Cracking the informal markets in Sub Saharan Africa: the need for strategic improvisation

Informal market, Nairobi, Kenya June 2011

Ernst & Young’s Consumer Products division  released a report for global consumer product companies interested in growing in Africa where they highlight the challenge of cracking the informal markets, described thus:

The informal economy is a key feature of life in Africa — estimated to account for around 42% of GDP in 2000 with the highest figures in Zimbabwe (59.4%), Tanzania (58.3%) and Nigeria (57.9%). South Africa is the least informal market — only 28.4% of GDP.

The International Labour Organization (ILO) estimates that 72% of non-agricultural employment in sub-Saharan Africa is informal, so small “mom and pop” stores have enormous market share — possibly as high as 85% of volumes.

The combination of lack of formal retail, underdeveloped infrastructure and a fragmented local logistics sector means that global consumer products companies often need to consider strategic improvisation to create their own solutions for cracking the informal market and reaching consumers effectively and in a cost-efficient manner.

Although not apparent, informal markets have structures, rules and a flow which businesses can tune into if they are prepared to invest sufficient time and effort.

After evaluating the search results for the term ‘strategic improvisation’ – popularized by a recent book analyzing The Grateful Dead’s lessons for management, I find this to be the most informative summary of the concept:

Four ideas make up the foundation of strategic improvisation. The first is the idea that managers and leaders need to be nimble. Nothing is certain (NB: The only certainty is uncertainty holds true for the emerging markets of Africa)- – especially not a five-year strategic plan. Strategic improvisation involves a continuous flow of acting, learning, and planning to manage and lead an organization in real-time as the situation takes form. It is a focus on fast action and adjusting plans on the fly as the situation changes and requirements become clear.

While taking the time and effort to understand the informal markets of the local economy will offer touchpoints for the most effective strategies, there is also the increased possibility of discovering the seeds of ideas within the informal economy which is in itself an excellent example of  strategic improvisation and creative ingenuity.

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