South Africa Could Unlock SME Growth By Exploiting AI’s Potential Through Corporate ESD Funds

The transformative potential of AI, at a pivotal moment, converges with the critical necessity for South Africa’s economic revitalisation. While AI holds some promise, particularly for the SME sector, realising its potential requires a strategic and concerted effort. As we navigate a low-growth economic environment, we must stop viewing Enterprise and Supplier Development (ESD) as merely a compliance scorecard obligation. Instead, we must recognise it as a potent lever to bridge the digital divide and inject growth-generative innovation into our economy.

SMEs are vital to our economic growth and job creation. Yet, despite the buzz surrounding the Fourth Industrial Revolution, the reality on the ground is stark. Studies indicate that AI adoption among South African manufacturing SMEs is low, limiting their innovation and productivity.

Our SMEs face significant hurdles. These include limited access to modern technologies, a lack of awareness regarding AI’s potential, and a critical shortage of relevant skills. Many small business owners lack the resources and expertise to independently explore and integrate AI solutions. This digital divide risks excluding a significant portion of the economy from the benefits of AI, further exacerbating existing inequalities across both business and social spheres.

Moving beyond tick-box compliance 

For too long, the ESD ecosystem has suffered from a reputation of being a tick-box exercise. Research from the Gordon Institute of Business Science (GIBS) suggests that many corporate programs are short-term and tactical, failing to generate real impact or integrate SMEs strategically into supply chains. We often see corporations sending beneficiaries on generic business courses without providing the direct technical or financial support necessary for them to stand on their own two feet.

If we are serious about transformation, we must shift our focus. Corporate ESD funds, mandated to support the development of SMEs, can play a crucial role in bridging the AI gap. By strategically directing these funds towards initiatives that promote AI awareness, provide access to AI tools, and facilitate tailored solutions, we can unlock transformative potential.

To truly unlock the power of ESD spend as a lever for growth, Corporate South Africa must strategically direct investment into four critical areas.

Firstly, a significant focus must be placed on Accessible, Practical AI Education. This involves investing in low-cost, specialised AI training programmes specifically for SME owners and their employees. These programmes should move beyond abstract theory to focus on practical applications that demystify AI and equip SMEs with the actionable knowledge required for effective implementation. As research indicates that organisational readiness is the most significant predictor of successful AI adoption, corporates should collaborate with vocational training institutions and online platforms to ensure these vital skills reach the entrepreneurs who need them most.

Secondly, corporates should foster Collaborative Innovation Hubs. Funds should be directed toward establishing partnerships between academic institutions, technology hubs, and SMEs to jointly develop affordable and relevant AI tools. While the government has initiated AI programmes, a much stronger collaborative effort across both the public and private sectors is essential to ensure these tools are widely accessible to SMEs.

Thirdly, Mentorship and Pilot Projects are crucial. Mentorship is often identified as a missing link in the entrepreneurial ecosystem. Corporates with internal AI expertise must actively guide SMEs through their AI adoption journey, offering hands-on assistance to identify relevant use cases and effective implementation strategies. Furthermore, ESD funds should be used to support pilot projects and proof-of-concept initiatives. By funding these pilots, corporates can demonstrate tangible benefits, build confidence among SMEs, and encourage wider AI adoption.

Finally, addressing Digital Infrastructure Development is non-negotiable. It is impossible to discuss AI adoption without simultaneously addressing connectivity challenges. There must be a deliberate intention to develop robust digital infrastructure, particularly in underserved areas. Investing in widespread, reliable internet connectivity and accessible cloud computing resources is essential to ensure equitable access to and utilisation of AI technologies across the entire SME landscape.

The corporate benefit: A resilient supply chain 

This is not charity; it is a strategic imperative. By supporting AI adoption, the corporate sector benefits from a more robust, efficient, and innovative supplier base. AI allows SMEs to streamline operations, optimise resource allocation, and improve decision-making. A thriving, AI-enabled SME sector contributes to overall economic growth and increased competitiveness, ultimately benefiting the entire economy.

The integration of AI into the SME sector must be approached responsibly, with paramount attention to ethical considerations and data privacy. However, the cost of inaction is far greater. By strategically leveraging ESD funds to empower South African SMEs with AI, we can unlock a new era of innovation and build a more competitive, resilient economy.

It is not just about technology but more on investing in the future of South Africa and its people. It is time for big business to move beyond compliance and start fuelling the growth-generative innovation our country desperately needs.

• Rowen Pillai, Co-Founder & Chief Executive Officer of LeanTechnovations