Posts Tagged ‘africa’

The comparative global impact of Alibaba vs. Amazon

Alibaba Business School and the United Nations Conference on Trade and Development (UNCTAD) brought 29 young entrepreneurs from 11 countries across Africa to the Alibaba campus in Hangzhou, China for the third eFounders Fellowship cohort.

Chinese corporate soft power influence is production driven, not consumption focused. Alibaba, the e-commerce giant with digital payment tentacles, has been graduating cohorts of young entrepreneurs from Asia and Africa this past year. This initiative is the outcome from Jack Ma’s seminal visit to Nairobi last year, when thousands of young Kenyans waited for him in the sun.

Photo Credit: Abdishakur Mohammed, July 2017, University of Nairobi grounds, Kenya

He talks about entrepreneurship in a digital world, and personally shows up to meet visiting cohorts to talk about taking the lessons learnt from e-commerce in the most challenging environments in China (rural, mobile, social) back home to their own not dissimilar operating environments.

Contrast this with the first thing that comes to mind when you think about Amazon these days – a desperate workforce unable to take a leak, afraid to lose their low waged jobs as worker bees in a humongous warehouse. It keeps prices down and the consumption that runs the billions flowing, but whom does it benefit beyond the shareholders?

It struck me when I saw the news about “Alibaba Global Leadership Academy” that Chinese soft power was increasingly about driving production and growth aka development along their entire value chain, even among putative new consumer markets, whilst the American model was still stuck in a consumption driven mindset of the 1980s first wave of globalization. Buy more cola, wear our jeans, use our credit card, say the American brands in Jakarta or Accra or Nairobi.

The difference in mindset is stark when you think about the tech giants of Silicon Valley looking to uplift with low cost connectivity and internet basics for free, and compare to the Chinese giants thinking about raising the purchasing power first. The english language media would have you believe its all about neo-colonialism for natural resources, but the recent shifts in tactics and strategy seem to imply a less demoralizing mindset than anything evidenced by charitable good works handing out goodies to the downtrodden. Because whatever the agenda, the bottomline will be that at end of the exercise there will be a group left inspired to build their own markets on their mobiles, versus a group left holding a palliative goodie.

“My experience here has shifted my thinking. Before, we were focused on pleasing the investors, but now I see the importance of putting our customers first, then my employees, then the investors,” said Andreas Koumato, 26, from Chad , the founder of Mossosouk, an e-commerce platform. “Let others [benefit], then later, we will gain.”

Production driven social impact is far more powerful than consumption driven. Human centered productivity even more so.

Ibn Battuta in Timbuktu

An ongoing project has me immersed in the history of West African trade, and of course, contemporary accounts of regional cross border trade. Rather than not blog, here’s a link heavy post on Ibn Battuta‘s travels in the region back in the 14th Century. Click on the image for a larger version of the map.

“Histories and biographies there are in quantity, but the historians for all their picturesque details, seldom show the ability to select the essential and to give their figures that touch of the intimate which makes them live again for the reader. It is in this faculty that Ibn Battuta excels.”

Thus begins the book, “Ibn Battuta, Travels in Asia and Africa 1325-1354” published by Routledge and Kegan Paul.

Abu Abdullah Muhammad Ibn Battuta, was a Moroccan Muslim scholar and traveler. He is known for his traveling and going on excursions called the Rihla. His journeys lasted for a period of almost thirty years. This covered nearly the whole of the known Islamic world and beyond, extending from North Africa, West Africa, Southern Europe and Eastern Europe in the West, to the Middle East, India, Central Asia, Southeast Asia and China in the East, a distance readily surpassing that of his predecessors. After his travel he returned to Morocco and gave his account of the experience to Ibn Juzay.

He wrote what was possibly the world’s first account of globalization.

His adventures reveal, as Dunn writes, “the formation of dense networks of communication and exchange.” These networks “linked in one way or another nearly everyone in the hemisphere with nearly everyone else.

“From Ibn Battuta,” Dunn continues, “we discover webs of interconnection that stretched from Spain to China, and from Kazakhstan to Tanzania.” Even in the 14th century, an event in one part of Eurasia or Africa might affect places thousands of miles away.

Battuta crossed over 40 modern countries and covered over 70,000 miles. He became one of the greatest travelers the world has ever seen. He left behind a travelogue of his life’s journeys filled with details on the places, people and politics of medieval Eurasia and North Africa.

Trained judge (qadi), scholar, and observer, he’s been called a true Renaissance man, surpassing his contemporary, that other, more famous traveler Marco Polo.

Primer on African Fintech: Myths, Misconceptions, Opportunities, Hotspots and Roadblocks

As we prepare to start work for our third African fintech client, I thought it was time to quickly and briefly introduce the opportunity space and clear up some misunderstandings around fintech in Africa.

  • The first point is the common confusion between Fintech and financial inclusion. Investopedia’s definition of Fintech says financial inclusion, that is, affordable and accessible financial services to the underserved and unbanked is only one of the many areas fintech is actively addressing. While technology helps provide cheaper solutions for emerging markets such as those on the African continent, all fintech cannot be said to be equivalent to financial inclusion.
  • This leads us to a clarification on what exactly is Fintech. I prefer to quote Investopedia since the entry in Wikipedia defines it as the industry itself. “Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies.
  • Thus, while financial inclusion is a key untapped opportunity space for fintech innovation of all kinds, there are numerous other opportunities along the entire value chain of financial service provision both B2B and B2C, including intermediary services, which are ripe for disruption in the African context.
  • Beyond the conventional preference for disruption of the existing context, there are as many if not more opportunities for meeting the unmet needs of African businesses and consumers. History, geography, economics and conventional wisdom have together combined to create a vacuum of solutions and services that address the unique circumstances of the African operating environment which still tends to be heavily cash dependent and is described commonly as “informal”. And this commercial environment has lagged in custom designed tools and services for small business productivity or household enterprise management.
  • Hotspots: Kenya overwhelming leads in mindshare as the leading fintech innovation market on the continent, and grabs the lion’s share of investments in East Africa. However, the GSMA’s latest report implies West Africa is rapidly catching up, and may outspend East Africa. The WAEMU region is a hidden hotspot, and Ghana leads the anglophone countries.
  • The largest market opportunity, by population, remains a challenge however, for a variety of reasons including policy and regulation. Nigeria’s payments innovators have made a name for themselves but their domestic market has not felt the impact of their efforts. Even mobile money, introduced more than 5 years ago, has only achieved 1% penetration. On the other hand, it took India years and years before digital payments reached visibly transformational critical mass. There’s hope.
  • Lastly, Chinese investment has just entered the African fintech space, talking up financial inclusion – a clear sign of its economic importance for the future development of trade and industry.

How informal financial services can lower the barriers to formal financial inclusion

Around 2 and a half years ago, I was on a short visit to Abidjan, the capital of Cote D’Ivoire as a guest of the African Development Bank. They were holding an innovation weekend for young women and men in the Francophone West African region who were interested in becoming entrepreneurs.

David O. Capo Chichi, who used to work back then for MTN, a major telco very kindly took me around the informal markets on his day off and we got to talking to market women about their financial management habits. One interesting behaviour linking the informal with the formal came to light.

An established spice seller told us she had a savings account at the bank, but accessing the bank’s services were a huge barrier – the opening times ate into her business hours and the long wait times meant loss of income from potential customers. At the same time, because she was dependent on cash income from daily sales, it was more convenient for her to put a portion of money aside on a daily basis. So what she was doing was paying a tontine collector for the service of showing up at her shop everyday and collecting her small amount of cash set aside for savings. He would hold it safely for her for a month and then she would take the total saved up amount back from him, take the day off work and go deposit it in her bank account. That was the only way she could have the flexibility and negotiability that budgeting on her irregular cash flow required and still access the benefits of a secure safe interest earning savings account at the bank.

Now today I came across this article describing a pilot program in Benin where the private susu (small small) or tontinier, such as that used by the lady in Cote D’Ivoire, have been formalized into a more secure and insured service for the same demographic of informal market women and traders. There’s even a digital component that updates the accounts via the mobile phone.

“The reality is that we can’t be everywhere, and the Susu collectors are near the population. We have to work with them and find the best business model to get them into the formal system.”

Now, this exact same model being piloted by the MFI in Benin may not apply in exactly the same way elsewhere, depending on the conditions prevalent in the operating environment, but its clear that the structures and systems in place at the formal institution can be made more flexible and negotiable – given a “human face” – by working together with the pre-existing informal financial services already in operation.

This behaviour also resembles that seen among the informal cross border traders at the Uganda/Kenya borderland. Teresia who sells clothes under a tree has established a trusted relationship with her mobile money agent. He shows up at closing time to help her transfer her cash into mPesa, thus securing it for her and saving her both time and effort through this personalized service. Though she said she had an account at the bank, it lies dormant, for the same reasons given by the spice seller in Abidjan – “Who can afford to close shop during the day to spend hours at the bank?”

Innovations aimed at increasing inclusion for financial services need not always contain a digital component for them to make a difference for the customer, and lower the barriers to adoption and usage. All it takes is a deeper understanding of the challenges and constraints of the end user in the context of their day to day life.

Connectivity, Communication, and Commerce: The 3 Cs of Africa’s Smartphone Led Future

Recent headlines touted the decline in marketshare being seen by smartphones on the African continent, and the concurrent increase in sales of basic devices. Yet a closer look shows that this shift might only be numerical due to the opening of new markets in heavily populated DR Congo and Ethiopia – first time buyers are likely to start with entry level phones.

In fact, role of smartphones in Africa is not only likely to grow and evolve over the coming 3 to 5 years but its very likely that it will be connectivity apps driving their adoption. We Are Social’s latest report shows Africa’s internet user numbers have been growing by over 20% year-on-year.

The 4th C – the Challenge of Unquestioned Assumptions and Great Expectations

With connectivity and communication, commerce was expected to take off but anyone tracking the headlines would notice the challenges faced by African e-commerce platforms. Some point fingers to connectivity as the issue, expecting to reap benefits from scale of penetration. Others point to high costs of data and devices, or challenges with completing the transaction online.

Looking at the patterns exposed by all the reports and the articles makes one wonder whether it’s the underlying assumptions and expectations that are the real problem. The untapped market is hyped out of proportion by each new entrant who rush in with their disruption to revolutionize the African consumer, only to rush back out again when the traction fails to succeed. This has been muddying the waters of what could have been a considered thoughtful opportunity to transform the social and economic landscape.

Yet its not all negative. If someone was to ask me about how connectivity and communication are driving commerce in the African context, I’d point to the plethora of informal trade in goods and services being conducted daily across social media platforms. Everyday there’s a new product or service launched with a tweet. Groups on Facebook encourage and support the entrepreneurial journey. Cryptocurrency trading is making Kenya famous as a first mover.

The difference in traction seems to be that which is self organized and organic vs that which is institutionalized and/or introduced from elsewhere. The external pressure to succeed in the same terms as that visible in the Silicon Valleys might actually be a greater barrier to the sustainable development of the African online community led commerce, increasing pressure on founders and startups with every negative headline. Maybe the lesson from the informal organic growth online is that might actually be a matter of throw the technology at them and see what emerges without lifting the lid every other second to check progress?

Maybe all that is needed is more locally relevant content, such as already being seen emerging from Nigerian and Kenyan tech blogs, rather than the imposition of metrics and heuristics from developed nation contexts.

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

Elements of Handpainted Graphic Design and Signage

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

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

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

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

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

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

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

The Strategic Entry of China’s Transsion into the Vacuum Left by Nokia in Africa

Branded storefront in Karatina, Kenya (April 2013)

If you’re outside Africa, you’ve never heard of them before, but a mobile phone brand called Tecno has been painting Kenya blue ever since I started fulltime fieldwork there in late 2011. It was in Mombasa that I first noticed the name and wondered what it was about. Over the years, I saw the line up of phones even in the smallest market towns and began wondering if this brand would be the new Nokia of Africa.

Transsion, Tecno’s manufacturer, has two other brands on the market – Itel, and Infinix catering to different price points and consumer segments. What sets the company apart is that they are solely focused on the African continent and do not even sell in their domestic market of China. This was a strategic decision, as a recent article says, and their rapid success very likely due to the vacuum left by Nokia. They’ve customized completely for the African market, going as far as to develop cameras suited for local conditions, something no other phone manufacturer has done anywhere on the planet.

“For African consumers, a main medium of entertainment is photos – they love to take selfies and share them with friends. The traditional camera was not optimised for the African consumer because often, for those with darker skin, the photos don’t come out well especially in low light. We did research using over 10,000 photos of African consumers to create a special algorithm to optimise the camera to attract 30% more light on the darker face. We call this ‘Africa Focus’. It’s been heavily popular. It improved our cameras and won the hearts of Africans who like to take selfies.

In fact, Itel is so popular among traders in the Uganda Kenya borderland due to its low price and long battery life, that our research associate went as far as to capture the mound of Itel packaging seen on the rubbish heap.

They’ve brought in local languages and messenger apps. They’ve established a factory in Ethiopia to show their commitment to Africa, and they’ve set a full customer care facility – something glaringly missing from any other imported brand’s portfolio.

In my opinion, they’ve done what Nokia could have and should have done, cater to the emerging markets across the developing world where they’d originally begun connecting people.

And, they’ve shown us that it is indeed possible for a consumer product manufacturer to not only focus solely on the African consumer market but to make an outstanding success of it.

Update:

Quartz echoed the story to share the factoid that in Africa, not only have featurephones sold more than smartphones but Transsion’s brands lead the way.

Household energy consumption behavioural study in East Africa: Cooking (Part 2 of 3)

Scrap wood fueled three stone fire in sheltered corner

The following is extracted from a six month study during 2012 on household energy consumption behaviour in rural Kenya and Rwanda among the lower income demographic, that led to an understanding of some of barriers hampering the sales of client’s solar products in this market. This 2nd part will focus on fuel usage and consumption behaviours for cooking. Users sampled for this study were selected based on varying fuel consumption patterns, ranging from a single homestead to a rural hotel catering for more than 12 hours a day.

Fuel Usage Behaviour is Influenced Greatly by Location

Choice of fuel and decisions on quantity kept in stock for cooking is dependent on the location of the primary residence rather than income. Rural homesteads in Kenya have a separate outhouse for cooking and firewood is the preferred choice of fuel even in those regions where shambas are too small to support their own grove of trees.

Kilonzi’s wife dreams of upgrading to an LPG cookstove some day in the future

That is, while Kilonzi’s wife on a large shamba in Makueni might stack enough firewood for just two or three days, collected for free from her own backyard, Mama Grace the tea farmer with land constraints in Kisii will purchase an entire tree to last her for a month. Meanwhile, the more economically challenged on small shambas devote a week foraging far and wide for enough brushwood to last for two or three months before needing to take time away again from more pressing household duties.

Charcoal is also used on the homestead but only for certain tasks like making chapatis or for quickly brewing tea for visitors or in the morning rush before school or work. Even if the charcoal is made right on the shamba from a tree that needed felling, most of it is kept aside for sale and considered a source of cash money rather than consumed as fuel.

Residents who live away from their shambas, taking up rooms in town due to their work where cooking must be done in the same space as living and other activities, cannot use firewood. In fact, if renting, landlords clearly state that the use of firewood is banned, as a safety precaution. Thus, urban residents are forced to choose fuels that can be used in small, portable cooking stoves and charcoal ends up being the most common due to its relative cost as compared to kerosene. Those who do own a kerosene stove are in the minority and again, its use is only for very specific tasks that require speed such as making tea for visitors or in the morning.

Heavy Duty Charcoal Usage by Hotel

For those whose primary fuel for cooking is charcoal, the quantity purchased is dependant on cash in hand if their income is not from a salaried position and this ranges from a ‘deben’ which lasts for about 5 or 6 days and costs around 100 – 130 Kes to an entire sack which ranges from 500 to 750 Kes and can last as long as a month. Pricing for fuel is closely related to its proximity to the source, since transportation can be expensive and convenience is a service that comes with a premium. Kerosene which sells for 83 Kes a litre at the petrol station in town was found to be selling at a rate of 140Kes/litre at a small duka deep in the interior.

Part One: Introduction to Household Energy Consumption Behaviour Study in East Africa (2012)
Part Three: Lighting & Concluding Remarks

2017 is the Year Mobile Service Operators Became Banks

South African business headlines read MTN takes on Vodacom for title of Africa’s biggest digital bank and usher in a whole new era for banking and finance on the mobile platform. Having watched this space impatiently for more than a decade, seeing this was a landmark worth noting.

The number of mobile-money customers in the region (Africa) is growing rapidly, having surpassed the number of traditional bank accounts in 2015 to reach 277 million by the end of last year, according to GSMA. ~ Moneyweb, 3rd November 2017

Here’s a curated selection of my journey watching the phone become a bank:

Photograph of Nairobi billboard taken January 2016 by Niti Bhan

Blowin’ in the Wind – perspective, May 2007

A User Centered Approach to Banking the Unbanked in Rural India (PDF, entire process) – January 2007

Pondering the Mobile Innovation Divide – perspective, December 2007

African Potential meets Indian Experience – perspective, May 2008

The Telco and the Bottom of the Pyramid – perspective, January 2009

Systems Thinking Applied To Why M-Pesa’s Economic Impact and Wealth Creation Lessons Affects the Entire Ecosystem – Afrinnovator, March 2012

What is The Prepaid Economy anyway? – 14.7.14, in response to Michael Kimani

Banking Opportunities in Africa – The Banker’s Association of South Africa, 2014

A bank meets a telco – how mobile banking is changing the landscape of financial services in Africa – The Prepaid Economy: African Edition, January 2016