Archive for the ‘Migrant worker’ 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.

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.

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.

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.

Fundamental Elements of Informal Sector Commercial Activity

There are two key elements which underpin the dynamics of any business or commercial enterprise in the informal sector. These are Time and Money.

A generalized framework can be diagrammed, as shown above, where the dotted line denotes the degree of uncertainty and volatility of an individual’s cash flow patterns – whether from a variety of informal economic activities – such as for the farmer or trader; or from the salary received for a white collar job. The X axis – Time – denotes the increasing accuracy of estimating the Arrival date of a cash payment (from some revenue source), and the Y axis – Amount – denotes the increasing accuracy of estimating the Amount that will arrive. Their relative ability to estimate Arrival and Amount with any degree of accuracy is indicative of their ability to forecast and plan for expenditure.

Thus, at one end of the continuum, one can position an odd jobs labourer who may or may not get paid work on any given day, and is unable to predict with any degree of certainty what type of job he’ll get selected for, nor for how many days it will last. It could be as basic as loading a truck for half a day’s pay, which in turn might even be in kind, and not cash. And, at the other end of this continuum, one can position a the typical white collar salaried professional or civil servant who knows with certainty exactly on which day they will receive the salary and exactly how much will arrive.

 

Positioning and Location

Now, we can frame these two elements of the commercial operating environment in the form of a position map, as shown above, that maps the ability to plan expenditures against the stability of the cash flow. The red arrow is the continuum of certainty and stability of Timing and Amount of an income stream, anchored by the most vulnerable odd jobs labourer at one end and the relatively most secure salaried professional at the other.

Where it gets interesting is the relatively liminal space in the middle where the various economic actors in the informal economy constantly shift position as they seek to mitigate the volatility of their income streams, through a variety of mechanisms. Much of their decision making is related to their own perception of uncertainty and ability to forecast.

For the purpose of this explanatory diagram, I have selected 4 typical examples drawn from different sectors of the informal economy common in the developing country context. Each are at the more vulnerable end of their own segments i.e. a subsistence farmer, rather than one with an established cash crop; or a small roadside kiosk rather than an established general merchandise store in a market town; since they have not yet achieved the goal of their business development strategies to move their own entrepreneural ventures towards relative stability, and thus provide more insight on the relationship between cash flow patterns and investment and expenditure planning.

The hawker of goods at a traffic light or junction is in a comparatively more fragile situation than the kiosk owner with a fixed location who works to develop relationships with passing customers in order to convert them to regulars at her store. Unlike the kiosk, which might be located near a busy bus stop, or outside a densely populated gated community; the hawker cannot predict which cars will pause at the red light as he darts through traffic shouting his wares. However, compared to the odd jobs labourer, the hawker has comparatively more control over his income generation since his is not a passive function of waiting to be picked from the labour pool in a truckyard or construction site.

The smallholder farmer might actually be better off economically in many ways than his urban brethren involved in informal retail, being able to live off the land more cheaply than in the city. Experienced farmers, for the most part, are able to predict with reasonable accuracy, more or less the quantity of their crop, and the estimated timing of the harvest. However, his sense of uncertainty is often perceptually greater due to the unmitigatable impact of adverse weather conditions, or the sudden infestation of a pest or blight, any of which could at any time completely destroy his harvest, and thus, his expectations. This sense of insecurity in turn influences his decisions on expense commitments to far ahead in time, or too large a lumpsum at some point outside of his regional harvest season. The farmer’s income streams are relatively more out of his control than the disposable income in the pockets of the kiosk’s customer base.

The market woman with her display of fresh produce, at the entry level of inventory investment capacity, might only have one or two different varieties of vegetables or fruit to sell, and may not yet have established a permanent structure – a table, a kiosk – in the market. She might start off with only a tarpaulin on the ground with some tomatoes and onions for sale. Unlike the traffic intersection hawker, however, she is more likely to begin by assuming a regular placement and location as this establishes the foundation for her future business development, through the factors of discoverability and predictability among the customers in that locale.

That is, in addition to Timing and Amount of Income – the cash flow patterns and sources – we begin to see the role played by location – Place1, as a supporting element of the commercial activity in the informal economy. While farmers are least likely to have much control over the location of the land they may inherit, their risk mitigation strategies to minimize volatility of their income streams and maximize their ability to plan for the future and manage emergencies will be discussed in depth in the section2 on rural household financial management. These practices are the foundation of business development strategies commonly observed in the informal economy in developing countries which tend to be less urbanized, and as is often the case, more dependent on agriculture as a component of national GDP.

 

Appendix
1 People, Pesa, Place: A Multidisciplinary Lens on Innovating in Emerging Markets
2 Rural Household Financial Behaviour on Irregular Income Streams at the Base of the Pyramid

Financial Behaviour Patterns Observed Among Households in Rural Informal Economy in Asia

This is the original working paper of the research conducted on rural household financial management, in developing country conditions, pioneering the use of methods from human centered design for discovery, during Nov 2008 to March 2009, aka the Prepaid Economy Project. It was peer reviewed by Brett Hudson Matthews, and I have incorporated his comments into the PDF.

This research study was carried out with the aid of a grant from the iBoP Asia Project (http://www.ibop-asia.net), a partnership between the Ateneo School of Government and Canada’s International Development Research Centre (www.idrc.ca)

The abstract:


The challenge faced by Bottom of the Pyramid (BoP) ventures has been the lack of knowledge about their intended target audience from the point of view of business development whereas decades of consumer research and insights are available for conventional markets. What little is known about the BoP’s consumer behaviour, purchasing patterns and decision making tends to assume that there are no primary differences between mainstream consumers and the BoP except for the amount of their income – pegged most often between $2 to $5 a day.

In practice, the great majority at the BoP manage on incomes earned from a variety of sources rather than a predictable salary from a regular job and have little or no access to conventional financial tools such as credit cards, bank accounts, loans, mortgages. This is one of the biggest differentiators in the challenge of value creation faced by BoP ventures, particularly among rural populations (over 60% of the global BoP population lives in rural areas).

Exploratory research was conducted in the field among rural Indian and rural Filipino populations in order to understand how those on irregular incomes managed their household expenses. Empirical data collected by observations, interviews and extended immersion led us to identify patterns of behaviour among the rural BoP in their management of income and expenditure, ‘cash flow’ and ‘working capital’ and the significance of social capital and community networks as financial tools. Practices documented include ‘conversion to goods’, ‘stored wealth’, ‘cashless transactions’, and reliance on multiple sources of income that mature over different times.

This paper will share our observations from the field; identify some challenges these behaviours create for business and also explore some opportunities for value creation by seeking to articulate the elements that BoP ventures must address if they are to do business profitably with the rural ‘poor’ based on their own existing patterns of financial habits and norms.


The Conclusion:

In sum, it can be concluded that the challenges for value creation can be quite different for BoP ventures interested in addressing the rural markets. From the observations made in the field, we can highlight three key implications for business development. These are:

  • Seasonality – with the exception of the salaried, everyone else in the sample pool was able to identify times of abundance and scarcity over the course of natural year in their earnings. Identification of a particular region or market’s local pattern of seasonality would benefit the design of payment schedules, timing of entry or new product and service launch, for example.
  • Relative lack of liquidity – The majority of the rural households observed tended to ‘store wealth’ in the form of goods, livestock or natural resources, relying on a variety of cashless transactions within the community for a number of needs. Conventional business development strategies need to be reformulated to take this into account as these patterns of behaviour may reflect the household’s purchasing power or income level inaccurately.
  • Increasing the customer’s span of control over the timing, frequency and amount of cash required – Since the availability and amount of cash cannot be predicted on calendar time, this implication is best reflected by the success of the prepaid mobile phone subscriptions in these same markets. When some cash is available, it can be used to purchase airtime minutes for text or voice calls, when there is no money, the phone can still receive incoming calls. Models which impose an external schedule of periodicity, frequency and amount of cash required may not always be successful in matching the volatile cash flow particular to each household’s sources of income.

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.

Cross-border mobile financial services in Africa are going to be huge

africa_webAnalysis Mason has an excellent article on the next big thing in mobile money across the African continent – cross border payments. I covered the emergence of these services, through regional operators as well as partnerships based on interoperability earlier. This is what I asked for:

Mapping it all

I’d love it if someone could capture all of this into one map and infographic – not only the cross border transactional ability but also the cross border interoperability as well as in country interoperability. Like the Zambians, I think the potentials for business, trade, e-commerce and biashara are far more than anyone has even considered. 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.

And this is what Analysis Mason’s article has to add:

Cross-border mobile money transfer services enable the informal sector to participate in the formal financial system and avoid opening a bank account, which typically requires more extensive documentation (for example, proof of residence) than registering with a mobile operator. Mobile money provides a safer, quicker, and often less expensive, alternative for cross-border money transfers.

Demand for cross-border remittances is also driven by regional integration, particularly in East and West Africa where regional agreements promote cross-border trade and monetary integration. Significant movement of African labour across borders, to seek higher wages and new employment opportunities (especially within regional ‘blocs’), also creates a mobile population, driving demand for mobile remittance services.

Given the dates of emergence of partnerships extending the reach of well known services such as Mpesa after the publication of this analysis, I suggest going with the data collated here first. On the other hand, they were the first to map it all so I’m surprised my earlier search didn’t turn up this article which shows an earlier publication date on the web page.

Can too much formalization be bad for poverty alleviation?

Earlier this year, there was an interesting article which pointed out the important role the informal sector plays in developing countries, particularly on the African continent.

Apart from being over-financialised, which reduces the incentives to create “real jobs” the other structural problem facing the South African economy is its over-formalisation. The informal sector accounts for just 15% of South African jobs, compared to 70-80% in East Africa, for example.

The reason, again, hearkens back to the white-dominated economy that apartheid created, where the majority black population was only valuable for their labour, so any entrepreneurial self-sufficiency in the black community was stifled, in order to channel them into the wage economy.
[…]
The over-formalisation presents a situation where a mama mboga (roadside vegetable seller) is expected to a get a food handling inspection license, pay corporate tax, pay the official minimum wage and provide health insurance for her assistant before being allowed to open a (physical) shop.

There is no space in such an economy for East Africa’s bodaboda or  Nigerian okada (motorcycle “taxi”) riders or second-hand goods sellers, and so, no wriggle room to quickly accommodate the mostly black young people coming of age every year.

Over-financialisation means there’s little pressure to create formal sector jobs, and over-formalisation means there’s little ability to create informal sector jobs.

In contrast, the Nigerian Bureau of Statistics has evidence that the bulk of the new jobs being created each quarter are from the so called ‘informal economy’ rather than the traditional formal sectors such as the civil service or large established private companies.

The informal economy’s comparitive weakness has always been its irregularity as compared to the predictable structure of teh formal, but here, as thousands of young people enter the workforce, this allows it to accommodate their income generation demands. Opportunity abounds for the hustler and the street vendor and low barriers to entry mean that anyone can earn a little something.

Perhaps its time for us to shift our perspective when we consider the informal sector, and consider its value and role in society with an unprejudiced eye. While numerous efforts are being made to address the dual challenges of unemployment and the demographic dividend, they will not happen overnight. The informal economy has clearly shown its persistence, resilience and importance for livelihoods wherever there has been significant need for development. Can we meet it halfway and speed up the time it would take to lift millions out of poverty?

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