The Internet and SMEs in Sub-Saharan African Countries: An Analysis in Nigeria

The Internet and SMEs in Sub-Saharan African Countries: An Analysis in Nigeria

Princely Ifinedo (University of Jyväskylä, Finland)
DOI: 10.4018/978-1-60566-026-4.ch344
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Abstract

The Internet is a global network of interconnected computers using multiple Internet protocols (IP). Increasingly, it is being used to enhance business operation by both small and medium-sized enterprises (SMEs) and large organizations around the world (Bunker and MacGregor, 2002; Turban, Lee, King, & Chung, Lee, J., King, D. & Chung 2004). One reason is that the Internet, when used to facilitate e-commerce and e-business, offers several benefits for the adopting organizations (Walczuch, den Braven, & Lundgren, 2000; Turban, et al, 2004). Such benefits include the following: 1) reducing distance barrier, 2) the development of new products and services, 3) opening direct links between customer and suppliers, and 4) enhancing communication efficiency. Our study of the relevant literature reveals that the diffusion of the Internet among businesses in Sub-Sahara Africa (SSA), including SMEs, is the lowest in the world at around 2% (ITU, 2005). A recent report shows that the whole of Africa has only 1% of the total international Internet bandwidth (UNCTAD, 2005). Thus, it is to be expected that businesses in the region with such poor connectivity and use will be unable to fully reap the benefits of the technology. Against such unfavorable situations, it would seem reasonable for research efforts to uncover why such unfavorable conditions prevail in the region. Sadly, very few studies exist that have investigated such issues. Little is known about the perceptions of the Internet or the factors inhibiting its spread among SMEs in SSA. To fill this gap in research, this article aims at adding to knowledge by presenting a summary of the findings of a preliminary study designed to investigate the perceptions of the Internet and the sorts of barriers facing SMEs in SSA desiring to adopt Internet in their operations or for commerce. The study used SMEs in Nigeria, a Sub-Saharan African country. The country was chosen for illustration proposes as it is the most populous country in Africa and has favorable indicators for the use of information and communication technologies (ICT) compared to other SSA countries (Ifinedo, 2005). Importantly, researchers, for example, Ojukwu (2006) have discussed use of ICT among Nigerian SMEs and it is hoped that this present effort will complement similar research efforts.
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Background

SMEs and Economies

SMEs can be described in several ways, for example, the European Parliament’s definition of SMEs refers to a business with up to 250 employees. de Klerk and Kroon (2005), writing from the perspectives of the Republic of South Africa, divided SMEs into three main subcategories: micro (< 5 people), small (between 5-50 people) and medium-sized (51-200 people). Nonetheless, we accept SMEs as businesses characterized by informal planning, strong owner’s influence, lack of specialists, small management teams, heavy reliance on few customers, and limited knowledge, amongst others (Bunker and MacGregor, 2002; Ifinedo, 2006). It is generally accepted that SMEs are the engine of growth of all economies (Bunker and MacGregor, 2002), including those in Africa. According to Ojukwu (2006), 97% of all businesses in Nigeria employ less than 100 employees, and the same is true in many African countries (Ifinedo, 2006). That said, SMEs in developed nations have been able to use ICT products such as the Internet in establishing e-commerce and e-business initiatives (Bunker and MacGregor, 2002; Turban, et al., 2004) and have subsequently benefited from such exercises. On the contrary, little or no progress has been made on such fronts in many developing countries, including SSA ones due to a variety of reasons, including inadequate know-how and a lack of resources (Ifinedo, 2005, 2006; Ojo, 1996; Ojukwu, 2006; Okoli, 2003).

Key Terms in this Chapter

E-Commerce: This term is used to describe the buying and selling of goods and services online.

Business-2-Business (B2B): This refers to the commercial activities between firms online.

Sub-Saharan Africa (SSA): This is the region of Africa excluding the Northern part of the continent and the Republic of South Africa.

E-Business: This refers to the sharing of business information, collaborating with business partners as well as conducting business transactions by means of the telecommunication networks.

Information and Communications Technology (ICT): These include technological products such as telephones, computers, the Internet, and so forth which are used to convert, store, protect, process, transmit, and retrieve information.

Business-2-Customer (B2C): This refers to the commercial activities between firms and customers online.

The Internet Protocol (IP): This is a unique number that devices use in order to identify and communicate with each other in a computer network.

The Internet: This is a global network of interconnected computers using multiple Internet protocols.

Small and Medium Sized Enterprises (SMEs): These are businesses characterized by informal planning, strong owner’s influence, lack of specialists, small management teams, heavy reliance on a few customers, limited knowledge, and often employ less than 250 workers.

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