Value Webs: Structure and Characteristics of the African Market Economy

When these markets are analyzed, moreover, they turn out to have a structure very unlike those of the West. ~ The End of Corporate Imperialism by CK Prahalad and Kenneth Lieberthal, HBR “Best of 1998″

When Prahalad and Lieberthal wrote this sentence over twenty years ago, they were referring to the huge consumer markets of India and China, based on quantitative metrics alone, eg. size of population segments. It, however, can also describe the situation on the African continent as long protected regional markets liberalise and open, such as Ethiopia’s or Nigeria’s, or as rapid adoption of mobile telephony digitalizes the ecosystem, best known in Kenya, but now being seen to be happening in Senegal or Ghana. Very few countries on the continent can’t be said to be digitally transforming the everyday lives of the mass majority, most of whom are employed informally and more than 95% are on prepaid/pay as you go purchasing plans for their smartphone or mobile internet services.

I use the label prepaid economy to categorize this digital economic activity only because of the dominance of the model regardless of white collar or blue collar, urban or rural, or educated or not. However, the description below is what is more important than what it is called. I first noted the emergence of this ecosystem almost exactly a year ago, written on 7th January 2019:

We were exploring the emergence of commercial activity on digital platforms in Kenya, and debating whether it could still be considered as an element of the existing informal economic ecosystem, or, was it something wholly novel and different?

What is emerging is not simply the digital version of the existing informal economy, its a novel hybrid that deserves consideration in its own right. Yet, calling it simply the digital  or the app economy would conflate it together with the developed world’s version, overlooking the unique characteristics that distinguish it as very African. ~ Africa’s emerging digital, social, mobile economy is neither formal nor informal but a bridge in between

Today, what I am writing to do, is put this theoretical wordplay together with the visual modeling we did of the informal trade ecosystem’s value flows that allowed us to map the webs of supply and demand – B2B and B2C – at the last mile of the East African Community’s regional trade ecosystem.

Diagram, January 2016, by Rinku Gajera – first prototype of visually mapping the exchanges of value between players in the borderland ecosystem from the informal trader’s perspective

Our second iteration of this diagram, as shown below, focused on the value flows, disaggregating them for greater clarity:

Revised Diagram by Rinku Gajera, February 2016 to visually model the informal trade ecosystem map at the borderland of Kenya and Uganda from the trader’s perspective

Once we saw the power of disaggregating the exchange of value – on a regular and consistent basis – that occurred in the form of transactions that the trader completed throughout the day and over the course of a week and a month, we were able to visually model the individual trader’s microweb, as seen below, effectively identifying the important/influential nodes in the informal trade ecosystem.

Now, imagine the process of zooming out from one borderland, and one trader’s microweb of value exchange between sources of supply and demand of flows of information, goods, services+people, currency/money. You will then understand my logical extrapolation of the structure of the ecosystem when you see Olivier J. Walther’s social network analysis1 of merchant brokers across three borders in West Africa in the diagram below:

It is obvious that were we to zoom into Walther’s diagram, at each node level, we would see a value web of exchange and flows of disaggregated value resembling Alice’s value web above. In fact, the rapid visual assessment of complexity of transaction flows and networks of nodes, acting as B2B and B2C depending on the context, will also allow for segmentation of ecosystem actors based on investment capacity in trade goods and services.

I have already written out the implications of this model’s value in assessing impacts of the AfCFTA.

My caveat here, as published by Wageningen’s Economic Research Unit back in June 2014, is that the textbook models of linear value chains are a trap for the unwary business analyst in the African context.

1 Walther, Olivier, Cross-Border Trade Networks in Nigeria-Niger-Benin (May 3, 2013). Available at SSRN: https://ssrn.com/abstract=2260177

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