IBR : Q1 2024

Investment in technology

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Considering investment intentions, mid-market businesses express a strong interest in investing in technology, with expectations of increased investment compared to the previous period. 

 

 

 

Technology investments and the impact of digitisation

In the dynamic landscape of South African mid-market businesses, the latest survey data from GTIL for IBR Q1 2024 unveils intriguing trends regarding technology investments and the impact of digitisation.

Trends in technology investment:

The survey reveals a strong commitment among mid-market businesses in South Africa to bolster their technological capabilities. When asked about their plans to maintain or increase investments in technology, a significant proportion of respondents expressed intentions across the following domains:

Purchasing/upgrading software: A notable 74% of mid-market businesses in South Africa are inclined towards investing in software, indicating a recognition of its pivotal role in modern operations.
Cybersecurity tools: With 61% of respondents prioritising investments in cybersecurity tools, it is evident that mid-market businesses are keenly aware of the importance of safeguarding digital assets in an increasingly interconnected world.
Investing in Artificial Intelligence (AI): 63% of respondents plan to invest in AI, highlighting the growing acknowledgement of AI's potential to drive automation and enhance decision-making processes.


Impact of digitisation:

The survey also sheds light on the tangible impacts of digitisation on mid-market businesses and their anticipated future implications:

Improved efficiencies and productivity: For both indicators respectively, the majority of respondents reported enhancements in efficiencies (56%) and productivity (63%)due to digitisation, indicating its role in streamlining operations and boosting output.
Enhanced customer engagement and profitability: Digitisation has facilitated better customer/client engagement for 52% of respondents, while 53% reported improved profitability, underscoring the transformative potential of digital technologies in driving revenue growth.
Challenges and opportunities: Despite the benefits, challenges such as increased costs (33%) and lost business (9%) were reported. However, these challenges are likely to be outweighed by the opportunities presented by digitisation in the long term.
 

The survey underscores the strategic imperative for South African mid-market businesses to embrace technology as a driver of innovation and competitiveness. By prioritising investments in software, cybersecurity, and AI, while leveraging the benefits of digitisation, mid-market businesses can navigate the evolving landscape with resilience as well as unlock new avenues for growth and success.

According to IBR data, mid-market businesses are focusing on many areas during this time. There is a significant concern about red tape (27%), strengthening infrastructure (49%), and making it easier to do business (45%). 

 

 

 

Mid-market businesses would like to see government processes and rules made simpler and more efficient. However, despite these desires for business-friendly reforms, fears about political instability due to coalition arrangements (31%) cast a shadow over economic prospects. The possibility of shifting political alignments and potential policy uncertainty following the elections may pose challenges for mid-market businesses in terms of planning, investment, and decision-making. Mid-market businesses understand the importance of stable governance and clear policy frameworks in maintaining investor confidence and driving long-term economic growth.

Despite these changes, mid-market businesses expect stronger monitoring (57%) and policy formulation (60%) to handle the changing environment. Transparent governance processes and effective policymaking are critical for ensuring regulatory clarity, mitigating market inefficiencies, and levelling the playing field for businesses of all sizes. Furthermore, proactive and forward-thinking policies can assist mid-market businesses in adapting to market dynamics, capitalising on opportunities, and mitigating risks in an increasingly globalised and competitive world. 

The IBR also throws light on significant constraints, identifying major areas of concern. The anticipation of transport infrastructure has declined to 47 in Q1 2024 from 51 in H2 2023, a lack of funding slightly decreased from 44 in H2 2023 to 43 in Q1 2024, and regulatory constraints remained at 44 in both periods, these are significant obstacles. Furthermore, employment expenses are expected to increase to 53 in Q1 2024 from 46 in H2 2023 and economic uncertainty expectation has reduced from 64 in H2 2023 to 58 in Q1 2024, there are constant difficulties influencing corporate operations. These constraints highlight the multiple challenges mid-market businesses would face when navigating the operating environment, which ranges from obtaining proper capital and skilled talent to dealing with regulatory challenges and market uncertainty.

Despite these challenges, mid-market businesses are well-positioned to adapt and capitalise on possibilities arising from infrastructure investments and policy reforms, while also managing risks associated with political uncertainty and economic volatility. Mid-market businesses that use their resilience, agility, and strategic foresight may navigate the difficulties of an election year and contribute to long-term economic growth and development.