Artificial Intelligence AI is transforming South Africas small, medium, and micro enterprises SMMEs. By cutting costs, streamlining operations, and opening new markets, AI is empowering startups to compete with larger rivals. From AI-powered chatbots in e-commerce to predictive analytics for inventory, SMMEs are racing to adopt these tools. But Cliffe Dekker Hofmeyr CDH, a leading commercial law firm, warns that without proper AI governance, startups face serious legal and financial risks. For Ventureburns community of entrepreneurs and founders, balancing innovation with legal safeguards is now essential.
A recent Gallup study shows AI use in US workplaces nearly doubled in two years, with 44 percent of employees using AI but only 22 percent seeing clear employer strategies. CDH notes South Africas SMMEs face a similar challenge, adopting AI faster than they can regulate it. Many startups use AI without policies, exposing themselves to legal vulnerabilities, says CDH. For cash-strapped ventures, the consequences could be devastating.
Five Legal Risks SMMEs Must Address
CDH highlights five critical legal risks around AI use:
Data Privacy Breaches South Africas Protection of Personal Information Act POPIA imposes strict rules on handling personal data. Uploading client details to AI platforms like ChatGPT risks breaches or cyberattacks, potentially leading to fines of up to R10 million or damaging reputations that can sink startups.