Technology has changed the way people do business. Mobile and digital payment platforms, blockchain, cloud computing and artificial intelligence (AI) tools have driven innovations in recent years. They enable businesses of all sizes to become more efficient and reach new markets.
For small and medium-sized enterprises (SMEs), these advances can be particularly powerful. SMEs are often the backbone of emerging economies. The World Bank estimates that they provide between 60% and 70% of jobs in sub-Saharan Africa and about 40% of GDP in low-income countries.
Now that smartphones are almost omnipresent and mobile Internet access has become greater accessible and widespreadSMEs can reach customers far beyond their immediate geographic markets.
Another area where digitization can make a noticeable difference is the fight against corruption. This is a persistent challenge. Corruption hinders the growth and internationalization of businesses throughout the region.
Electronic payments, electronic procurement systems and automated record keeping can make business processes more transparent and accountable. Digital platforms can also improve interaction between businesses and government agencies. This minimizes the need for face-to-face interactions where corrupt practices often occur. It also enhances fairness and transparency.
We conducted a study to find out whether SMEs in the Ghanaian and Nigerian manufacturing sectors believed that introducing more digital tools and systems would reduce the risk of corruption. We also wanted to know if they thought this would increase their chances of being able to do international business.
The answer was a resounding yes. And those who had already adopted some kind of digital technology said their international business had increased as a result.
Their challenges and successes can provide valuable insights into the potential impact of digitization on the fight against corruption across the region.
The study
The study focused on SMEs that were not more than 10 years old. Everything was working in the production area. In Ghana, we generated a random list of potential participants from the Ghana Business Directory. We contacted 800 companies. 292 responded. In Nigeria, our participants were drawn by the Export Promotion Council of Nigeria. Of the 600 companies contacted, 189 responded.
Respondents were founders and/or CEOs. They answered questions we asked about, among other things, their perceptions of the levels of corruption in the country concerned.
It was clear that respondents saw a link between digitizing their businesses, reducing the risk of corruption that hinders their work and strengthening their international presence. A CEO from Ghana said:
Digitization has helped us gain access to global markets and streamline operations, making us reduce petty corruption and (become) more competitive.
A Nigerian founder told us:
Corruption has hampered our operations, causing delays and increased costs. However, digitization has helped us circumvent some of these issues, improving efficiency and transparency.
Their experiences were echoed by many other respondents from both countries.
What the findings reveal
Our findings have implications beyond individual companies.
They suggest that by promoting digitization, governments in African countries can help create a more transparent and efficient business environment. This will attract more foreign investment and boost sustainable economic growth.
Studies suggest that countries perceived as less corrupt tend to attract more foreign direct investment. There is also plenty of evidence that investors are more confident in stable, transparent environments where the risk of corruption-related uncertainties is lower.
Several key recommendations emerged from our study.
First, investing in strong digital infrastructure is paramount. This requires both urban and rural areas to have consistent and high-speed Internet access. Reliable internet connection is the backbone of digital transformation. It enables SMEs to operate online, access global markets and use digital tools effectively. Although individual governments must be the main drivers, international organizations and development agencies can support these efforts.
Second, comprehensive training programs should be developed to enhance digital literacy among SME owners and employees. These should cover basic digital skills, cyber awareness and advanced digital tools specific to various industries. It is also important to create online resources, including tutorials, webinars and support forums, that SMEs can access at their convenience. This ensures continuous learning and support as they use digital solutions. Here too, development agencies and international organizations have a role to play.
Finally, we recommend that policy makers offer tax incentives, grants and subsidies to SMEs investing in digital technologies. This can help offset the initial costs associated with digitization and encourage more businesses to make the leap. Through digitization, sub-Saharan African countries can create an enabling environment for SMEs to thrive, despite the challenges posed by corruption.
