AI offers unparalleled opportunities for economic expansion, job creation, and service delivery. If South Africa is to compete in the global economy, the government must create an environment where AI innovation can thrive.
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By Pieter Bensch
Finance Minister Enoch Godongwana is due to present his revised Budget Speech in a few days. At Sage, we hope his new Budget Speech and government policy go beyond the usual and focuses on digital technologies and the opportunities that artificial intelligence (AI) presents for the South African economy.
In his State of the Nation Address (Sona), President Cyril Ramaphosa said South Africa will be able to unlock enormous potential by building industries of the future, such as green manufacturing, renewable energy, electric vehicles and the digital economy.
AI offers unparalleled opportunities for economic expansion, job creation, and service delivery. If South Africa is to compete in the global economy, the government must create an environment where AI innovation can thrive. If not, we risk falling behind as territories like the US, UK, EU and China, which have earmarked tens of billions of dollars to invest in AI.
We believe that government should take a multifaceted approach to AI: using AI to streamline its own operations; attracting global tech investment; preparing South Africans for the workforce of tomorrow; and recognising the disruptive potential of AI and digital tech in the small and medium business (SMB) sectors.
Initiatives like the R100 billion transformation fund over the next five years for black-owned firms, which was announced at the Sona, and small business enterprises and the venture capital fund for tech start-ups are promising steps towards supporting and incentivising innovative SMEs. However, how these funds will be structured and disbursed will be crucial to ensuring maximum impact.
The government should also consider how AI could enable the wider SMB community. Sage’s Small Business, Big Opportunity report shows that South African SMBs recognise the value of digital transformation but trail the global market in leveraging technology. Only 47% of South African SMBs are relying on AI to drive revenue growth, compared to 63% of global respondents.
The government and big business should be proactive in fostering AI adoption among SMBs. Public-private partnerships could help make AI tools more accessible to small businesses. Creative use of AI could also help agencies such as the South African Revenue Service (Sars) and the Department of Labour streamline services to the benefit of smaller businesses. By creating an enabling environment for AI adoption, the government can empower SMBs to become more competitive, efficient, and resilient.
The state of South Africa’s public finances is the elephant in the room when the government prepares its budget. Responses to a planned increase in VAT in the initial budget highlight that there is low tolerance for further tax increases. With the present debt level, further borrowing is out of the question. The government should identify cost-saving opportunities and address inefficiencies to free up funds for social programs, infrastructure investment, and financial assistance to help small businesses adopt AI.
We believe that technology, especially AI, could play an important role. The President’s plans to modernise the public sector through technology investment are a positive step toward improving service delivery. AI and automation act as powerful enablers in governance, driving efficiency by reducing the mismanagement of funds and accelerating public service delivery. However, leadership remains the ultimate custodian, responsible for ensuring these technologies are implemented ethically, effectively, and in a way that enhances both operational efficiencies and the overall user experience.
Furthermore, Auditor-General reports consistently highlight how billions are lost each year to wasteful and irregular spending. Robust systems and AI could help to identify spending anomalies as well as provide insights to prevent financial mismanagement. A transparent, digitised procurement system, powered by AI, could help drive down costs and ensure that government gets value for money.
Automated systems could also help to scale up and improve public service delivery while reducing administrative costs. In the initial budget, the Minister earmarked funds for Sars to utilise new technologies to assess and reduce the tax gap, including illicit financial flows, while making it easier and more efficient for businesses to trade through our borders and comply with their tax obligations. This could be a powerful example of AI in action.
South Africa needs a budget that is not just about raising money but about spending it efficiently. As Ramaphosa emphasised in his Sona, growth and innovation must be the cornerstones of our economic future. But without fiscal discipline, we risk undermining those objectives. By embracing AI-driven efficiencies and cutting unnecessary expenditures, we can build an economy that is both competitive and sustainable.
Pieter Bensch, Managing Director and Executive Vice President for Sage Africa & Middle East
BUSINESS REPORT
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