Archive for the ‘Biashara Economics’ Category

The African Informal Sector: GDP Contribution vs Scale of Human Impact

The informal economy in sub Saharan Africa (SSA) tends to be measured as a share of GDP, counting its contribution to the national economy. By this metric, Nigeria has the most economically empowered informal sector, contributing over 60% to the GDP. On the other extreme, South Africa, has one of the smallest contributions to the GDP from the informal sector, but the highest unemployment rate.

Yet both Nigeria and South Africa are neck to neck when it comes to the title of “largest economy on the African continent”, or place in the top 3. So what does this tell us about these IMF metrics being used to measure the informal sector?

The human impact story is missing from the equations

South Africa might have one of the smallest informal sectors in terms of contribution to their GDP, but the number of people generating their income from the informal sector is almost as large as Tanzania, whose informal sector contribution is more than double, second only to Nigeria.

WIEGO’s research, from which the above employment figures are drawn, highlights the social impact and scale of the informal sector in human terms. Already, the informal sector’s employment opportunities are growing faster than the much smaller formal sectors in most major African economies. New graduates and working age adults still need to find a way to put food on the table.

Its not enough to simply look at GDP contribution when it comes to the complex value embedded (and untapped) in the informal economies of these nations. Where social safety nets are scarce, and systems variable in their functioning, the human and social impact of the informal cannot be ignored in development planning and policy design.

Mobile First Africa: Social Media’s Boost to Rural Productivity in Kenya

Now in business for just six months, he also uses social media pages to sell his products, improving his customer reach.

“Through Facebook posts I receive enquiries and orders from Kenyans in the diaspora living in the US, South Korea, South Sudan, UK, Switzerland and Botswana who want the splits to be delivered to their families in Kenya,” he said.

“I also use the page to educate farmers and friends more about brachiaria grass.” ~ How farmers look for new markets every season

Continuing with yesterday’s theme of business productivity in mobile first Africa, this story caught my attention for the way this farmer leveraged the reach and discoverability of social media to grow his business.

Social biashara such as this is diffusing outwards from the urban centers where it first began. Expect to see many more such stories emerge from the unexpected places.

The Resilience of Innovation under Conditions of Scarcity

Kouassi Bafounga works on a storm lantern, Bangui, Central African Republic, January 16, 2018. Thomson Reuters Foundation / Inna Lazareva

Innovating beyond the traditional tin lantern – a simple wick attached to the can – Kouassi Bafounga cuts shapes from tin cans and fixes them together with glass, string and a little petrol to produce storm-proof lanterns.

Last year, Bafounga was one of 11 winners in a “Fab Lab” innovation competition run by the French embassy and Alliance Française, a French cultural centre in Bangui, with financing from the European Union’s Bêkou Trust Fund. The finalists, chosen from more than 100 applicants, received assistance to develop their products into businesses.

Inna Lazareva writes on this “creativity from crisis” sharing stories of inventors and makers who must single-handedly create solutions for daily needs in highly volatile conditions of material scarcity.

Given the challenges faced by the Central African Republic, I see these stories as evidence of the resilience of innovation, something often overlooked when we ooh and ahh over the creations themselves.

How can we learn from this?

 

For more on Innovation under conditions of scarcity and Scarcity as a driver for innovation

Lessons for development from the demand driven investment strategies of the informal sector

This shopkeeper in Laare, Kenya provided me with deep insight on how investments in expensive inventory are managed in a heavily cash based economy. He runs a consumer electronics store stocking everything from solar panels, music systems, spare parts and batteries, through to mobile phones and accessories.

His purchasing decisions are based on visible consumer demand, he said, preferring to stock what he calls “fast moving items” that sell and keep the cash flowing than to risk tying up capital in something that might not sell. For instance, he pointed to a dusty 5W solar panel, this has been sitting here for a year since most customers in the area prefer buying 20W or larger.

In this context, “fast moving items” are not the same as the marketing term “Fast Moving Consumer Goods” or FMCG which refers to over the counter perishables and consumables like tea, shampoo, biscuits or soap. Instead, they refer to the product range that sells in the local market, and as my visits to electronics stores in different parts of Kenya back in 2012 quickly showed, each market had different price points and products which tended to be “fast moving”.

In a more economically challenged region, it was black and white 14″ TV sets, smaller solar panels and no name Chinese mobile phones, while in the wealthier region around Kilgoris as we see in the previous post, its flat screen Sony Bravias and very large solar panels that sell.

Local demand drives decisions, and thus business growth strategies and investments. Can this insight not also inform development strategies?

The Economist has just published this article on how fish farms are experiencing a boom in response to the growing demand for food from the big city:

The task of feeding that huge population has not been accomplished by the government, by charities or by foreign agricultural investors. It is the work of an army of ordinary Bangladeshis with an eye for making money. Mr Belton’s research shows that the number of fish-feed dealers in the main aquaculture areas more than doubled between 2004 and 2014. So did the number of feed mills and fish hatcheries. Mr Belton has found similar trends in Myanmar, where the fish farms are often larger than in Bangladesh, and in India.

As well as transforming landscapes in a large radius around Dhaka, the fish boom has changed many people’s lives. Aquaculture requires about twice as much labour per acre as rice farming, and the demand is year-round. Many labourers who used to be paid by the day are now hired for months at a time. Seasonal hunger, which is a feature of life in some rice-farming regions of Bangladesh, is rarer in the watery districts. People are eating more protein. Mohammad Shafiqul Islam, a feed dealer, points to another advantage. Because food is now so cheap in the cities, migrant workers are able to send more money back to their families in the villages.

I believe this element of assessing local or regionally accessible demand for a product or commodity before investment is often missing even from the private sector influenced “making markets work” philosophy now prevalent in development strategies. Too often, the “market” is framed as an international one, and an e-commerce platform devised as the bridging solution. Local intermediaries are demonized as “brokers out to squeeze profits at the farm gate” without once considering their role as infomediaries of supply and demand. The very information networks that provide the shopkeeper with guidance on what would sell and what to order are often erased and replaced with an app. Little or no attention is paid to existing consumer demand nor any attempt to link to the existing ecosystem. The informal becomes invisible.

How many of these pilots fail to sustain themselves once the project’s funding cycle ends?

Elements of Handpainted Graphic Design and Signage

The first time I went to Africa, my research companion, a South African designer, very apologetically mentioned the use of handwritten signage in his country. We were there on behalf of Samsung, and our global design research team included members from Seoul, Singapore, and Pretoria.

“Its all rather primitive over here” he said, but I fear my heart was captured.

Look at this signage and graphic design for a radio station in western Kenya. It has its own balance and harmony. It’s primitive only if you believe that fonts must generated by computers, and laser cut in acrylic before it can be used. Mass production is as modern as automation and takes away the unique beauty of the best of the signage that I’ve seen.

There will, of course, always be the aspirational ones, and the ambitious will do their best to satisfy. Some succeed very well indeed.

Look at this set of shops – each has its name written in a unique font, or handwriting style, while the whole still manages to convey the brand being advertised with a semblance of coherence. A true artist at work.

My favourite, however, is this one from the wall of an agro-vet dealer’s store. In a context where language and literacy tends to vary across a spectrum of facility, clearly communicating that you can get your cows artificially inseminated here is a bonus. The use of colour and the ombre backgrounds show the work of an artist.

And finally, this combination of a stencil – used for the desktop computer, and calligraphy – though the letter spacing may or may not have been deliberate, holds a position in its own right. That might not even be a stencil but the whole piece is crafted with care.

Why the African Consumer Market is NOT the same as the African Middle Class

Consumer goods store, Kilgoris, Kenya (March 2012)

The biggest challenge faced by consumer facing companies looking at the African Consumer Market is the age old positioning of the “middle class” as the ideal target audience. This middle class is segmented by the same attributes as the original middle classes who formed the consumer markets of the developed world.

This is the outside of the same store. Its located in a town called Kilgoris, situated at the edge of densely populated Kisii in western Kenya, and the sparse land of the nomadic Maasai pastoralists.

When you consider the range, the variety, and the price of the products displayed for sale, and compare it to the small dusty town with just one modern building, you wouldn’t imagine that solar panels worth USD 200 or Sony Bravia flatscreen TVs would be selling like hotcakes. But they do.

No dealer in a heavily cash based consumer market such as upcountry Kenya would tie up his working capital in expensive consumer electronics if there wasn’t a demand for it that meant the products sold quickly enough to keep the cash flowing in. My assumptions were completely upturned by this shopkeeper’s insights – it was the Maasai making purchases after attending the weekly livestock market.

A maasai manyatta Source: https://bushsnobinafrica.wordpress.com/tag/maasai-mara-game-reserve/

They’d pack 6 foot long solar panels, flat screen TVs, and satellite dishes onto the tops of hired trucks and take them off to their thornbush and mud manyattas. Yet neither you nor I would classify them by any of the traditional marketing department’s attributes as being part of the “middle class” consumer segment.

On the other hand, they were undeniably part of the African consumer market, and as the shopkeeper informed us, they were not only willing to spend on their homes, regardless of what they looked like from the outside, they could afford the best that he had to offer. He showed us his entire stock of kitchen appliances, water filters, jugs, mugs, and even children’s toys and fake flowers from Dubai! It is dealers like this who know best what their customers want and they range as far away as Nairobi to obtain the products in demand.

But I wonder if the marketers and the analysts still seeking the middle class have a clue about this huge market invisible to their eyes? And, whether, they’re looking in the right places?

Zambia’s inclusive approach to various sectors in the informal economy is worth noting

The Zambian government most recently announced that they would provide certificates to illegal (artisanal) miners in order to recognize and formalize their activities. In addition, they were being encouraged to form cooperatives – a legally recognized organizational structure – that would permit further benefits to this informal sector.

Compared to the challenges Ghana is facing with galamsey – the local word for illegal or rather, artisanal mining – one must sit up and take note of Zambia’s decision to lower the barriers to inclusion rather than build the walls higher to protect large scale formal extractive industries.

And mining isn’t the only sector to be so considered by the Zambian government. There was an announcement last year of their intent to legalize street vending – the bane of all developing country cities – and bring vendors – mostly women with families to support – within the formal employment and revenue net.

I looked for updates on this legislation and have yet to find something, though there’s lots of news on managing the street vending and hawking rather than the usual method of chasing them off the streets or confiscating their goods. That in itself gives me hope that we’ll see some pioneering advances from Lusaka.

In fact, there’s an article in the Zambia Daily Mail from a week ago that says “Its the perfect time for vendor training“:

Most of the traders on the streets are women who carry their children along due to lack of caregivers at home. For many women, this vending is considered an extension of their reproductive and domestic role. And so they are willing to risk it all and toil all day so that they could earn enough to cater for the following day’s orders and meals for the family.

However, many of these have dreams, big dreams to grow, provide and educate their children to a level where their offspring will never have to earn from the streets. And with the right training, many, with aspirations to grow their businesses and create a brand for their products, could benefit from financial and business knowledge that they could otherwise not be able to afford.

Some vendors have decided to change from trading in goods that are high-risk (these include foodstuffs such as vegetables and fruits) to those that have less risk such as clothing and other products. However, without any improvement in the level of knowledge of the new trade they are about to engage in, many are likely to fail, and they may return to what they know best, no matter how risky it is. It would therefore be prudent for organisations with the perfect know-how to take this opportunity to offer knowledge that will enable them to make the swap with better planning and more confidence.

Street vending is viewed by many as an economic activity for those with a low level of education. But what the cholera outbreak has taught us is that, if it is left without interventions, the negative effects will spread out and affect the whole nation.

The training I am suggesting could include assistance with regard to business registration, opening companies, tax remittances and branding of businesses, among other things.

I can’t help but underline all that is being said, and express my hope that other cities – Lagos, Nairobi, I’m looking at you – will take a leaf from Lusaka’s book.

East African Imports in rural Rwanda?

This highway ‘storefront’ in rural Rwanda made me wonder if the trader had imported his goods rather than purchased them locally. And, further, if they were imports from Kenya.

First, unlike the majority of such roadside shops, he is dealing with multiple products – while all are related to home decor, they are made of vastly different materials – wood, ceramic, plastic flowers. This is so rare that one can say he’s one of the handful such displays I’ve seen. This gives rise to the conjecture that he’s spread his inventory investment across a price range – from a full double bed to a bunch of flowers – to cater to the range of customer expectations on the road. And, that in itself is a sign that he’s purchased them from different dealers as people tend to specialize in product lines they trade in.

Second, it resembles the product lines along Ngong Road in Nairobi far more than the what I saw being locally produced. That made me wonder if these had been imported across the borders – which also underlines the careful display and the choice of the highway to capture the attention of wider variety of customers with differing wallet sizes than just his hometown market.

Today, 5 years after that trip through Rwanda, I’ll never know, but I can wonder out loud, can’t I?

Trading economics: a new theoretical system

From the Financial Times, a snippet from a guest post by Wang Zhenying, director-general of the research and statistics department at the PBoC’s Shanghai head office and vice chairman of the Shanghai Financial Studies Association, summarising the arguments in his new Chinese-language textbook on economics.

“Trading economics” is one new theory emerging against this backdrop. Mainstream economics deduces the macro whole by extrapolating from the behavior of individual “representative agents”. Trading economics replaces this with a systematic and comprehensive analysis approach. It stresses that in an interconnected world, the interaction between trading subjects is the fundamental driving force behind the operation, development, and evolution of economic systems.

Trading economics first analyses the actions of trading subjects, then builds a dynamic trading network among trading subjects through trading relations, and finally reveals the operational rules of the economic system. The rules could be examined from two perspectives: short-term and long-term. The business cycle and price changes are examined in the short-term perspective. The long-term perspective would focus on the rules of economic evolution as well as changes in technology, knowledge, system, and network.

Throughout the history of economics, trading economics is the first and foremost theory to incorporate all economic phenomena into an all-encompassing logical system. It changes the long-standing scenario in the economics field, that is, the macro was separated from the micro, and the short-term from the long-term. Trading economics is a revolution of mainstream economic theories and is bound to exert a great and profound impact on all areas, including economic theoretical research and practical application.

 

NB: I thoroughly enjoyed reading this summary and expect to contextualize future research with some of the theoretical frameworks as presented here.

 

 

Leveraging Disability as Competitive Advantage: The Wheelchair Cargo Movers of Uganda

Only in Busia do wheelchair owners from all over Uganda congregate as it is to their economic advantage to do so. Documented, and observed were the handicapped professionals who crossed the border numerous times a day ferrying goods.

In the past 25 years, the Busia tricyclists have created a strong community with initiative and resourcefulness in exploiting economic and political opportunities. Dialogue and negotiations have allowed them to conduct business without having to pay customs duties under the watchful eye of the authorities.

They point out with satisfaction that there are no disabled people begging on the streets of Busia, not even on Fridays when Muslims give out alms to the poor. On the other hand, each new officer must be sensitized.

These children from destitute families earn shillings helping with moving the freight. Neither participant is dependent on handouts.

 

Photographs: Michael Kimani, for Emerging Futures Lab, in Busia, Uganda, December 2015.