Research on the Performance of the Services Sector

7.2. Challenges, Obstacles and Opportunities

General Challenges and obstacles

Through the assessment process firms were asked to outline the current challenges that they face in the day to day operation of their business. From this analysis there are three key problem areas that small business in this sector have identified, these are:

Funding: 37% of business identified access to short term funding (working capital) as being a problem. Many businesses have noted the unwillingness of financial institutions to assist them.

Market Intelligence: 29% of business have identified that a key problem that they face is the lack of knowledge of what are the current growth and development trends in their sector.

Infrastructure: Unlike the firms that required working capital that point highlights the fact that many firms (13%) have indicated the need for funding assistance so that they can purchase the necessary infrastructure to compete efficiently.

Other points that have been raised by firms are around skills development (8%) as well as payment delays (5%) and transport costs (3%).

Specific Challenges

Specific challenges that are faced by businesses in the ICT industry include:

Access to finance is a serious challenge for ICT businesses as it hampers every aspect of the business from operations and management of cash flows to purchasing of equipment and paying for running costs.

Working capital is another big issue that businesses face particularly in the startup of an ICT business, accessing working capital can be difficult for SMMEs.

Skills shortages across the industry affect the operations of the businesses as the labour costs can be higher due to the completion for skilled staff, also businesses that lack the relevant skills experience a decline in their client bases.

Lack of resources such as finance, skills, marketing knowledge and training also affect the operations of ICT businesses and hamper growth.

Lack of infrastructure is a serious concern as the ICT industry is based on infrastructure and having the necessary infrastructure in place as well as having access to infrastructure is critical to developing a sustainable business.

High cost of imports and products for resale affect the cash flow and profit margins as price fluctuations cannot be mitigated yet the price of services and products need to remain relatively unchanged to maintain existing client bases.

The biggest effects of the obstacles and challenges on businesses in the ICT sector are:

• 
  Decline in business (25%)
  
• 
  Slows the growth of the business (20%)
  
• 
  Increases operational costs (19%)
  

It should be noted that 19% of the businesses that were surveyed felt that the challenges faced by their businesses did not have an impact on the overall operation and outputs of the business.

Figure : Effect of challenges on business

Outcomes, Needs and Requirements

Following on from the above challenges, firms were then asked specifically what type of interventions they required. Interestingly while skills development had been ranked lower than other challenges it is in greatest demand (35%) by firms in this sector. Linked with the above findings interventions in the areas of:

Providing market intelligence is in high demand by firms (30%)

Assisting firms with procuring short term funding (26%)

An important note that has been made by firms linked to the idea of infrastructure is the provision of Incubation programmes (4%). These interventions have proved very successful in provinces such as the Western Cape and should be seriously considered going forward.

General Opportunities

A number of opportunities in the ICT sector were identified during the surveys. These opportunities are applicable to the different provinces and have been illustrated in the table below.

Opportunity	Province
	WC	EC	NC	KZN	NW	Limp	MPA	GAU	FS
Business application software					x	x	x
Cctv systems	x
Creative industries		x				x	x	x	x
Document management systems	x						x
e-learning, e-banking software development			x		x		x	x	x
e-waste management	x						x
Internet and wifi provider		x		x	x	x		x
IT training and software development	x			x		x		x
Multimedia platforms	x	x							x
Network development				x				x
Online marketing	x	x	x				x
Social media platforms and software	x	x	x
Telecommunications and technology development	x	x				x			x
Voice over IT								x
Website development			x	x	x		x

Specific Opportunities

Assessing the opportunities outlined above there are three general categories in which these opportunities fall. While the above opportunities can be accessed by SMMEs, it is also important to assess the associated opportunities which occur when the above are developed.

Software and systems development: While the direct opportunities for development and expansion are limited to the business that is undertaking the opportunity (due to specialised nature of the opportunities) some associated opportunities exist

Smme’s can provide physical infrastructure to these software development firms and well as ongoing maintenance of these systems

Smme’s can also consider partnering with these firms to look at distribution their products. This case the smme would act as an agent and earn a commission on each sale.

Training

Smme’s would be required to provide the infrastructure for the training to take place i.e. venue, catering, equipment etc.

As in the opportunity above Smme’s can also look at partnering with these firms to look at distribution of their products.

Infrastructure provision

Smme’s can provide a host of services to these companies i.e.

• 
  Logistic support
  
• 
  Sourcing of infrastructure components
  
• 
  Provision of labour
  
• 
  Maintenance
  

Outcomes, Needs and Requirements

When asked to describe what is needed to access opportunities in the ICT sector, all of the businesses that responded felt that there were three things needed to access opportunities:

• 
  Finance
  
• 
  Infrastructure and resources
  
• 
  Training
  

The expected outcomes of these opportunities are the promotion of job creation in the ICT sector as well community and skills development. Furthermore it is expected that the advancement in skills could lead to new developments in technology and the manufacturing sector of the ICT industry.

Conclusion

Businesses in the ICT sector play a role in creating jobs as well as developing skills and assisting in community development. The major challenges faced by these businesses are accessing funding, market intelligence and infrastructure. These challenge and obstacles have negative effects on the businesses and generally cause a decline in sales, slow business growth and higher operational costs. To assist in combating these challenges the businesses in the ICT sector require assistance in developing market intelligence and securing funding. However despite the challenges and obstacles that exist in the industry, these businesses remain optimistic about opportunities that exist in the sector and feel that with funding, training and access to necessary infrastructure the sector will continue to grow and create jobs and develop skills.