Can an Internet Adoption Framework be Developed for SMEs in South Africa

Abstract

Over two billion people across the globe are now connected to the Internet and the numbers are growing at approximately 200 million people per annum, attracting focus by businesses and governments especially pertaining to contributing to economic growth. Small and medium enterprises (SME) as engines of growth for South Africa, given that they have proved to provide over 50 per cent of employment in many economies, cannot be left out of the technology race. An adoption of Internet would leapfrog these SMEs to levels beyond survival but lead to sustainable businesses.

This study¹

In association with UNISA Graduate School of Business Leadership (UNISA SBL).

investigated the viability of the development of an Internet adoption framework that is appropriate to the needs of SMEs in South Africa. SMEs in South Africa have been slow to adopt Internet technologies owing to the development and implementation of an Internet framework could best serve the SME sector needs.

In-depth interviews were conducted with SMEs to investigate the levels of adoption by SMEs and an analysis of the current Internet supply ecosystem was conducted. The research results reveal that SME are using what is available but not to full capacity to enable their business to thrive, given the benefits provided by Internet technologies. Their slow adoption is due to; lack of infrastructure and skills, lack of cyber laws, which will provide trust, slow Internet speed and high costs of connection.

The results also provided a positive outlook towards ascertaining if an Internet framework can be developed to serve the needs of SMEs in South Africa, if government is to take the lead facilitator role.

Keywords

SME Internet ICT competitiveness ecosystem

Introduction

Empirical research shows that over two billion people across the globe are now connected to the Internet and the numbers are growing at approximately 200 million people per annum (www.internetworldstats.com). This growth has given the Internet much needed focus by businesses and governments especially pertaining to contributing to economic growth.

A global survey by the World Bank has indicated that a 10 per cent increase in broadband penetration results in a 1.38 per cent increase in Gross Domestic Product (GDP) (Kim, Kelly & Raja, 2010).

Globally governments have been identified as the key facilitator to accelerate Internet adoption by supporting growth, which will foster firm innovation of new network services and promote access by firms and users. Countries such the United States, United Kingdom, Australia and South Korea, which have been cited to have a strong Internet ecosystem, have shown a high Internet contribution to the GDP and those that fail to recognise the benefits of advancing Internet technologies run the risk of large losses to competitiveness. India has also been used by researchers as benchmarks from which other countries can learn (Jayakar, Schejter, & Taylor, 2010; Narayana, 2011).

The United Nations (UN) Secretary General Ban Ki-moon in 2013 articulated the great importance the UN attaches to the role of a vibrant and socially responsible private sector in advancing sustainable development and the Millennium Development Goals. They see the private sector development as a catalyst to economic growth, and calls on governments to actively be engaged in promoting enterprises capable of creating jobs, raising income and productivity, diversifying the economy and generating government revenue, and this can be achieved by promoting the knowledge economy through Internet. Bughin et al. (2011) attributes a full Internet ecosystem having a supply of human skills, adequate infrastructure, financial capital for businesses and a business environment that attracts investors and facilitates ease of transactions.

The benefits for a business that adopts the Internet technologies include improved productivity through process automation, creation and easy access to markets giving rise to innovation and reduction in input costs which can strengthen the competitiveness of an enterprise, leading to competitive advantage. Furthermore, the adopting business is able to build collaborations, improve processes and is able to store and retrieve information efficiently (Ismail, Jeffery, & Van Belle, 2011).

Small and medium enterprises (SMEs), due to their characteristics of being more entrepreneurial, risk-takers and innovative are seen as critical to the adoption of Internet. Research in New Zealand shows growth in sales and profit for businesses that have adopted the Internet. Other research has shown Internet adoption being associated with improvements in productivity, economic growth and the creation of new markets.

Notwithstanding, a study by Modimogale and Kroeze (2011) reveal low levels of the benefits of ICT and what the knowledge economy can contribute to business efficiency. ICT is still perceived as complicated and expensive and SMEs prefer to stick to general use of ICT. The question is if ICT presents such great opportunities for small businesses, what could be other factors that prevent them to fully tap into the benefits to boost their businesses. Other studies by Irefin, Abdul-Azeez, and Tijani (2012) have attributed poor telecommunications infrastructure, limited ICT literacy, inability to integrate ICT into business processes, high costs of equipment and connectivity, government policy, poor telecommunication infrastructure and poor understanding of the dynamics of the knowledge economy, as factors impeding the adoption of Internet technologies.

This research analysed factors that affect Internet adoption and identified key stakeholders to lead and facilitate the implementation of a full Internet ecosystem in South Africa, making it attractive for SMEs to harness the benefits presented and grow their skills in the knowledge economy to sustain their businesses beyond the survival mode.

Objectives

The study aimed to ascertain whether an Internet adoption framework can be developed from the observed effective common platforms and best practices for South Africa’s SMEs. Empirical research reviewed does not indicate a prevalence of such a framework in existence in South Africa. Further analysis was done to determine the macro-level environmental factors that influence Internet adoption. Key to implementation of an ecosystem is the identification of stakeholders that could lead in advancing Internet adoption by SMEs. Frameworks can be underpinned and investigated using attributes and aspects formulated by government, policy makers and/or stakeholders. Data collection was limited to businesses in Gauteng Province with a view that the collective behaviour of the SMEs to be observed should reflect the majority of the individual firms. Gauteng is the economic hub of South Africa therefore an assumption that a framework developed on the basis of findings on a Gauteng sample could well serve the rest of the SMEs in the country and thus extrapolate the findings to denote a wider sample.

Literature Review

Many studies conducted on ICT adoption by South African SMEs fall short of a comparative analysis and learning’s that can be taken from a country with similar socio-economic challenges as South Africa (Goldstuck, 2012; Ismail et al., 2011; Modimogale, 2008; Modimogale & Kroeze, 2011; Mpofu, Milne & Watkins-Mathys 2009; Pongwana, 2010). The closest identified country has been India, which has been cited by Sharma, Sundar and Murthy (2012) as exemplary in advancing ICT adoption as it took advantage of ICT for economic growth and developed policy for development.

The Internet offers value-added tools to any business, thus literature review selected focuses on areas of competitiveness and productivity that SMEs can harness from Internet adoption. The definition of ICT used in this study is that used by Mpofu & Watkins-Mathys (2011, p. 2):

Any technology used to support information gathering, processing, distribution and use. This covers all forms of technologies such as computers, internet, websites, fixed telephones, mobile phones and other wireless communication devices such as networks, broadband and various specialised devices.

This study therefore made use of the words Internet and ICT interchangeably as the focus is on the Internet and the added value it can bring for a business and SMEs.

ICT as a Value Added for SMEs

Research suggests that an investment in the Internet sector has a positive impact on job creation, productivity, GDP growth and innovation. The results come in the form of improved competitiveness among businesses, emergence of new industries, enhanced education and improved skills (Schwab, 2012). The following driving forces that influence and reshape industry have caused many businesses and SMEs alike to change their business models:

Globalisation,

Changes in long-term industry growth rate,

Emerging Internet capabilities and applications,

Consumer changing patterns,

Innovation in products and processes,

Cost efficiency,

Regulation and changing societal patterns.

The Internet has the potential to add significant value to the operations and the competitive position of SMEs, even though empirical research (Bughin et al., 2011; Goldstuck, 2012; Ismail et al., 2011; Modimogale & Kroeze, 2011) has indicated that SMEs are often reluctant to embrace technological change and rather adopt more traditional approaches like basic computing for conducting business and operations. In order to compete on a bigger and global scale, the many benefits of the Internet need to be considered.

Previous studies have found evidence of Internet implementation in a business leading to improvements in productivity and economic growth (Bechetti et al., 2003; Bughin et al., 2011; Chondros, 2011; Zhen-Wei Qiang et al., 2009). For example a two times increase in broadband Internet speed can result in 0.3 per cent in GDP, due to increases in productivity, automated and simplified processes, and better access to services (Schwab, 2012). These studies, however, fall short of providing a South African evidence of increases in productivity due to broadband speed increases. Literature review survey also indicates that broadband speed in South Africa is very slow and costly (www.mybroadband.co.za).

Businesses are also constantly facing challenges to build competitive advantage largely driven by external factors such as changes in customer demands, prices and technology. In Australia, the government implemented a programme to increase connectivity leading to national competitiveness. Forty-three billion Australian dollars was injected into the development of high-speed Internet connectivity, which made it accessible to Australian business and homeowners (Schwab, 2012).

A study by Vlachos and Chondros (2011) on SMEs in Greece reveals that ICT compatibility is a significant predictor of all performance variables. The research further identifies Internet practices positively correlate with overall business performance, the variable of business performance being competitiveness, increased sales, profitability and sustainability. Ismail et al. (2011) identify how Internet can benefit a business in dealing with the competitive forces, and for this purpose, Porters five competitive forces is used. Porter five forces analysis is a framework for industry analysis and business strategy development, which draws on industrial factors to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Studies by Ismail et al. (2011) and Vlachos and Chondros (2011) are, however, limited to ICT technologies which SMEs use and what value they derive from them.

Why SMEs

SMEs have grown in importance in the global economy as they make up 90 per cent of all business establishments (Mahemba & Bruijn, 2003). In South Africa, SMEs contribute approximately 57 per cent to GDP and provide about 61 per cent of all the countries employment (Goldstuck, 2012). The benefits of Internet outlined above give SMEs an opportunity to compete effectively in the new economy. SMEs also face challenges of rising input costs that compel them to streamline their operations to save costs through production efficiencies, reduction of marketing expenditure, development of new products of service and identify new markets (Jayakar et al., 2010). The WEF Report (Schwab, 2012) has reported that South Africa and the other BRICS members could be damaging their opportunities and economic prospects negatively by lagging behind in ICT readiness. The WEF Report (Schwab, 2012) does not go further in identifying key stakeholders to advance this ICT readiness.

A model by McKinsey Global Institute (2011) identifies critical areas in building a strong Internet ecosystem as the promotion of human skills, easily available financial capital, development of infrastructure and an attractive business environment (see Figure 1). The McKinsey Report, however, does not cover South Africa, which motivated this study to understand the impact of the model on SMEs and governments role in achieving a full Internet ecosystem.

Figure 1.

Source: Adapted from McKinsey Global Institute Report (2011).

The same study cites India as a good case to benchmark an Internet supply ecosystem. This presents a good platform as India has similar socio-economic issues as South Africa including a lack of quality education, a shortage of quality infrastructure and a low share in international trade. India is also part of an initiative, India Brazil South Africa initiative, set up in 2003, which aims to act as a forum to share various developmental and economic learning’s and experiences.

ICT in India

India has become an example of a country that took advantage of ICT for economic growth and developed timely regulatory reforms and systems for both technology and industry developments (Bughin et al., 2011; McKinsey, 2011; Sharma et al., 2012). The country built on developing a full Internet ecosystem supported by public policy and private investments. The results have been a high adoption of Internet value-added services such as e-commerce by businesses with new service such as e-payment emerging and financial card circulation from 51 million in 2004 to 240.2 million in 2009 (Sharma et al., 2012). The study is, however, limited to e-commerce adoption and does not give an overview of the landscape in terms of infrastructure, human skills, business environment and financial capital as per the McKinsey model.

The city of Bangalore in India was developed as a cluster to foster ICT development in the areas of advancing human capital to feed into the ecosystem, financial capital to finance new ventures entering the market and facilitate activity in the cluster, infrastructure and a conducive business environment (Figure 1). The advantages provided by the cluster were

Proximity to customers

Access to information from and about competitors

Access to skilled labour

A presence of hardware and software suppliers

Better access to support services, training facilities, R&D institutions

Availability of maintenance/repair services

Availability of infrastructure such as consultancy and support services, and presence of industry associations

Higher productivity of labour (Narayana, 2011, p. 1293).

The second factor that contributed to a successful ecosystem was special policies implemented by the India government, which encouraged the use of ICT in institutions of learning, industry and government. Without proper policies, growth of the Internet industry could be hampered and poorly regulated industry may result in high prices, inferior quality services to the consumers and grey markets resulting in revenue losses for the government. Policies are developed by government to direct industry growth with an aim to benefit the state and its citizens and through regulation (Sharma et al., 2012). Proficiency in ICT includes the ability to use technology as a tool to research, organise, evaluate and communicate information, will provide businesses with the ability to use digital technology, communication tools and networks appropriately to solve information problems.

In terms of the McKinsey Model (2011), India changed their ecosystem as follows:

Human capital: The ecosystem was developed in the city of Bangalore through a broad network of technical and business education institution.

Infrastructure: This forms the backbone of the ecosystem. IT and electronic business clusters by introducing efficient transport networks, developing incubator and data services to offer an attractive environment for new companies were created.

Business environment: An environment conducive for growth in usage in terms of attractive tax policies and subsidies was implemented.

Financial Capital: The City officials developed strong financial support for entrepreneurs through various government institutions, to nurture innovation and firm up entrepreneurial support.

The literature in this section provides a motivation for strengthening of ICT promotion policies aimed at sector-led growth and globalisation of Bangalore. A cluster approach to Internet ecosystem provides a compelling outlook that could possibly be an approach to benefit South African key stakeholder of Internet supply ecosystem.

South African Context

Empirical research has shown that South African SMEs are merely surviving instead of growing. The SME Growth Index (2012) identified some of the challenges as lack of access to finance, access to IT skills and increase in input costs. The results indicate that 74 per cent of the businesses surveyed feel that the business climate has become more difficult. Mpofu and Watkins-Mathys (2011) also state that small businesses, due to their relative small sizes, lack of resources and capacity, are not able to harness the advantages presented by Internet adoption as a value-added tool for a business.

ICT Infrastructure

The Crompton, Hildebrandt and Metakides (2012) has reported that the quality of the ICT infrastructure has become an increasingly important determinant of the overall investment climate of a country, meaning that government and development partners should prioritise ICT infrastructure meets the needs of different kinds of enterprises including SMEs and leveraging the opportunities created by mobile telephony. Irefin et al. (2012) identified ICT infrastructure as the second most important factor that inhibits the adoption of ICT by SMEs, and the third as government support. The role of government is the development of physical infrastructure, legal and regulatory issues, policy and adequate research and development.

Human Capital

The role of government has been identified as a catalyst in creating an enabling structure for ICT services. Schwab (2012) has identified skills as an important factor in a country’s economic and ICT growth. South Africa faired poorly in the skills area, ranking at 102 out of 144 economies. Furthermore, the quality of education in South Africa ranked 140 out of 144 economies for the quality of its educational system (Table 1).

Table 1.

WEF Global Competitiveness Report

	Ranking	No. of Countries
Education in South Africa	140	144
Quality of math and science education	143	144
Secondary education gross enrolment rate	56	144
Adult literacy rate	93	144

Source: WEF Report 2012–2013 (www.weforum.org).

The country therefore has to radically improve its ICT education in order to be competitive in a fast-changing economy, which increasingly relies on ICT skills.

Financial Capital

Empirical research suggests that a single national broadband network is required to build affordable connectivity, which will create a competitive environment to the market through a well-regulated wholesale model. The lower input costs and increased competition will warrant the best service levels at the lowest possible price for consumers and SMEs. Vlachos and Chondros (2011) also suggests that government should offer financing incentives to SMEs to adopt Internet technologies.

Business Environment

The SME Growth Index (2012) survey, a multi-year research project which investigates the views and experiences of 500 SME operators in the South African economy, indicates that 35 per cent of the respondents have experienced a threat to their survival and 74 per cent feel that it had become more difficult to operate a business in the second year of their business.

A study by Pongwana (2010), however, suggests that working context, in which we find similarities to business environment, does not positively impact the mobile technology in SMEs. His study is, however, limited to hospitality industry.

The above literature on the South African context reveals an apparent gap between the infrastructure that is accessible to South Africa, linking the countries to the globe through the fast Internet, and the infrastructure in land. The country seems to be lagging behind on critical factors that determine an information society. South Africa ranked 70 out of 144 countries on the ability to benefit from the digital era. The question is why SMEs are still not adopting if all systems seem to present readiness to adopt (Schwab, 2012).

Research Methodology

The evidence from results indicates that qualitative study was conducted and not quantitative as no measurement of phenomenon has been given. Quantitative research was considered for this study; however, since the design refers to the systematic empirical investigation of social phenomena via statistical, mathematical or computational techniques, it would have limited the richness of data that the study intends to discover.

The research design applied the grounded theory method, which uses a prescribed set of procedures for analysing data and constructing theoretical model from them (Leedy & Ormrod, 2010). Currently there is no existence of a framework for Internet adoption in the South African government, as evidenced in the literature review (third section) and grounded theory provides an adequate process of developing a model or framework. Information gathered in the literature review formed a theoretical basis on the development of an ICT adoption framework.

Open-ended questions were developed prior to the interviews, forming the field-based part of the research. The questions related to how an Internet adoption framework could be developed that is appropriate to the needs of SMEs in South Africa. The sampling method used was purposeful, which means that the respondents selected were most likely to yield the valuable information about the topic and help develop a framework for ICT adoption. Further criterion applied was selecting the respondents according to their level of business sophistication, which aims at segmenting small business along a business sophistication continuum from informal street vendors to more sophisticated businesses (Finscope South Africa, 2010). The continuum ranges from business sophistication model 1–8, level 8 being the most sophisticated. A prevalence of email and Internet starts emerging from BSM 7 and 8. It is through this basis that the sampling was collected.

A small sample of 11 business located in Gauteng Province, South Africa, was used, as validated by Guest, Bunce, and Johnson (2006) that qualitative studies sampling is generally smaller than those used in quantitative studies, the argument being that a point of diminishing return to a qualitative sample is reached (the more data are being added, it does not necessarily lead to more information). Another factor is that quantitative research is very labour intensive, analysing a large sample can be time consuming and often simply impractical. Other empirical research suggests that to follow the principles of qualitative research, the sample size should apply the concept of saturation (Guest et al., 2006; Mason, 2010). The challenge with this approach is that research proposals and protocols require that a sample size be stated upfront and a recommendation is to provide a yardstick upfront for this study. In-depth interviews were utilised as a qualitative study.

In collecting the data, a series of subset were used to direct the interviews, which were approximately 1 hour each. The categories were as follows:

Benefits of Internet to the business

Awareness of the knowledge economy

Ability of the business to access relevant ICT skills

Ability of the business to access to capital

Governments role in advancing Internet adoption.

The completed questionnaires were coded for ease of analysis. The coding process assisted in establishing causal relationships to help develop a framework and achieve the objectives of this study. The codes were then analysed and those that relate to emerging and dominant themes were grouped together, to ultimately emerge into a possible framework. The next step involved a comparison to the literature review in order to generate theory more systematically by using explicit coding and analytic procedures.

Findings

All the 11 businesses surveyed were Gauteng based due to the physical location of the researcher. The respondents were all business owners all with over 5 years of existence.

Five themes emerged on the benefits SMEs derive out of ICT and Internet technologies and have been adopted to provide a concise and organised structure in the manner in which the research findings have been collated.

Theme 1: Extent of Adopting ICT

Responses confirm that these enterprises are aware of the positive attributes Internet has contributed to their business to operate globally from one location. This is consistent with the literature that ICT, when implemented as part of the business strategy to support business processes, will possibly lead to competitive advantage (Modimogale & Kroeze, 2011).

The trend emerging from respondents demonstrates the centrality of ICT in the everyday operations of the enterprise. Furthermore, how globalisation through ICT has enabled the enterprises to extend their business operations beyond South African borders and provide them with access to international markets. The key point from the respondents is overall agreement that, although ICT is central to their business operations, the human element should complement ICT to cement relations with clients, presenting a new and interesting finding, which can be explored in any future study.

Another aspect emerging from the findings is that enterprises that are labour intensive only adopted ICT for administrative purposes, rather than increasing their client base and exploiting the benefits thereof, which would enable them to expand their enterprise nationally and internationally. In comparison, Markides and Anderson (2006) had conclusive results that successful businesses that are innovators do not only use ICT to reduce costs from their existing business process but use it to either offer new value proposition to existing customers target and attract new customer segments. The difference with the surveyed businesses that are labour intensive is that they have not yet explored using ICT for operational efficiency. The findings are consistent with Mpofu and Watkins-Mathys (2011), Modimogale and Kroeze (2011) and Pongwana (2010), who also surveyed the labour-intensive hospitality industry, and had conclusive results that basic ICT technologies were used as opposed to advanced ones. Mpofu & Watkins-Mathys (2011) further classifies this applications as stage 2 ICT adopters, meaning a basic or beginner‘s level at which the adopter has recently adopted but unaware of technologies that could take their businesses further.

Theme 2: Positive and Negative Experiences

Respondents pointed positives being, ICT having enabled their enterprises to readily access information to provide an informed advice to clients and keep up with the latest trends. Others cited ICT having exposed their businesses operations beyond South African borders and also contributed towards the enterprise increasing its global profile. The positive themes are in line with Pongwana’s (2010) research that indicate that mobile technology positively impact businesses in terms of performance.

Major challenges pointed out include effect of power outages and theft of telephone cables, especially in businesses that are located in the industrial areas. These interruptions affect delivery times as some of their machines are fully automated. The findings are consistent with research by Mpofu & Watkins-Mathys (2011) in which power outages along with financial constraints were major barriers to ICT adoption.

Other professional services-based businesses mentioned their challenges as access to ICT skills, costs, infrastructure and information security as an impediment to adoption. The McKinsey Model (2011) constitutes a full Internet ecosystem as that which provides adequate ICT infrastructure, ICT skills, an attractive business environment and financial capital as outlined in the literature above. Studies by Sharma et al. (2012) and Narayana (2011) attribute successful ecosystem to a timely implementation of policies to support the industry.

Theme 3: Role of ICT in Other SME Sector

Respondents pointed out that ICT has enabled them to rely less on labour whilst increasing production through ICT and this further enables the sector to keep up with international trends and provide them with competitive advantage over their counterparts. ICT-enabled innovations enable businesses to compete against established businesses that have first-mover advantage by using guerrilla tactics to outperform their rivals (Markides & Anderson, 2006). The above can be summed up to be consistent with the literature which showed evidence of creation of new markets, increase in productivity and reduction in operational costs by an SME. Adopting SME in the case of this survey mentioned that they have surpassed other SMEs in the same industry who have not adopted. Bughin et al. (2011) confirms this point that Internet implementation brought a 10 per cent increase in profitability and lower administrative costs in the 4,800 businesses surveyed.

Theme 4: E-Business Strategy

Most of the surveyed SMEs indicated that they either did not have an E-business strategy due to limitations in that area. Those that had an integrated E-business within their ICT sector pointed out benefits of an e-strategy being an increase in the company’s competitive nature. Other benefits pointed were ability to benchmark with other global businesses and learning from the best practices within their sector:

Section 4.1 in the literature review, which provides empirical evidence that Internet practises positively correlate with competitiveness, increased sales, profitability and sustainability (Ismail et al., 2011; Vlachos & Chondros, 2011). A new finding from the survey is the use of social media for awareness and attracting new customers. Inference can be made that social media can be classified as an Internet-enabled tool and thus is consistent with the literature.

Factors Affecting Internet Adoption

Focus was on the effect of Internet infrastructure, ICT skill, access to finance and business environment. SMEs surveyed are concerned about cost, bandwidth size, coverage and cyber laws. On the converse, the SMEs felt negative about the current Internet supply ecosystem, even though they have evidenced reduction in costs over the years.

There are glaring aspects in the literature, which indicate a gap in the availability of adequate infrastructure in South Africa. Lack of ICT infrastructure such as poor communication infrastructure, IT vendor support and skilled manpower affects ICT adoption negatively (Kannabiran, 2012). However, Kannabiran’s study carried out in India indicates that lack of infrastructure does not affect IT adoption, largely due to the fact that SMEs surveyed were located in the cities where infrastructure is adequately provided. Conclusion can be drawn from the comparison that South Africa, even though making improvements in the area of infrastructure (Schwab, 2012), is still not on par with India in terms of the Internet supply ecosystem, thus the negative comments. The emerging new trend is that respondents feel that a more competitive ICT industry will stimulate the economy and could possibly lead to investments in high speed Internet, coverage in all areas, improved reliable bandwidth and lower prices. One can concur with the respondents given that Schwab (2012) ranked SA 59 out of 144 economies in terms of ICT infrastructure and digital content, is a position largely attributed by investments by the private sector.

ICT Skills in South Africa

IT background level of the owner and low awareness of use will result in low adoption (Kannabiran, 2012). This finding is consistent with (Ismail et al., 2011; Modimogale & Kroeze, 2011; Mpofu & Watkins-Mathys, 2011) who identified ICT skills by business owner as critical to ICT adoption and their surveys showing low levels of adoption due to the owner’s limitation of what ICT tools would benefit their businesses. There appears to also be a gap in the young people qualifying in ICT skills. The findings under this theme also appear to be consistent with the section in the literature.

Access to Finance by SME in ICT Sector

All the businesses surveyed have not had the need to approach any financial institution for a business loan. All the businesses were equity funded.

Stakeholders to Advance ICT Adoption by SME and their Role

The stakeholders that were identified by the respondents as key to advancing ICT adoption were noted in the following order:

Government

Business (Telkom, Vodacom etc.)

Regulator (ICASA)

Associations

Even though most of the respondents felt that government should take the lead in advancing ICT, they acknowledge that this position will only be effective if government partners with private sector. The impact of government policies and initiatives has revealed direct and indirect stimulation to the supply of information, which leads to faster technology diffusion (Irefin et al., 2012). The literature above also indicates successes in India where governmental efforts have shown that a leadership role by government can lead to faster adoption by the countries citizens especially businesses.

Recommendations

Inference can be made from the research results and the literature review that key stakeholders pertinent to the development of an Internet framework are

SME sector

Government

ICT industry

SME Sector

The research results and the literature review indicate that SMEs have seen evidence of reduced operational costs, access to new markets and increased productivity from using Internet as a value add in their business. SMEs have low awareness of how the Internet can be linked to their business models. The positive comments in terms of the strengths of the current Internet system were that the reduction in costs over the years and the availability of the service. The uptake of ICT by businesses yields important economic benefits as long as it is accompanied by investments in the reorganisation of the business (Gatautis & Vitkauskaite, 2009). The question therefore would be why the SMEs have not adopted at the same pace of the current developments. This study affirms the need for government to take the lead but SMEs should also seize the presented opportunities.

A recommendation to the SMEs would be as follows:

Organise SMEs in similar industries in clusters (similar to the Bangalore case in India) so as to explore supply chain opportunities presented by the proximity of each other. Clusters help close the gap between business, research and resources, and advance faster knowledge transfer (Gatautis & Vitkauskaite, 2009).

SMEs to educate and upskill themselves on basic Internet and ICT value-added services.

Willingness to allocate an investment time and money towards ICT and Internet value-added software and services.

Government

Government has been identified in both the research results and the literature as a key lead facilitator to advancing ICT adoption by businesses and SMEs. This confirms that the objective of identifying which key stakeholder to lead ICT adoption has been achieved. An Internet framework that stems from a government can lead to a haul in uptake by businesses and consumers alike, creating a robust environment for economic activity (Gatautis & Vitkauskaite, 2009). Government can

Build high-quality infrastructure that is affordable and accessible to majority of the citizen.

Provision of an attractive business environment for firms to strive and benefit from using ICT

Provide basic ICT skills from primary education and in vocational training and on-going lifelong learning.

Develop a regulatory environment that will generate trust, security and privacy and consumer protection among the citizens.

In partnership with the private sector, facilitate content availability across all platforms and encourage development thereof.

Provide services, in conjunction with private sector, to improve uptake of ICT by SMEs.

Observing from the literature review and the research results, conclusion can be made that Gatautis and Vitkauskaite’s (2009) recommendations offer a succinct outline that can address the plight in South African SMEs. Respondents voiced their concerns with regard to the skills level, Internet security and slow Internet speed and high costs, which could be addressed by an active government lead. The concerns can be summed up as relating to the supply ecosystem of the Internet, as in Bughin et al. (2011).

Conclusive views from this report are made recommendations for government are suggested as follows:

Prioritise the quality of education to focus on producing more technology-focused skills. A nation that has knowledge and understanding of technology and its benefits, will adopt at a faster pace and the close the technology gaps.

Build public–private partnerships with large business in the ICT sector to accelerate a full supply Internet ecosystem in South Africa.

Implement strong regulatory framework to support business and citizens.

Develop clusters environments as in Bangalore in India, which foster ICT development, attract foreign investment, stimulate innovation, foster learning and promote exports into nugget strategic areas.

Provide tax incentives for businesses that invest in ICT.

Encourage implementation of ICT consulting programmes to SME via industry associations, NGOs and government agencies.

Prioritise procurement to SMEs and monitor unscrupulous behaviour through corruption hotlines.

In terms of the core objective to ascertain whether an Internet framework can be developed, literature review and research indicate that the possibilities are evident that this is achievable should the government look at the above recommendations. Implementation thereof will lead to improvements in the current status quo.

Industry

Industry is a key to create a robust economic activity attractive to citizens and businesses. Industry in this case refers to large businesses in the ICT. The research identified the industry role as of creation of products and services and to create a competitive environment to drive down costs. A conducive environment created by both business and government partnership leads to consumers being attracted to use the products and services. Industry needs government to develop the full Internet supply ecosystem. The regulatory and legal framework will determine the costs and pricing that the large industry can pass on to consumers and SMEs alike. Large business can be lured by government into creating more platforms and services for SMEs to take advantage of the Internet technologies in their businesses.

Conclusion can thus be made that an Internet framework for Internet adoption by SMEs would include the large industry as a key partner and a vehicle to a digital and knowledge economy.

Concluding Observations

The purpose of the study was to determine whether a framework could be developed for Internet adoption for SMEs. This was to be done by observing common platforms from best practices in the case of this study in India. The common platforms have been outlined in the literature.

The research results also suggests that SMEs are facing challenges of understanding what ICT or Internet applications to adopt to enhance the competitiveness, productivity or innovativeness of their businesses and they could benefit from some form of guidance of cost effective accessibility. Governments have been identified as the lead facilitators to advance ICT adoption, with focus not only on ICT sector and SME sector growth independently, but look at strategies that will integrate the two areas for implementation of a broad-based policy.

As per the McKinsey Internet adoption framework in the literature review, supply strategies focus on the development of infrastructure, promotion of human skills, easily available financial capital and an attractive business environment.

In sum, the study has therefore being able to achieve the objectives and the actions should take place to address the objectives as follows:

An Internet framework can be developed in South Africa should the four pillars that form the McKinsey Model be applied. These are development of infrastructure, promotion of human skills, easy and accessible financial capital and an attractive business environment. An implementation of the above will ensure a strong supply ecosystem which will generate a robust environment conducive for business and consumers. A thorough due diligence should be conducted with the state-owned enterprises tasked with the delivery of the four pillars identified above, to ensure smooth implementation. The high demand for services will attract large business to create products and services and SMEs are likely to invest their time and money into the industry. Similar to what India did to stimulate the market, government-led initiative can only be a springboard for the development of the industry.

An analysis of the macro-level factors that influence Internet adoption indicates that SMEs are driven by a profit motive to adopt the Internet. They will invest in what they believe will benefit their business to either be more competitive, productive or innovative. The action is for SMEs to harness the skills training opportunities in order to determine which ICT technologies can benefit their businesses best. Knowledge will lead them to take the lead in driving their businesses to take part in the digital knowledge economy.

In terms of stakeholders to advance Internet adoption, the main objective has already highlighted the need for a government-led initiative to ensure success.

The current supply Internet ecosystem in SA is at least functional. Many of the SMEs business would not have started their businesses had it not been of the advantages of the Internet they highlighted in the research. The rise in input costs has enabled the SME to innovate on ways to cut on costs using technology, and access to markets 24/7. The weaknesses are glaring as both the literature and research highlighted the issue of ICT skills having a negative effect on Internet adoption by SMEs. The key action is for an improvement in the current education system, so that it is technology inclined. This is a function of government and industry can assist through their CSI programmes to provide training and bursary schemes to train in those areas.

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