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ICT Usage and Its Impact on Profitability of SMEs in 13 African Countries

Author

Listed:
  • Steve Esselaar

    (Independent Communications, Authority of South Africa, Sandton, South Africa)

  • Christoph Stork

    (LINK Centre/Research ICT Africa (RIA), PO Box 601, WITS, 2050, Wits University, Johannesburg, South Africa, +2711717 3914,)

  • Ali Ndiwalana

    (Makerere University, Kampala, Uganda)

  • Mariama Deen-Swarray

    (Namibian Economic Policy, Windhoek, Namibia)

Abstract

This article reports on a small and medium enterprise (SME) survey carried out by the ResearchICTAfrica (RIA) in 14 African countries. It argues that the negative return on investment reported in the literature can be attributed to the failure to distinguish between the formal and informal sectors. This article demonstrates that informal SMEs have a higher profitability than formal ones. It further shows that ICTs are productive input factors and that their use increases labor productivity for informal as well as formal SMEs. The article further argues that there is still demand for fixed-line phones among SMEs but that mobile phones have become the default communications tool because fixed lines are either too expensive or not available. The primary policy recommendation arising out of this is that applications for SMEs need to be developed using mobile phones. (c) 2007 by The Massachusetts Institute of Technology.

Suggested Citation

  • Steve Esselaar & Christoph Stork & Ali Ndiwalana & Mariama Deen-Swarray, 2007. "ICT Usage and Its Impact on Profitability of SMEs in 13 African Countries," Information Technologies and International Development, MIT Press, vol. 4(1), pages 87-100, October.
    • Handle: RePEc:tpr:itintd:v:4:y:2007:i:1:p:87-100
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    Citations

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    Cited by:

    1. Katharina Michaelowa & Franziska Spörri, 2012. "ICT als Beschäftigungsmotor in den Entwicklungsländern?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(3), pages 85-97.
    2. Ibrahim Mike Okumu & Faisal Buyinza, 2018. "Labour productivity among small- and medium-scale enterprises in Uganda: the role of innovation," Journal of Innovation and Entrepreneurship, Springer, vol. 7(1), pages 1-17, December.
    3. Jean-Philippe Berrou & François Combarnous & Thomas Eekhout, 2018. "Usages du mobile et performances économiques des micro et petites entreprises informelles à Dakar. Quels profils d’usagers pour quels segments de l’informel ?," Working Papers hal-02148197, HAL.
    4. Vigneswara Ilavarasan & Mark R Levy, 2010. "ICTs and Urban Microenterprises: Identifying and Maximizing Opportunities for Economic Development," Working Papers id:2819, eSocialSciences.
    5. P. Vigneswara Ilavarasan, 2017. "Bridging ICTD research and policy-making: notes from a systematic review on MSMEs in the low- and middle-income countries," Information Technology for Development, Taylor & Francis Journals, vol. 23(4), pages 723-733, October.
    6. Sanja Popović-Pantić & Dušica Semenčenko & Nikola Vasilić, 2020. "Digital Technologies And The Financial Performance Of Female Smes In Serbia: The Mediating Role Of Innovation," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 53-82, January –.
    7. Jean-Philippe Berrou & François Combarnous & Thomas Eekhout, 2017. "Les TIC : une réponse au défi du développement des micro et petites entreprises informelles en Afrique sub-saharienne ?," Working Papers hal-02148324, HAL.
    8. Richard Heeks, 2010. "Do information and communication technologies (ICTs) contribute to development?," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(5), pages 625-640.
    9. Navyashree G. R. & Savita Bhat, 2016. "ICT Investments and Growth of Small and Medium Firms: A Study of Food Processing Industry in India," Working Papers id:11306, eSocialSciences.
    10. Ibrahim Mike Okumu & Faisal Buyinza, 2020. "Performance of Small and Medium-sized Enterprises in Uganda: the Role of Innovation," Working Papers 363, African Economic Research Consortium, Research Department.
    11. Navyashree G. R. & Savita Bhat, 2018. "ICT Investments and Growth of Small and Medium Firms: A Study of Food Processing Industry in India," Working Papers id:12731, eSocialSciences.
    12. Jean-Philippe Berrou & Francois Combarnous & Thomas Eekhout & Kevin Mellet, 2020. "My mobile, my market: Mobile phone uses and economic performance in the informal sector in Dakar [Mon mobile, mon marché. Usages du téléphone mobile et performances économiques dans le secteur info," Post-Print hal-02506855, HAL.
    13. Paunov, Caroline & Rollo, Valentina, 2016. "Has the Internet Fostered Inclusive Innovation in the Developing World?," World Development, Elsevier, vol. 78(C), pages 587-609.
    14. Islam, Md. Mazharul & Habes, Essam M. & Alam, Md. Mahmudul, 2018. "The usage and social capital of mobile phones and their effect on the performance of microenterprise: An empirical study," Technological Forecasting and Social Change, Elsevier, vol. 132(C), pages 156-164.
    15. Eivor Oborn & Michael Barrett & Wanda Orlikowski & Anna Kim, 2019. "Trajectory Dynamics in Innovation: Developing and Transforming a Mobile Money Service Across Time and Place," Organization Science, INFORMS, vol. 30(5), pages 1097-1123, September.
    16. Mohamed Kossaï & Patrick Piget, 2012. "Utilisation des technologies de l'information et des communications (TIC) et performance économique des PME Tunisiennes :une étude économétrique," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(3), pages 305-328.
    17. Jonathan Donner & Marcela X. Escobari, 2010. "A review of evidence on mobile use by micro and small enterprises in developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(5), pages 641-658.
    18. Baozhi Li & Ni Zhuo & Chen Ji & Qibiao Zhu, 2022. "Influence of Smartphone-Based Digital Extension Service on Farmers’ Sustainable Agricultural Technology Adoption in China," IJERPH, MDPI, vol. 19(15), pages 1-14, August.
    19. Paul Adjei Kwakwa, 2012. "Mobile Phone Usage by Micro and Small Scale Enterprises in Semi-Rural Ghana," International Review of Management and Marketing, Econjournals, vol. 2(3), pages 156-164.
    20. Thomas Eekhout & Jean‐Philippe Berrou & François Combarnous, 2023. "Entrepreneurs' mobile phone appropriation and technical efficiency of informal firms in Dakar (Senegal)," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(6), pages 1429-1455, August.

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