Archive for the ‘Consommateurs’ Category

West Africa’s incipient mobile platform boom will transform the ECOWAS economy

While East Africa has tended to grab the headlines as the mover and shaker in mobile platform innovation, there’s an imminent boom due to emerge in West Africa. The GSMA’s most recent report on the West African mobile ecosystem contains all the signals of this happening within the next 3 or so years.

Even in mobile money solutions, where East Africa has had a headstart (and worldwide fame for M-Pesa), numerous new solutions have been launched in West Africa and subscriber numbers show double digit growth.

In addition, both smartphone penetration (~30% of all subscribers) and internet use are growing as well.

All of this, taken together with the growth of incubators, accelerators and variations of tech hubs to support the startup ecosystem provide evidence of a transformation underway.

Does West Africa have the potential to surpass the success of East Africa? I believe so, given its larger population, greater numbers of dynamic economies from both Francophone and Anglophone regions, and the side effect of years of watching East Africa grab the headlines.

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

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?

Mobiles at the Border Post: Anti-Atlas of Borders Exhibition Slides (Jan 2016)

In January 2016, our submission for the Anti-Atlas of Borders Art Exhibition in Brussels was accepted for a commission of 500e. We were thrilled and surprised since we’d never imagined our work on mobile platforms, technology, and the borderland biashara could be considered from the arts and culture point of view.

Here is our story in the form of slideshow – each of these was printed in full size and hung on the walls.

Some Highlights from Reviewing the African Consumer Market 2014-2017

Photo by Niti Bhan in Busia market, Kenya in January 2016

Recently I was reminded of the cover story in the Africapitalist magazine published back in 2014 on the theme of the true size of the African Consumer market, that is, the hidden and untapped purchasing power embedded in the continent’s vast informal and unrecorded sector. Today I’ll start by reviewing some of the consumer trends, particularly in FMCG, that have become rather obvious over the past three years.

    1. Airtime is now a Fast Moving Consumer Good (FMCG) With the advent of a wide variety of different voice and data bundles, as well as affordable smartphones, airtime in Africa, while still prepaid, can be considered along side tea or sugar its distribution and sales patterns. In fact, smartphones and in-app purchasing have made it so that airtime voucher sellers are rapidly going out of business in key markets like Nigeria. In early adopter markets like Kenya’s this digitization has led to barriers lowering for the adoption of crypto-currencies like bitcoin and ethereum.
    2. Hair is a huge business across the continent. This goes beyond cosmetic products like shampoos and creams, to include hair extensions, weaves, services, and add-ons. Hair care related services are mostly in the informal sector while products themselves might be both formal (Unilever, Godrej, Marico) or informal (recycled weaves, imports from Indian temples, etc). Services are also traded and Maasai experts often travel around working and sending money home from providing weaving services. There is a gap in the market for local players and branded chains of retail outlets for the Maasai moran to leverage.
    3. Women’s hygiene and well-being products. This market has been valued at USD 800 million annually and is virtually untapped by formalized solutions. There is literally a gap of products priced for women who are neither beneficiaries of NGO donations, nor can afford urban supermarket prices of imported brands. Otoh, this FMCG product has finally become visible as a market opportunity.
    4. Social Biashara. Smartphones and free-to-use social media networks such as YouTube and WhatsApp have transformed the entrepreneurial opportunity space for unemployed youth struggling to earn in challenging economies across the African continent. In subsequent posts I will consider the impact of e-commerce and changing consumer behaviour on existing markets, both formal and informal. For now, assume that these apps have lowered the barrier to finding and providing trade goods and services and giving rise to an entire demographic of freelancers in cutting edge services including Ethereum/Bitcoin to Euro brokerage.

Women’s Entrepreneurship Driving Emerging Future in Africa

We’ve been silent of late on this blog due to work deadlines and end of the year paperwork, however this will change. I’ve promised to write one blog post every day – even if its a few lines – for the next 30 days. I realized it was habit and discipline that was missing, not content related to this blog.

 

Meanwhile, here are some data points to ponder:

African entrepreneurs are missing out on the untapped potential market – said to be worth around $ 800 million – for women’s hygiene products such as sanitary napkins. The opportunity exists at every price level, from branded consumer oriented premium goods distributed through local supermarket chains, to rural handmade and re-used napkins that enable girls to go to school. What are you waiting for, if you’re looking for new ideas to invest in?

 

African women are also driving the small home solar revolution. I’m planning on sharing key extracts from the household energy consumption behavioural study I’d conducted in rural Kenya and Rwanda soon on this blog. In the meantime, the article linked above offers some food for thought on this trend.

 

Elsewhere, women whose herds of goat were ravaged by drought are picking up the pieces with cash grants which they are ploughing back into their businesses.

Ahatho Turuga arranges goods in her shop set up with support from The BOMA Project in Loglogo village, near Marsabit town, Kenya, on November 29, 2017. Thomson Reuters Foundation/Benson Rioba

 

This theme is best wrapped up by an article showcasing Maggy Lawson of Lomé, Togo, a woman whose trading ability has made her famous throughout the African continent and abroad.

Maggy Lawson is a Mama Benz. That’s what people in West Africa call women who have become rich in the textile trade – so rich that they can afford a Mercedes-Benz. Maggy Lawson owns homes in Dallas, Washington, Paris, and Monaco, as well as a villa on the outskirts of Lomé with marble floors and teak paneling. She is both wealthy and influential, representing the coastal regions in the Togolese Parliament and advising the Minister of Labor on important economic questions.

 

Here is our report on Nigeria‘s informal and formal textile trade, tracing the value web from end user customer through brokers to wholesalers and retailers of appliques.

 

Launching Our Digital Documentation Project: Ibadan’s Tailors, Traders, and Textiles by Nigerian/British artist Folake Shoga

finalcopyAfter months of hard work, I am very honoured and proud to announced our new digital documentation project by my friend Folake Shoga, a Nigerian/British multidisciplinary artist with more than three decades of experience.

She went on a journey of discovery through the twists and turns of the informal value web that holds together West Africa’s famed textiles and fashionably styled culture.

Her window to this world is centered around Ibadan, Nigeria, and she takes us through an illustrated, personally narrated documentary that spans the experience of getting a new dress, from choosing the right fabric, all the way through building a fashion brand.

Come and join us for this fascinating peek behind the scenes! You can also find this unique photo-documentary again on my portfolio page.

As global firms (MNC) pull back from emerging markets, what does this mean for Africa?

tumblr_nwsbz0ytDw1qghc1jo1_500Last week’s issue of The Economist drilled down deeper to cover the retreat of globalization – at least in the most visible form, that of the multinational brands dotting cityscapes around the world. The retreat of the global company, they trumpet, the end of Theodore Levitt’s vision.

Credit Suisse takes a concise yet comprehensive look at these weak signals in their well-written report that frames the situation as a transitional tug of war between globalization and multipolarity – an inflection point, rather than a retreat. They make it sound like missing the turn at an intersection and having to come back to the traffic lights to figure out which way to go.

Duncan Green of Oxfam captured the essence well:

But the deeper explanation is that both the advantages of scale and those of arbitrage have worn away. Global firms have big overheads; complex supply chains tie up inventory; sprawling organisations are hard to run. Some arbitrage opportunities have been exhausted; wages have risen in China; and most firms have massaged their tax bills as low as they can go. The free flow of information means that competitors can catch up with leads in technology and know-how more easily than they used to. As a result firms with a domestic focus are winning market share.

In the “headquarters countries”, the mood changed after the financial crisis. Multinational firms started to be seen as agents of inequality. They created jobs abroad, but not at home. The profits from their hoards of intellectual property were pocketed by a wealthy shareholder elite. Political willingness to help multinationals duly lapsed.

Of all those involved in the spread of global businesses, the “host countries” that receive investment by multinationals remain the most enthusiastic.

The first thing to note is that the global MNCs being considered by The Economist are primarily the legacy ones  – fast food chains like McDonalds and KFC (Yum Brands) – whose shiny logos used to represent the liberalization of the closed markets of India and China.

Even at powerhouses such as Unilever, General Electric (GE), PepsiCo and Procter & Gamble, foreign profits are down by a quarter or more from their peak.

or the few examples of emerging market brands that have gone global such as China’s Lenovo which purchased IBM’s Thinkpad and India’s Airtel which bought into the African market.

What’s being touted as their competition are regional brands, who aren’t as stretch out globally in terms of their supply chains, and less vulnerable to currency volatility. Further, the majority of these global brands are heavily dependent on their B2C marketing and sales – the question of whether they ever managed to understand their new markets is a topic for another post.

And so, we ask, what will this mean for the emerging economies of Africa, who are only now seeing the first fruits of FDI? Who will come and develop their consumer markets?

India and China apparently. And strategically – through unbranded affordable commodities and the acquisition of successful regional consumer brands – rather than the legacy MNC approach influenced by Levitt. Even Japan recognizes this, as they seek to piggyback on the Indian experience.The economics of scale that propelled the first rounds of growth for the manufacturers of washing machines and the automobiles never did make sense infrastructurally for the majority of the African consumer markets.

Instead, the patterns pointed out by The Economist and Credit Suisse imply that opportunities will lie among regional stars – Equity Bank of Kenya, for instance, whose regional footprint is surely but steadily creeping outwards across the East African Community and trading partners – or, the telcom brands such as Tigo (Millicom) who innovate for each of their local markets.

The jobs and exports that can be attributed to multinationals are already a diminishing part of the story. In 2000 every billion dollars of the stock of worldwide foreign investment represented 7,000 jobs and $600m of annual exports. Today $1bn supports 3,000 jobs and $300m of exports.

Godrej, for instance would be considered a regional Indian giant rather than a multinational in the conventional sense of a Unilever or P&G.

Where [MNCs] get constrained is, they are driven by lot of processes that are global. For a smaller organisation like us, we are completely empowered; decision-making is quick and we can initiate changes very fast. We are more agile and have an advantage over them.

Yet their expansion outside India shows a “pick and choose” strategy of markets they’re comfortable entering.

The group’s acquisition strategy hinges on identifying unlisted companies built by entrepreneurs looking for capital, picking up stakes and working with them to scale up their businesses.

At least two homegrown Kenyan FMCG brands – skincare by a global giant and cosmetics by private equity – have been acquired. As have snack foods, spices, dairy products, and other products that cater to local tastes. The best known being Fan Milk of West Africa. Private equity such as Abraaj make no bones about going after consumer driven opportunities.

Given these choices, sustainable African businesses who understand their consumer markets have an opportunity to establish their brands and grow – with the financial help that’s strategically becoming available.While Chinese imports make the market highly competitive and price conscious, fish and tyres are substitutable goods in a way skincare and cosmetics are not.

African consumer companies – formal, informal, or semi-almost there-formal – need to hustle right now.

The retreat of the MNCs offers a chance to exhale, and expand, and grow, but the advent of the East implies waking up to the need for serious strategic thinking about domestic comparative and competitive advantage – one of which is incomparable knowledge of local consumers, culture, and needs, and critically, experience of their vast informal sectors and cash intensive economies.

The dangerous assumption that there’s no competition from the informal sector

In addition, the informal economy of open street markets still dominates 90% of retail in large countries like Nigeria and Kenya, meaning it’s a near safe bet there’s plenty of room to grow. ~ Quartz Africa, Jan 2017

Failure is a risk, and an inescapable function of the amount of resources invested, not just money. Time, effort, and managerial ambitions are also losses that destroy value for companies. Danger, then, lies in leaping to assumptions that turn out to be wrong. This is one of them.

First, a bit of history. Just over a decade ago, the Indian market was opening up to world’s investment flows in the retail sector, and estimates of the potential were as rosy and glowing as Africa’s today. From The Economist in April 2006:

Most Indian shops belong to what is known, quite accurately, as the “unorganised” sector—small, family-owned shops surviving on unpaid labour and, often, free land for a small stall. “Organised” retailing accounts for only 2-3% of the total, and of that, 96% is in the ten biggest cities, and 86% in the biggest six. However, organised retailing is growing at 18-20% a year and inspiring a rush of property development. Shopping malls are springing up in every big town: some 450 are at various stages of development.

By 2015, it was clear that these ambitious potentials were never going to materialize, though many malls did spring up in cities across the country. Last year, I covered this topic looking back at the growth projections and the subsequent real numbers achieved from the perspective of the resilience shown by the informal retail sector. I noted, in August 2016:

Yet if you look at the data from 2015, you’ll see that the forecasts were far too ambitious – formal retail has only reached 8% penetration in the past 10 years. Nowhere close to the 25% expected by 2010. Mind you, these were all the management consultancy reports bandying the numbers around.

I bring this up because I’m seeing the same kinds of projections happening right now for the African consumer market by the very same firms.

Second, this time it’s not just a management consultancy report with all the research and analysis efforts they pour into making their case. It’s not been distilled into one single yet dangerous sentence:

meaning it’s a near safe bet there’s plenty of room

Yeebo_Market_08

“Plenty of room” (Photo Credit: Yepeka Yeebo in Accra, Ghana)

There’s an inherent assumption within the assumption that the myriads of little stands, market ladies and their longstanding relationships with customers and suppliers, and the entire ecosystem which exists, such as in the photograph above, can simply be bulldozed over with a granite and marble mall development covered in shiny unreflective glass.
It didn’t happen in India, and it’s not happening in Africa. From Ghana, this news article on mall development says:

Ghana’s economic woes have translated into a variety of challenges for formal retailers who are competing for sales alongside the dominant and deep-rooted informal shopping sector. According to a recent report by African commercial property services group Broll overall sales in most modern shopping malls are well below historic averages, despite garnering sufficient foot traffic.

cth8lgkwcaauetyFurther, and more dangerously, this blithe assumption of a cakewalk where an informal sector so tangibly exists, overlooks the innate ingenuity of those who seek a dignified life even while hustling for a living. And that there’s no competition or customer service.

Snapshot of the Dynamics of the Urban Informal Retail Trade in Nairobi, Kenya

Informal Economy Dynamics - Updated

Made by Latiff Cherono – click for larger image

Latiff Cherono quickly made up this diagram during a brainstorming session with Francis Hook and myself on the ways and means to further disaggregate the general category of “Informal wholesale and retail trade” that the Kenya National Statistics Board uses to lump together the second largest sector providing employment in Kenya after agriculture.

jobs2 In urban conditions, vending and hawking of this sort is the largest source of income for the formally unemployed.

As you can see in the map visualizing Latiff’s analysis of a well known location for street vendors and hawkers to operate breaks down traffic flows not only by speed but also takes in account both static and dynamic forms of informal trade.

It may look chaotic but there are principles underlying the decisions made by both pavement vendors and mobile vendors (streethawkers in traffic) for their location of choice. These relate to the speed of passersby and potential customers – both wheeled and heeled, as Francis is wont to say – and closer analysis will most likely provide evidence of attempt to drive more footfalls to the shopfront, so to speak.

An example is the way pavement vendors locate themselves on either side of the busy bus stops, while mobile vendors who vend their way through traffic focus on the bottlenecks created by the roundabout and the traffic police.

We’re still in early days yet but time and money seem to be two of the factors that describe the attributes to segment and categorize the informal retail sector in urban Africa.