One of the most stunning shocks of COVID-19 is how quickly it exposed the fragility and weak financial foundations of tourism SMEs. Within months after the government introduced the lockdowns, studies showed that SMEs were taking strain, with many facing closure.
The depth of the impact came through clearly during a series of webinars called #StayinBusiness hosted jointly by Seeza Network and eight provincial tourism authorities. The words that participants used to describe their mood painted a grim picture.
At Seeza Network we felt this confronted us with one inescapable question: with all the investment that has gone into tourism enterprise development (TED) over the years, both nationally and provincially, why do the financial foundations of SMEs remain so weak? We think it’s a question all of us who are involved in any shape or form in TED can no longer ignore.
In an attempt to grapple with this question, Seeza Network undertook two SME surveys, a national one in November 2020 and a KwaZulu-Natal one in March 2021, with 93 tourism SMEs participating in both. The surveys sought to find out what factors, on the part of support programmes on the one hand and SMEs on the other, accounted for this weak SME resilience. The results were revealing.
The results in both surveys, which asked almost identical questions, showed a mismatch between the support SMEs deemed of priority importance and what programmes have offered them. In the much larger national study SMEs ranked in the top four areas of needed support international marketing (63%), funding (60%), website development (40%) and technology upgrade (37%). If website development and technology upgrade are read together, then the message is clear that SMEs have a strong felt need for effective digital presence.
That, read with the priority placed on international marketing, leads to one inescapable conclusion, that SMEs are seeking assistance to increase international market access and digital engagement.
However, when asked what support they have actually received in the past, the results placed in the top four: local marketing (38%), business incubation and international marketing in joint second (26%), and skills development (24%), with website development taking the fifth position (19%).
While it is encouraging to see that support programmes have given priority to local marketing, which is crucial in the context of COVID-19 given the widely held view that recovery will mostly be domestically driven, an important nuance is that the focus of these local marketing efforts has been on exhibition participation.
Exhibitions are undoubtedly an important element of the marketing mix and should continue to feature in the marketing activities of SMEs. However, their reach is significantly limited compared to geographically unrestricted online presence and engagement.
SME competitiveness and growth
Several recent studies, including by the Organisation for Economic Co-operation and Development (OECD), World Economic Forum, and Vodafone Business, have emphasised the centrality of digitalisation in driving SME competitiveness and growth. The OECD asserts that “the COVID-19 crisis has stressed the need to accelerate SME digitalisation, to weather the storm in the short term, as well as for increasing resilience in the longer term and build back better”. Similarly, Vodafone points out that the most digitalised SMEs have identified new business opportunities during COVID-19 at more than double the rate of the least digitalised. The message is clear.
The predominant focus by support programmes on supply-side measures such as incubation and skills development or mentorship, important as these are in building the overall capabilities of SMEs, has meant that their number one expressed need, namely broader market access, has been less prioritised.
Seeza Network believes that when SMEs enjoy effective market access, which enables them to grow their revenues, they take care of their capacity-building needs. Therefore, to effectively respond to their support needs and expectations, facilitating market access, principally through digital enablement, should be the number one priority.
Seeza Network’s research has found this not to have been the case to date. This points to an urgent need for a rethink of the country’s approach to TED. More generic training, incubation and mentorship is not priority need for SMEs. Digitally enabled market access is.
To this end, Seeza Network is encouraged to see the emergence of solutions that seek to fill this gap. Interestingly, some of the most promising developments, which hold great promise in terms of opening up vast markets to SMEs through digital enablement, emanate from outside the tourism industry itself. These include initiatives driven by commercial banks and mobile telephone companies.