Archive for the ‘global’ Category

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.

Exploring the Scope of Biashara Economics

biashara2There’s a dearth of research on the economics of biashara – the everyday commerce that keeps daily life running. And this hampers the efficacy of the design of programmes and policies meant for operating environments where the informal economy may be providing employment for more than half the working age population, and often, as high as 80 to 90% – India is at 92%, just for context.

This is not yet a literature review, although that is next on my list. It’s an attempt to capture the realization, while reading a couple of fascinating articles on the South African township economy, that the underpinnings of the informal retail and trade economy were not themselves the subject of research.

We stand firmly on the shoulders of giants, I realized, when reading these papers, though they maybe few in number. Without John Keith Hart’s body of work, none of us would be here, not even the “informal economy” –  the label itself attributed to his work in Ghana in the early 1970s. And without Martha Alter Chen’s rethinking of the informal economy, I wouldn’t have taken the path that I have this past decade.

…as long as you lump together the activities of the people like selling hotdogs door to door (although buying it from a wholesaler informally), distilling wine for the village, keeping small shops within walking distance when towns are far away or even urban services ranging from garbage disposal to dishwashing to repairing shoes – with the “firms that are hiding from formal regulations and don’t want to pay taxes etc” any formal programs or activities, whether from the social and economic development angle or the corporate profitability angle are going to act at cross purposes.

Martha Alter Chen writes in “Rethinking the Informal Economy” that India stands out as an example where the informal economy has been accepted, acknowledged and now slowly being addressed by government policy. Not in order to dissolve it or remove it but to work with it simply because the incomes of far too many people are dependent on it and no formal systems can be put into place to take care of each and every corner of the country nor her billion citizens.

One can then take what seems to be working, called “creative, resilient and efficient” by Hart, quoted by Chen, and enable systems that support it further, fostering development and increasing success rates at the touchpoints where the informal and formal meet.

So, it is with their distant blessing I will also put forth all that we’ve uncovered about the economics of informal trade and commerce, in the context of the various existing studies which overlap and provide us with insights or confirmation on our own findings. Including the tag “biashara economics”; I’ve now created it’s own category.

Analysis of the mobile phone’s impact on cash flows and transactions in the informal sector

As we saw, Mrs Chimphamba needs to juggle time and money as part of her household financial management in order to ensure that expenses can be met by income. We also saw that the mobile phone was made viable and feasible by the availability of the prepaid business model that gave her full control over timing and the amount required to maintain it — how much airtime to purchase? when? how often? — all of these decisions were in her hands, within the limits of the operator’s business model. Now, we’ll take a closer look at the impact of the mobile on her domestic economy.

Readily available real time communication has helped Mrs C by speeding up the time taken for a decision on a purchase or a sale. That is, the transaction cycle has been shortened. As the speed of information exchange increases, it increases the speed of transactions — it shortens the duration of time taken to execute them from inception to completion. This, in turn, implies that more transactions can now take place in the same amount of time thereby increasing the frequency and the periodicity. When mobile money is present, one can see that as both quantity and frequency of transactions speed up, so does the cash flow. We’ll come back to this factor.

To explain using a real life example, Mrs Chimphamba does not need to sit at her homestead wondering if today someone will pass by to purchase a bottle of wine. Similarly, Mrs C’s customers do not need to go out of their way to pass by her homestead to see if the wine is distilled and ready for sale, or whether it will still take another day or two for the next batch to be ready. Further, the uncertainty of whether they’ll have cash on hand on that future day, or if they’ll return as promised are all elements that real time communication have minimized.

Now, Mrs C is able to let her regular customers know that she’s making a new batch for sale and do they want to reserve a bottle for purchase? It allows her customers to put aside cash for this purchase. She is even able to accept and execute larger orders for some future date, and even accept some cash advances if her operating environment includes the presence of a mobile money transfer system such as those more prevalent in East Africa. This in turn changes her purchasing patterns and decision making as the pattern of cash flows — timing and amount — changes. She isn’t making do anymore on an unknown and predictable sale based on sitting and waiting for someone to show up to buy her wine.

Real time communication has improved the decision making cycle for both buyer and seller in a transaction as it counteracts uncertainty and information asymmetry even while speeding up the time take for a decision.

As the quantity and frequency of transactions increase— first, in cash conducted face to face, and then later, remotely by mobile money, regardless of the size of each transaction — the change in cash flow patterns begins to smooth out the volatility (the uncertainty factor has changed completely) between incoming and outgoing, as well as the decisionmaking involved. That is, the gap between income and expense starts becoming less in terms of both timing and amount — there is the possibility of a steady stream in the pipeline. Calculus offers hints of how the curve can begin to smoothen out as frequency and periodicity of transactions begins to accelerate.

Size of transactions thus begin to matter less in that the incoming amount now does not need to be so large as to cover expenses for an unknown duration of time before the next incoming payment; nor do expenses have to be tightly controlled constantly due to the uncertainty of the duration of time before the next payment, and the types of expenses incurred during this unknown period of time.

So the boost in decision making — how long it takes to complete a transaction, how often can transactions be completed — enabled by the real time communication facilitated by the mobile phone; plus the attendant immediacy of receiving payment via the same platform is the root of the improvement in the hyperlocal economy and consumption patterns among the informal sector actors. This is why large established traders (with sufficient financial cushion) were heard to observe that both purchasing power and consumption patterns had changed in their market town (Busia, Kenya Jan 2016) in the past 10 years since first the mobile phone, and later, mPesa, were introduced into their operating environment.

Uncertainty and information asymmetry that have long characterized the fragile and volatile nature of the informal sector operating in inadequately provided environments with unreliable systems and scarce data. In the next chapter we’ll step back and take a broader look at communication, connectivity, and commerce in the informal economy starting with the description of the operating environment’s characteristics regardless of continent.

This is part of a newly launched Medium where I will write in detail on economic behaviour and its drivers in the informal economy. Much of it draws upon the original research in the field from 2008-2009 which was shared on the prepaid economy blog. I found that time had passed and increased my understanding and I wanted to explore those discoveries in writing. Much of this is the foundation for recent works on ‘Mama Biashara‘.

Africa’s Middle Class: Development economics and marketing demographics conflating the holy grail

The most developed nation on the African continent, south of the Sahara desert, is considered to be South Africa with its financial and transportation infrastructure and systems, a legacy from history. In the first decade of the 21st century, the black middle class – known as Black Diamonds in marketer jargon – came into prominence on the back of numerous economic initiatives after the fall of apartheid.

img-south-africa-consumer-goods-02The rise of the Black Diamonds was meant to be the signal of a changing rainbow nation, one whose peoples would finally be included in the social and economic advancements long enjoyed by a privileged minority. This emerging middle class was also among the first to be noticed as African consumers in their own right, and their discovery pioneered the subsequent search for the now mythical African middle class. Even then, their total number was under scrutiny for its aspirational inclusivity versus actual households fitting the conventional definition of a middle class. From The Economist writing in 2007:

The University of Cape Town’s Unilever Institute of Strategic Marketing says there are now 2.6m “black diamonds”, as it calls the black middle class, a 30% increase in less than two years. Included in the definition are working professionals; those who own things such as cars, homes or microwave ovens; university students; and those who merely have the potential to enter these categories. The survey estimates that these black diamonds represent 12% of South Africa’s black adults, and make 180 billion rand a year ($26.2 billion), or 28% of the country’s (and more than half of all black South African) buying power.

For some, such as Lawrence Schlemmer, a sociologist in Cape Town, this definition is far too broad to be meaningful. He agrees that numbers are rising fast but argues that they are still tiny. Last year, he says, only 322,000 black South Africans (less than 1% of the black population of 38m) could be deemed “core” middle class, a far cry from 2.6m black diamonds.

Still, whatever their size, the buppies are affecting the economy and the political landscape.

This week, a comprehensive new survey by the South African government shows the on the ground reality in 2016. The National Income Dynamics Study (NIDS)‚ launched by the Department of Planning‚ Monitoring and Evaluation (DPME) in Pretoria surveyed 28‚000 people who were tracked every two years from 2008 to 2015. Very similar in fact to the recent household panel survey completed in India. Even their conclusions resemble each other:

According to the study‚ those in the middle class have a tendency to drop in and out of poverty.

And the size has not actually changed much since 1993 – the year before the fall of apartheid and the election of Nelson Mandela.

The study also shows that the South African middle class is much smaller than estimated‚ sitting at around 14.5% of the total population in 2014. Women are more affected by poverty, and even those who manage to climb the ladder may slip down again.

“…It has not grown much since 1993 — growing its share by only two percentage points in the past 23 years…”

20151024_mac237And, perhaps, the real challenge we face with the ongoing search for Africa’s middle classes is the conflation that took place back then between a consumer marketing segmentation and a socio-political demographic.  By allowing the aspirational reach of the consumer marketing driven research to inflate the size of the segment classified as middle class, it has given rise to an ongoing and complex muddle across teh entire continent. As the AfDB’s former president Donald Kaberuka said last year:

“I think we are wasting too much time on the definition of the middle class and the cut off point, it is a sterile debate.

“A dynamic middle class that rises with the sea increases domestic demand, the diversity of the economy, [its] resilience, and they also stabilise the politics of a country as well, since they have a stake in the system.”

He has a point. But perhaps not the one he intended to make. Instead, if we consider disentangling consumption and demand for consumer products from the increase in political voice and “stake in the system”, we may in fact discover that there is indeed a sizeable bourgeoisie emerging even though they may not possess all the qualifying criteria traditionally attributed to a middle class per se. (Previous posts on this topic have been tagged informal bourgeoisie)

There’s the demographic segment which is the middle, and then, there’s the conceptual body of solid citizens invested in the democratic stability and economic growth and development of their countries. As Jacques Enaudeau wrote in 2013:

But fixated on wealth, the discussion on middle classes in Africa misses out on the other two pillars of social stratification: social status and political power.

As soon as those two are factored in, discussing the “African middle class” as a homogenous entity seems absurd, and so it should. Thinking that what separates the senior civil servant from the street hawker or the country head of a multinational from the shop owner is a matter of daily expenditure amounts to looking at their reality through the wrong end of the telescope: the bigger picture is that they live in different worlds.

In the developing world, the formal sector with its white collar jobs populated by university graduates may jostle cheek by jowl with the informal economy’s life lived on the street but that proximity might be on the only thing they have in common.

For here lies the rub: the material culture that the notion of “middle class” posits as shared consciousness is articulated to a strong sense of individualism, which is borderline contradictory with the idea of class. All the more reasons for the analysis to consider the representations which members have of themselves as a group and the historical context in which such groups are being shaped.

This, however, is not the post to unpack those complexities of self image and collective consciousness. It’s one which pauses to ponder the newest set of findings on the dynamic nature of poverty and wealth in the more uncertain and volatile operating environments of the still developing world. And considers the South African example introduced today:

There has, however, been considerable demographic transformation within that band of the middle class, with Africans now outnumbering whites by about two to one, the report said.  Factors driving the surge include greater access to credit, improved education levels, BEE and improved economic growth until recently.

Transformation of societies is underway, just as the Indian researchers concluded in their analysis. This might be a much larger global trend underway, whose weak signals we’re just beginning to pick up now. I’ll be following up with these musings on the blog. The people with the real problem on their hands are the consumer companies looking to justify entering the African markets, and perhaps that’s a topic to take up in the next article.

In which countries is it hardest for young people to find work in 2016?

jobsI’m currently working on a study within a team of 5 people (including myself): 2 senior and 2 junior level men. The seniors have retired from public service. The two young men have graduated 5 years ago from local public and private universities, top of their class but could not find stable jobs. Thus, they work on a project basis whenever they get a chance, which can be few and far in between.

The two men are less than 35 years old. They are representative of the majority of young people in Benin: educated, neither in school nor working at stable jobs yet striving to make ends meet. Public sector only hires approximately 1 000 people when you have more than 10 000 people graduates that enter the job market every year.

Looking at the ECOWAS region on the ILO’s chart displayed above, I cannot help but be dismayed at the findings: in the majority of countries, less than 7% of young women and men are not able to find work. In two countries, it is from 7-13% and in only one country it is from 13-20%. These statistics imply that African youth in ECOWAS is mostly employed. That is wrong. Most young people are underemployed or unemployed. Those who manage to find an occupation work on a temporary basis or at lower qualification positions or start a small scale trade. The rest hope for the best.

Despite countries’ higher growth rates (GDP stable around 5% for the most part) and greater education attainment by youth, jobs remain scarce.  When they are available, age-ism in our societies make it such that priority is given to older people (who undoubtedly have more experience).

The ILO’s findings cover up a problem (high rates of unemployment) that is a vector for migration/brain drain or the rise in terrorism. It also masks the role that the informal sector plays in job creation. ECOWAS countries’ economies are driven by more than 50% by the informal economy. In Benin, where the informal sector represents more than 90% of the economy, graduates are found becoming drivers of taxi-motos to make ends meet. That occupation is said to generate on average daily profits of $4. They were not able to find work within their sector so they became taxi-motos.

All this to say that the ILO’s statistics narrate a single story that perpetuates the idea that youth employment is not a critical matter whereas it is among the top 3 priorities for ECOWAS countries due to its consequences for sustainable growth, stability and social justice.

Research Question: Why is the informal retail sector so persistent and resilient?

retail2Retailing in India is currently estimated to be a USD 200 billion industry, of which organised retailing makes up 3% or USD 6.4 billion. By 2010, organized retail is projected to reach USD 23 billion and in terms of market share it is expected to rise by 20 to 25%. (Sinha et all, 2007)

These claims of projected growth were made based on a 2005 KPMG report on the Indian Consumer market, while the chart itself with it’s aspirational forecast is from the IBEF website. I have been watching and waiting for more than ten years for India’s retail revolution to take place.

The consistent message from the beginning of the retail boom has been that since the organized retail sector (what we would call the formal) has only been ~2% of the total retail trade in India (the balance is informal retail) there was ample opportunity for growth in modern retail.

Yet if you look at the data from 2015, you’ll see that the forecasts were far too ambitious (or, perhaps, aspirational, in the push for modernization driving India’s recently opened markets) – 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. And with very few exceptions, the majority of the SSA markets tend towards the same kind of proportions of organized vs unorganized retail  (formal vs informal, modern vs traditional et al are all variations on this theme with minor differences in definition).

And, even as the retail real estate development investments are booming, we are already seeing the very first signs of the same challenge that India faced – over capacity, low footfalls, and empty malls. Just yesterday, the news from Ghana – a firm favourite of the investment forecasters –  has this to say:

Ghana’s economic woes have translated into a variety of challenges for formal retailers who are competing for sales alongsidethe dominant and deep-rooted informal shopping sector. According to a recent report by African commercial property services group Broll – titled Ghana, Retail Barometer Q2, 2016 – overall sales in most modern shopping malls are well below historic averages, despite garnering sufficient foot traffic.
[…]
“International players are also looking at the market and re-adjusting their product/pricing mix to cater for the real middle class, whereby we are talking more in terms of value products rather than high-end products.”

And, retail developers are turning their attention to secondary cities such as Kumasi and Takoradi, as Accra reaches saturation point. The exact same pattern as we have been seeing in India. You would think people might pause a moment to take a look at similar markets and operating environments to assess patterns of market creation development.

This pattern is what gave rise to the research question I would like to frame – why has the informal retail sector been so persistent and resilient? What does this mean for modern trade? And, what are the implications for urban development and planning?

The trajectories of the Indian and the Ghanaian economies have taken different turns, thus, while one might point to these factors as the reasons for the challenges facing the mall owners and the retail brands, the big picture over the past twenty years points to something more fundamental in these operating environments common to the developing world.

That is what I would like to find out.

Le commerce direct des produits fabriqués en Chine est-il susceptible de perturber le marché des consommateurs africains?

This article has been translated into the French by Yacine Bio-Tchané

La première plateforme d’e-commerce spécialisée dans la vente directe des produits fabriqués en Chine vient d’être lancée au Togo, un pays de l’Afrique de l’Ouest. Coincé tout comme la République du Bénin entre deux grands pays davantage connus, le Nigeria et le Ghana,le Togo est un petit pays francophone d’environ 7 millions d’habitants.

frenchComme l’énonce l’article :
« Nous voulons être les pionniers du commerce électronique au Togo et tirer parti de la forte coopération multiforme entre la Chine et le Togo, le premier pays carrefour commercial en Afrique de l’Ouest “, a déclaré Yuan Li, fondateur de JMSA-MALL, à Xinhua vendredi dernier à Lomé.
«Nous faisons la promotion d’échanges commerciaux directs, entre les clients africains et les commerçants chinois, de produits authentiques chinois à des prix intéressants “, a-t-il expliqué.

Des appareils électroniques jusqu’aux machines agricoles, la plate-forme offre une large gamme de produits chinois, qui sont vendus au Togo, ainsi que dans plusieurs autres pays de la sous-région tels que le Bénin, le Niger, le Ghana et le Burkina Faso.

Toutes les principales cartes de crédit sont acceptées comme mode de paiement ainsi que le système de paiement local via mobile money – Flooz (Moov). Il y a une politique de garantie avantageuse, et les articles sont entreposés à leur arrivée dans un bâtiment local pour les livraisons, au cas où l’article commandé n’est pas déjà disponible en stock dans leur entrepôt local. En outre, JMSA-MALL offre aux PME locales l’occasion de vendre leurs marchandises à travers leur plateforme. En apparence, cela semble bien – en supprimant les intermédiaires, ils peuvent offrir des meilleurs prix.

Yacine Bio-Tchané, notre collègue béninoise a aussi ses marques à Lomé. Ensemble, nous avons discuté de l’impact potentiel de ce lancement dans le contexte local, ainsi que des implications plus larges. Voici quelques réflexions:

Est-ce que cette plate-forme de vente « directe au consommateur» a un impact sur les commerçants locaux qui se rendent en Chine pour se procurer leurs produits?

Yacine a fait observer qu’à partir du moment où la plate-forme vend tout, des appareils électroniques aux machines agricoles, si certains éléments coûteux et lourds ne sont pas facilement disponibles au Togo, mais pour lesquels il existe une demande,ils peuvent être achetés en ligne et les utilisateurs pourront profiter de cette occasion. Aller à la Chine, identifier le bon produit au bon prix et l’expédier au Togo est long et coûteux (1). La plate-forme e-commerce réduit considérablement les coûts de transaction, ce qui la rend très attractive pour les acheteurs locaux.

Les produits chinois sont connus pour être moins cher (en prix et parfois en qualité) que les autres produits de sorte qu’ils sont très compétitifs et accessibles à de nombreux Togolais, surtout compte tenu du faible pouvoir d’achat. Si, au lieu d’aller au marché et de se promener à la recherche de ces produits, tout le monde pouvait acheter en ligne, les gens préfèreraient le faire. Cependant, alors que le Togo a 67% de pénétration des téléphones mobiles, moins de 10% de la population a accès à l’internet. Cela implique que la solution de commerce électronique est accessible à peu de personnes, mais cela pourrait déclencher une utilisation accrue de l’Internet par les commerçants.

Bien que l’article ne dise pas quels sont les principaux acheteurs (nationalité), il dit qu’ils couvrent plusieurs pays. Il ne serait pas surprenant de voir que la demande soit plus orientéevers le Ghana par exemple.

Le commerce direct de la Chine crée des marchandises

D’autre part, étant donné les coûts, le temps et les tracas pour aller en Chine à la source et expédier des produits à vendre au pays, cette plate-forme pourrait être attrayante pour les commerçants locaux eux-mêmes, à la fois au Togo, et au niveau régional. Comme le fait remarquer Yacine, la demande pourrait ne pas émaner du Togo même mais plutôt des pays voisins. Selon le fondateur de la plate-forme, le Togo est une plaque tournante du commerce en Afrique de l’Ouest pour la Chine.

La Chine a accru le commerce et les relations diplomatiques avec le Togo au cours de la dernière décennie. Il est même dit que la Chine est devenue le premier partenaire financier du pays. Les entreprises chinoises opèrent dans les industries, l’agriculture, le commerce et la construction. Ils créent de l’emploi et sont en concurrence avec des entreprises locales dans la vente de certains produits tels que les tissus.

Le fait que cette plateforme d’e-commerce soit tournée vers les consommateurs et qu’elle soit soutenue par un entrepôt local rempli de marchandises produits par la Chine est symbolique. Pour Yacine, le message le plus fort que la plateforme envoie est que les Chinois sont entièrement installés au Togo. Ce genre d’investissement à long terme, associé à leurs investissements accrus dans les industries, est déterminant. La Chine n’est plus un simple partenaire qui vient pour des projets périodiques, maintenant c’est un acteur important qui influe sur le comportement des consommateurs. Elle est sa propre image de marque, avec le lancement de ce consommateur face à la boutique en ligne.

Géographiquement, le Togo est bien placé pour toucher facilement l’Afrique de l’Ouest anglophone et francophone. L’e-commerce est déjà en train de décoller de façon exponentielle sur le marché géant du Nigeria, mais il en est encore à gagner du terrain dans les autres pays voisins. La Côte-d’Ivoire a quelques acquis, mais elle est encore à ces premiers jours. Traditionnellement, les Chinois ont attendu que les marchés soient à maturité avant de les inonder avec leurs prix plus bas – le marché du téléphone mobile illustre cela.
Ce lancement de la plateforme semble précoce pour les perspectives de l’e-commerce (de même que les paiements mobiles), mais pas du point de vue des tendances du marché et du commerce mondial.

Les industries manufacturières de la Chine ressentent les effets rétrécissement du marché mondial, et les problèmes de surcapacité. Le marché intérieur a toujours l’axe majeur de leur développement, ceci semble êtreleur première tentative sur un autre marché. Le commerce informel entre l’Afrique et la Chine n’a pas entièrement été sous le radar –les compagnies aériennes africaines et chinoises ont été les premières à répondre à la demande. En outre, il y a d’autres changements en cours de réalisation qui impacteront directementl’Afrique de l’Ouest, comme cerécentarticle de CNN le montre:

Au cours des 18 derniers mois, bien que des chiffres concrets soient difficiles à trouver, des centaines – peut-être même des milliers – d’Africains sont soupçonnés par les habitants et les chercheurs d’avoir quitté Guangzhou.

La dépréciation du dollar dans les pays d’Afrique occidentale dépendante du pétrole, associée à la politique d’immigration hostile de la Chine, le racisme généralisé, ainsi que le ralentissement et l’échéance économie, indique que Guangzhou perd son avantage concurrentiel. […] Alors que la Chine devient moins rentable, de nombreux Africains ressentent avec plus d’acuité les aspects négatifs de la vie la bas.

Si la montagne ne peut pas soutenir Mahomet, pourrait-elle au moins réduire les coûts en construisant des entrepôts appuyés par des marchés en ligne? Les centres d’entreposage de marchandises chinoises ne sont pas inédits sur le continent africain, l’Afrique australe dispose déjà d’un certain nombre, tandis qu’il a été dévoilé que la Chine finance la plate-forme logistique de la Tanzanie. Comme l’a déclaré le fondateur de JMALL, cette “plaque tournante du commerce qu’est le Togo semble être un nouveau pays partenaire. Est-ce que la plateforme d’e-commerce est un projet pilote pour tester efficacementle coût régional du marketing B2C?

Les géants du e-commerce Chinois comme Alibaba ont montré la voie avec les efforts de leur agent pour ouvrir les marchés ruraux difficiles de l’arrière-continent. C’est seulement une question de temps avant qu’un autre type d’intermédiaires n’apparaisse au Togo (et ailleurs) et offre des services similaires pour faciliter le commerce. Cette fois, cependant, ce sera depuis le confort de leur pays d’origine, car ils assistent les commerçants et les consommateurs avec les achats en ligne. Pris ensemble avec des investissements continus dans les systèmes de paiement via mobile money, les initiatives d’inclusion financière et l’utilisation du modèle d’agence – la Chine semble avoir saisi un excellent espace d’opportunité à explorer.

 

(1) Voici un documentaire qui suit un commerçant congolais pendant son shopping à Guangzhou, en Chine, cherche à remplir son conteneur avec des marchandises exportables. Il donne une assez bonne idée de l’expérience client.

Will Cross Border Mobile Money Boost intra African Trade and Regional Integration?

cross border MMTOver the past 18 months, since I started tracking the spread of cross border mobile money payments across the African continent, there has been visible progress in leaps and bounds, as documented by the GSMA. In fact, back then, I’d written:

Top down reportage on banking and interoperability seems to focus only on the customer’s individual needs, and overlooks their agency as entrepreneurs, traders and business people.

The map above has been taken from the GSMA’s Mobile Economy 2015 report, and the 2016 report reproduces it as well. Now, the role of mobile money transfers in facilitating cross border and intra African trade is finally being recognized for its potential and cost savings. Author Ashly Hope lays out clearly the high cost of remitting money in the SADC region:

cost of remittance sadcSouth Africa and Tanzania are the largest sources of remittance, yet their transaction costs are significantly higher than the Sub Saharan average of 9.7% (which in turn is the most expensive region in the world where the average cost is now ~7.4%). And this is only one regional grouping.

It is when we look at the penetration of mobile money, that we see something that hints at the digital economy emerging in East Africa (birthplace of Mpesa in case you weren’t aware).

Given teh pace of change, we can safely assume that the figures given above have only increased since 2014. Tanzania’s mobile money market has been frequently cited for its growth and opportunity – it is also outstanding for the level of interoperability within the telco ecosystem.

In the previous article, we noted that Tanzania had just flagged off a Chinese funded regional logistics and trade hub which would include a local footprint for the distribution and sales of China made goods in the form of a warehouse.

“The trade hub will also help Tanzanians especially women to buy products here instead of travelling all the way to China, hence cutting costs down,” said Ms Janet Mbene, Deputy Minister of Industries & Trade.

Savings on travel and shipping is bound to translate into increased inventory purchases, and thus value and/or volume of goods traded. Taking the context of the entire East African Community’s “informal” cross border trade, and the visualization of the interconnections now provided by various mobile money transfer systems in the map above, one can safely start to forecast the potential gains to both traders, and the telcos, as the landscape of the local operating environment begins to change in response to infrastructure investments.

Whether this potential opportunity is exploited by the region’s traders, or overlooked and missed due to the existing digital divide, is the question that remains to be answered. The EAC’s mobile economy (~96% prepaid) needs to start thinking of itself as more than just telco led and impact hub driven, and get down to the ground at the fringes for the future.

Will Direct Access to China-made Goods Disrupt Trade in West Africa’s Consumer Market?

jmsamallThe first e-commerce platform for direct trade of China made products has just been launched in the West African country of Togo. Squeezed together with the Benin Republic between the larger, and better known countries of Nigeria and Ghana, Togo is a small francophone country of around 7 million people. Per the article:

“We want to be the pioneer of e-commerce in Togo and to capitalize on the strong multifaceted cooperation between China and Togo, a premier trade hub country in West Africa”, Yuan Li, founder of JMSA-MALL, told Xinhua Friday in Lomé.

“We are promoting a direct trade of genuine Chinese products with fair price between the African customers and the sellers in China,” he explained.

From electronic devices to farm machines, the platform offers a wide range of Chinese products, which are sold in Togo as well as other countries like Benin, Niger, Ghana and Burkina Faso in the region.

All major credit cards are accepted for payment as well as the local mobile money payment system – Flooz. There’s a generous return policy, and shipments arrive at a local brick and mortar shopfront for pickup and returns. That is, if the item ordered isn’t already available in stock at their local warehouse. Furthermore, JMSA-MALL offers local SMEs an opportunity to sell their wares through their platform. On the surface, this looks good – by cutting out the middleman, they can offer lower prices.

Yacine Bio-Tchane, our Beninois colleague also has a footprint in Lome, Togo. She and I discussed the potential impact of this launch in the local context, as well the broader implications in general. Here are some thoughts:

Will this ‘Direct to Consumer’ (DTC) platform have impact on local traders who travel to China for goods?

Yacine made the observation that since the platform sells everything from electronic devices to farm machines, if some pricey and heavy items are not readily available in Togo but for which there is a demand can be bought online, users will take advantage of that opportunity. Going to China, identifying the right product at a good price and shipping it back to Togo is timely and costly (1). The e-commerce platform significantly reduces transaction costs, which makes it very interesting for local buyers.

Chinese products are known to be cheaper (in price and sometimes quality) than other products so they are highly competitive and accessible to many Togolese, especially given the low purchasing power. If, instead of going to the market and walking around in search of those products, anyone can buy it online, people will prefer doing so. However, while Togo has 67% penetration of mobile phones, less than 10% of the population has access to internet. This implies that few consumers have access to the ecommerce solution but it could trigger an increased use of internet from traders interested in China made goods. Although the article doesn’t say who the top buyers are (nationality), it would not be surprising to see that increase in demand is being pulled by Ghana.

Direct trade of China made goods

On the other hand, given the costs, time, and hassles of going to China to source and ship products back home for sale, this platform might be attractive to local traders themselves, both in Togo, and regionally. As Yacine observes, demand might not be from Togo itself but rather the neighbouring countries. As the founder of the platform says himself, Togo is a critical trade hub in West Africa for China.

China has increased trade and diplomatic relations with Togo in the past decade. It is even said that China has become the first financial partner to the country. Chinese companies operate in industries, agriculture, commerce and construction. They create employment and compete with local companies in selling certain products such as fabrics.

The fact that this e-commerce platform is a B2C marketplace backed by a local warehouse full of China made goods is a signal of this investment. For Yacine, the strongest message the launch of this platform has sent is that the Chinese are fully settled in Togo. That kind of long term investment, coupled with their increased investments in industries is a game changer. China is no more a simple partner coming in for projects but has now become an important actor with influence on consumer behaviour. This is a big pivot in its brand.

west_africa_2_storyGeographically, Togo is well positioned to easily access both anglophone and francophone West Africa. E-commerce has been taking off exponentially in the giant market of Nigeria, but has yet to gain traction in other neighbouring countries. Ivory Coast has seen some gains, but it’s in an early stage. Traditionally, the Chinese have waited for markets to mature before flooding it with their lower priced variations – the mobile phone market is one such example. The launch of this platfrom seems rather early from the e-commerce (and mobile payments) perspective but not from the point of view of global trade and market forces.

China’s manufacturing industries are feeling the pinch of shrinking global trade, and the problems of over capacity. The domestic market has been one major focus for development; this initiative seems like an attempt at creating another. Consumer goods trade between Africa and China has not entirely been under the radar – both African and Chinese airlines were the first to respond to demand. Further, there are other changes afoot that directly impact West Africa, as this recent article from CNN shows:

Over the past 18 months, although concrete numbers are hard to come by, hundreds — perhaps even thousands — of Africans are believed by locals and researchers to have exited Guangzhou.

A dollar drought in oil-dependent West African nations, coupled with China’s hostile immigration policies, widespread racism, and at-once slowing and maturing economy, means Guangzhou is losing its competitive edge. […] As China becomes less profitable, many Africans feel the downsides of living there more acutely.

If the mountain cannot support Mahomet, could it cut costs by building warehouses fronted by online marketplaces? Warehouse centres for China made goods are not new to the African continent, southern Africa has quite a few, while Tanzania’s China funded logistics hub has just been flagged off. The JMALL founder’s opening statement positions Togo as another such ‘trade hub’ in West Africa. Is this e-commerce platform a pilot to test regional B2C marketing cost effectively?

Chinese e-commerce giants like Alibaba have shown the way with their agent led efforts to open up the challenging rural markets of the mainland’s hinterlands. It’s only a matter of time before a different kind of intermediary springs up in Togo (and elsewhere) offering similar agent services to facilitate trade. This time, however, it’ll be from the comfort of their home countries, as they assist traders and consumers with online purchases. Taken together with ongoing investments in mobile money payment systems, financial inclusion initiatives, and the utilization of the agency model – China seems to have grasped an excellent opportunity space to begin exploring.

 

(1) Here’s a documentary following a Congolese trader during her shopping spree in Guangzhou, China, looking to fill her container with tradeable goods. It offers us insight on her customer experience.

This article has been translated into the French by Yacine Bio-Tchané