the old days when the business with the biggest marketing budget also had the largest audience. Social media especially has become an invaluable and affordable mass marketing tool for SMEs.

Mobile connectivity is another important aspect. An increasing number of entrepreneurs need to be mobile for their businesses, and being able to access one’s company data from anywhere is important. The growing popularity of mobile payment software and technology is also making it easier for SMEs to offer their customers card and online payment facilities, which increases the size of sales and orders that they can process at a time.

Making use of cloud services and online tools to manage data also helps to reduce operating costs and improves efficiency for SMEs. With the revolution in information and communication technology, all of the above elements have become very specialised industries, and businesses can utilise the technology even more efficiently with the help an experienced consultant.

Yet, SMEs cannot exploit these benefits to their full extent if South Africa’s data remains at its current high cost. As an example, the average cost of 1 Gigabyte of mobile data in South Africa is between R99 and R150. Taking into account that a business is likely to rely on massive amounts of data being exchanged within the span of a month, the cost adds up incredibly quickly. Kenya, which is the second most expensive economy for mobile data, is a little over half that price.

Both government and the private sector therefore need to work towards bringing the cost of data technology down to much more equitable levels. South Africa needs more investment in communication and data infrastructure in order to improve accessibility, as well as improved regulations and incentives to bring down data and technology costs for the SME market. Growing the SME sector needs to be a priority, and making data more affordable and accessible can go a long way in making this happen.

Jeremy Lang is the regional general manager at Business Partners Limited.