Cognitive dissonance and smartphones in East Africa

via twitter, a modern day kanga from East Africa

Its jarring to see high level INGO messaging still talking about “ICT4D” not doing it’s part to bring about technology driven transformation in rural or informal sector Africa when every other sign from the continent points to a mainstreaming of ICT that goes beyond the individual’s capacity to tweet.

The kanga is a traditional item of women’s clothing worn all along the Swahili coast of Eastern and Southern Africa. Probably originating from the monsoon driven textiles trade with the west coast of India long ago in the mists of history, the kanga is rather well known for incorporating Swahili proverbs and aphorisms within its design.

While traditional sayings might refer to love or social relationships, warnings and idiomatic sayings, this photograph of the kanga, now making the rounds on social media, which I’ve shared above, provides clear evidence of the ubiquity of smartphone technology and social media communication in local culture.

Surely your screenshot is waiting in your inbox isn’t a traditional proverb nor an age old Kiswahili aphorism.

How the African movable assets bill can unleash innovation opportunities for the rural economy

Somewhere in Kenya, 4th June 2012 (Photo: Niti Bhan)

As Kenya joins Zambia and Zimbabwe in ratifying a Movable Property Security Rights Act, there’s a sense that the floodgates to innovation in access to finance might be taking place in rural Africa, south of the Sahara and north of South Africa.

Kenya’s law also goes beyond the cows and goats and allows a borrower to collateralise future receivables arising from contractual relationships.

How it ends up being implemented will set the stage for the next big disruption in financial inclusion. In the meantime, let’s take a closer look at the opportunity space for innovation in the informal and rural economy that dominates these operating environments.

1. A whole new bank, designed to meet the needs of rural Africa

Last night, a tweet by Charles Onyango-Obbo struck me forcibly, and reminded me of our Banking the Unbanked proposal crafted for ICICI back in January of 2007.

The very fact that contemporary thoughtleaders in the Kenyan banking industry are unable to take the concept of livestock as collateral for loans seriously, taken together with the deeply embedded assumptions of the formal economy’s financial structure leaves the door wide open to disruption.

It would not be too difficult to conceptualize a rural, co-operative bank custom designed for the local operating environment. In Kenya, where the mobile platform provides clear evidence of the viability, feasibility, and desirability of innovative financial tools and services that work for irregular income streams and provide the flexibility, reciprocity, and negotiability inherent in the cooperative local economies, such a bank could change the social and economic development landscape overnight.

In fact, one could conceivably foresee this “bank for rural Africa” scaling far beyond Kenya’s borders.

2. Insurance sector must respond to banking disruption

The domino effect of disruption in the banking sector should kickstart the stagnant insurance industry that has been ineffectually attempting to scale outside of the formal economy’s neatly defined boundaries. Bankers willing to take livestock as collateral for loans will therefore require insurance on their movable asset as a surety against the risk of disease, or drought.

Current products tend to emerge from the international aid industry, seeking to insure smallholder farmers against the shock of losing their livestock to climate related disasters such as prolonged drought, or an epidemic of illness. There is a dearth of relevant and appropriately designed insurance products from the private sector targeting the needs of the rural economy. For all the talk of African urbanization, even the most optimistic projections show that East Africa’s rural population will continue to dominate.

Thus, this an opportunity ripe for the plucking, given the right mix of product, pricing, and promotional messaging.

3. Disrupting assumptions of Poverty and Purchasing Power

Whether it is Kenya’s significant non profit sector or the nascent consumer oriented markets, the redrawn lines defining assets, collateral, and the floodgates of access to finance will require a complete overhaul in the way the population is segmented and measured.

Once these hundreds of movable assets have been valued, insured, and registered officially, even the most reluctant banker must now count the pastoralist among his wealthiest local clientele, able to draw a line of credit against his true wealth to the tune of thousands of dollars without feeling the pinch.

4. Triggering a rural investment and consumption boom

From mabati for a new roof and simti for the backyard wall, to the latest model smartphone or pickup truck, the concurrent boom in investments and consumption provides an ample playing ground for new products and services tailored for the contextual needs upcountry. Finally, Farmer Joe can install that solar powered irrigation pump for his orange groves in time to reap the next big harvest. And Mama Mercy can think of building up a nest egg of investments faster from the income provided by her farmyard animals.

Kagio Produce Market, Kenya, April 2013 (photo: Niti Bhan)

This might turn out to mean upgrading to a breed of high yield milch cows or being able to provide them with better quality feeds and medicines, but the financial bridge that a well designed strategy leveraging this movable assets bill and it’s timely implementation could mean the difference between the brass ring or treading water.

5. Trade and Commerce will open new markets

Given that the Kenyan Movable Property Security Rights Act 2017 goes beyond livestock to include other stores of wealth and value creation, there will be an undeniable impact on regional and cross border trade. No trader will give up the opportunity to leverage their existing inventory if it qualifies for additional credit that can be plowed back into the business.

On the road to Bungoma, Western Kenya, February 2016 (Photo: Niti Bhan)

Trader’s mindset and the documented biashara growth strategies already in evidence point clearly to the productive economic use of this access to finance rather than passive consumption alone. As their business grows, they will require a whole slew of tools and services tailored to their needs. This could be as simple as a basic book keeping app or as complex as customized commodity (assets, livestock, non perishable foodstuffs, grains and cereals) exchange platforms that integrate the disruptive new services percolating through the entire ecosystem.

In conclusion

These few steps outlined above are only the beginning of laying the foundation for disrupting the current social and economic development trajectory of small town and rural Kenya. I see immense potential for both direct to consumer as well as business to business segments for forward looking organizations seeking a foothold in the burgeoning East African markets.

We, at Emerging Futures Lab, would be pleased to offer you customized white papers on the opportunities for new products, services, and even business models, based on this emerging financial environment recently signed into law by President Kenyatta. Contact us for an exploratory conversation on the scope and scale of your particular industry’s needs. Our experienced team can help you maximize these opportunities from concept design and prototyping all the way through to path to market strategies.

Detailed breakdown of Uber’s business model in Kenya puts spotlight on weaknesses

Latiff Cherono has just published an indepth analysis of what exactly it takes for an Uber driver in Nairobi to cover the cost of doing business. Here’s a snippet,

In this post, I try to understand the root cause of the disconnect between how the customer (who defines the value), Uber (the service that controls the experience) and the driver (the one who provides the service).

He accompanies his analysis with a detailed breakdown of costs and revenues, such as the table below, and others in his post.

And concludes:

The incentive for any person who starts a business is to maximize their profits. As such, we should expect that Uber drivers will approach their business in the same vein. However, the data provide by Uber to the driver is limited and prevents them from making informed decisions about generating revenue. For example, drivers do not know the estimate distance of a new trip when they accept it via the app. They are also penalized for not accepting rides (even if that trip may not make financial sense to the driver). All this is by design as Uber wants to maintain a steady supply of “online” vehicles on their network. One may argue that Uber is not being transparent enough with its independent contractors.

My thoughts:

Nairobi, Kenya isn’t the only ‘developing’ country context where Uber is creating unhappy drivers (and customers, one assumes) due to the design of their system. While most of the first world challenges to the company have come from the perspective of the formal economy and its regulations and laws regarding revenue, tax, employment status et al, the same cannot hold for the entirely different operating environment where the informal sector holds sway. And taxi driving is one such service.

Kampala, Uganda has it’s own challenges for Uber, including:

Uber drivers are reportedly leaving the service, switching off the Uber apps or not picking calls from corporate clients and those paying with a credit card. For the first four months after its launch, Uber was offering drivers incentives that saw them earn between Ush200,000 ($57.1) and Ush350,000 ($100) a week.
With increasing competition, drivers say that Uber’s incentive structure has been changing. In the first four months, Uber drivers were getting Ush15,000 (about $4) per hour, but this has since been scaled down to Ush10,000 ($2.9) and to Ush4,000 ($1.1) in incentives.

There is so much to be unpacked here, including the entire section on Uber’s own perception of how the market works, upto and including how to introduce time limited incentives, that I’ll follow up on it subsequently.

In this post, I wanted to highlight Latiff’s analysis and hard work pulling together the operating costs data, even as I leave you with this snippet from the article:

Uber’s commission in Nariobi was reduced from 25 to 20 per cent following protests by drivers in August, accusing the taxi hailing service of working them like slaves.

As I wrote earlier in the year, Uber could have done so much more in these markets, particularly on the path to formalization. Instead, they’re continuing on their journey as yet another smartphone app making life even easier while squandering the potential for real world change for the less privileged members of our societies.

Borderland Biashara: Mapping the Cross Border, National and Regional Trade in the East African Informal Economy

Rinku Gajera & Michael Kimani, Malaba Border, Kenya, January 2016. Photo: Niti Bhan

And, we’re back! With apologies for the long delay in posting on the blog, we’d been busy wrapping up our groundbreaking design research for development programming project for Trade Mark East Africa this past month or so. As you can imagine, the last few weeks of any project suck all the bandwidth out and leave little for blogging or writing.

Let me be the first to say that this project could not have been executed or completed without a rockstar research team – Rinku Gajera, Research Lead, and Michael Kimani, Research Associate, together put in gruelling hours in the sun, and on Skype, to help increase our understanding of the informal economy in East Africa, particularly the informal trade sector – cross border, national, and regional. Emerging Futures Lab has been immersed in design and development of pioneering methodology for mapping the informal trade ecosystem – henceforward known as biashara, at the borderlands of the East African Community, since November 2015.

For this opportunity, I must thank the CEO of Trade Mark East Africa, Frank Matsaert, who saw our passion and our belief in the worth and value of the informal sector, and recognized the need to understand the traders, their business practices, and their aspirations, as the first step necessary for the design of interventions that are not only people-centered, but cost effective and impactful. We were granted creative license to colour outside the box of the terms of reference with our designer’s empathy and exploratory mindset, and frame this project as an exercise in developing the understanding necessary for the design of human centered methods, tools and frameworks for development programming. You can be sure that there will be more on this topic published soon on this blog, so grab the RSS feed now, or sign up for inboxed posts.

Download the Borderland Biashara Ecosystem Mapping project at the Kenya/Uganda border at Busia and Malaba.

Nov 2015 – Inception report Informal Economy, Kenya/East Africa/Uganda
Jan 2016 – Literature Review on Informal Cross Border Trade in the East African Community (EAC), the DRC and South Sudan
May 2016 – Final Report, General Public – Borderland Biashara, by Emerging Futures Lab

Trade in East Africa – A very short introduction to a very long history

Who were the pioneers who opened up the trade routes that criss cross the seas and deep into the interior from the ancient ports of Zanzibar and Mombasa? We don’t know who these intrepid sailors must have been, making their profit from rich Roman’s wives seeking Indian silks and spices, but the African continent’s eastern shores were known to traders at the very beginning of the Common Era (CE).

Azania is the name that has been applied to various parts of southeastern tropical Africa. In the Roman period and perhaps earlier, the toponym referred to a portion of the Southeast African coast extending from Kenya, to perhaps as far south as Tanzania. Azania was known to the Chinese as Zésàn (澤散) by the 3rd century. Even China’s most famous explorer, Zheng He only reached Malindi a few decades before Da Gama’s voyage in 1497.

East African coastal cities participated in a larger Afro-Asian trade network a thousand years before Vasco Da Gama peeked around the Cape of Good Hope to find the way to sail to India. Gujarati traders were already criss-crossing the ocean for biashara with the Swahili Coast of Eastern Africa. As far back as the 3rd c. CE, the banana, domesticated in India, came to Madagascar (and thence to the African continent) as part of the broad Afro-Asian/Indian Ocean trading community.(1) By the 13th Century, Africa was well integrated in the global trading pattern.

Trade flourished in the Indian Ocean as East Africa, India, Southeast Asia, China, the Spice Islands participated in a thriving commercial network that encompassed both overland and maritime routes. Asian and Arab sailors mastered the monsoon wind patterns of the Indian Ocean to capitalize on commercial opportunities.

History has finally found a name for one them, present at the dawn of the age of colonization – Kanji Malam – the merchant sailor from the ancient port of Mandvi on the coast of the Indian state of Gujarat who showed Da Gama how to cross the ocean to India from Malindi on the Kenyan coast. These hazy but deep links of trading history are captured here by the Friends of Mombasa.

East Africa was part and parcel of the trade and served as “cross cultural agents” in the global commercial networks of that era. The Swahili Coast is the best known of these multicultural trading societies.

The Coast of East Africa has had a long history of trade, involving constant exchanges of ideas, style and commodities for well over two thousand years. Marriage between women of Africa and men of the East created and cemented a rich Swahili culture, fusing urban and agricultural communities, rich in architecture, textiles, and food, as well as purchasing power.(2)

Further inland, the Kamba, of what is now Kenya, and the Nyamwezi of erstwhile Tangayika, formed the trader’s networks that linked the ports of the Swahili Coast to the wealth of the heart of Africa.(Roberts, 1970; Cummings, 1975) Copper from Katanga vied with ivory and gold to pay for the textiles and metals. Caravan routes laid down in centuries past are reflected in the roads and rails of today.

The pioneers of all the major routes were African traders. Nyamwezi caravans from central Tanzania, reaching the coast about 1800, developed the most important route from their homeland to Bagamoyo on the mainland directly opposite Zanzibar. Kamba ivory traders from central Kenya opened a route that ended at Mombasa. Eventually, this route crossed Kamba and Maasai country, branching east towards Uganda and north to Lake Turkana. The oldest route stretched from Yao country to Kilwa. (3)

With the Global North’s industrialization of the slave trade and colonization came the top down administration of the formal economy, as the need for manual labour spelt the beginning of the end of these ancient caravans of trade.

You may also enjoy The African Diaspora in the Indian Ocean World.

Reflecting on the mobile internet in Kenya

Poster in shop, Kagumo, Kenya 18th October 2011

After the past three weeks of focusing on cyber cafes and internet access in urban and rural Kenya, we’ve been questioning the value of the “mobile internet” statistics provided by operators to the CCK. Muchiri pointed out that since most of our feedback seemed to revolve more around SIM operated routers installed by cybers, or mobile broadband modems sold either to regular home and business users or even, in the smaller towns, used to link networked computers in small cybers to the internet, what did the information actually communicate?

A thousand shillings cheaper than in Nairobi, seen in Kagumo, Kenya

At the shop we were in, Jacqueline (who is saving for her own laptop for Christmas) explained to us that it was cheaper to buy a data bundle or use the modem, than to browse on the phone using the Ksh 2/min offer directly. Extremely knowledgeable about the most cost effective ways to browse using whichever device you may have, she uses her phone for social networking constantly and prefers it to the cyber which she only visits occasionally. However it was she who pointed out to us that she didn’t think that it was internet enabled phones alone that were affecting the cyber’s business but also the fact that affordable devices (desktops, laptops and modems) were increasingly popular and easily available.

If so, then the 98% of Kenya’s internet users who are on mobile internet may not be doing it through mobile phones alone as is so often assumed but via a variety of SIM based devices. A detailed breakdown of devices under the heading of ‘mobile internet using SIM’ as reported to the authorities might begin to offer a clearer perspective on user behaviour and modes of access.

Insights from the South African low income market (BoP) opportunity

Durban, South Africa - Jan 2008

I came across this article from South Africa titled “Why companies should care about the low-income market” which has some excellent insights about this demographic and opportunity space. Also called the ‘BoP or Bottom of the Pyramid’, it is the mass majority segment in the emerging middle class in Sub Sahara today (per recent reports.) I’ve interspersed my observations in between snippets from the article which are in italics:

He notes that large firms are also becoming more secretive about their bottom of the pyramid (BoP) strategies, perhaps a sign that they are beginning to take this market seriously. “We see a very clear trend that companies are no longer asking what the bottom of the pyramid is.”

This is an interesting piece of news – BoP markets are now internationally recognized as a long term growth market opportunity, the secrecy implying that the strategy is less about CSR (and attendant goodwill via PR ) and more about competition.

“If you look at the upper-income segment in South Africa, those markets are mature, they are growing at perhaps 1% to 2% per year, whereas your low-income segments are growing at anything between 9% and 15% per year. You ignore such trends at your peril,” Coetzer explains.

Here’s why companies are taking it seriously – those are some significant growth figures, offering the kind of returns on investment that saturated, mature markets cannot.

Another point here is that BoP customers are very rarely formally employed with a regular paycheck. The BoP market is also mostly cash based and almost 70% of the lower income markets are rural. All of these mean that they have not felt the impact of the global recession (there are exceptions such as migrant worker remittances from the rich world for example).

The article gives an example of tapping into REculture – the informal market’s characteristic behaviours of recycle, reuse, repurpose, resell and repair.

Coetzer explains that bottom of the pyramid strategies do not always just comprise of selling products, but also purchasing from the low-income segment. An example of this is Collect-a-Can, a non-profit but self sustaining recycling business, with steel and tinplate producer ArcelorMittal and beverage can manufacturer Nampak as shareholders. Collect-a-Can pays people cash for collecting used beverage cans and provides tens of thousands of unemployed South Africans with the opportunity to earn a living.

Opportunity spaces

“immediate untapped opportunities are present in the ﬁelds of ﬁnancial services (especially mobile money), home upgrading and repairs (plastering, tiling, electrical installations, insulation, energy‐saving light bulbs, solar panels) as well as the distribution and delivery of goods. ”

An earlier survey […] revealed that the majority of informal entrepreneurs in Cape Town townships are looking to grow their businesses, but are unable to do so because the type of credit, insurance, training and financial services available in the formal market are not adapted to their needs.

Catering for the low-income segment often calls for creative business models and product innovation.

While these unmet needs are the most visible, increasing competition will require a more strategic, customer-centric approach beginning with a greater understanding of this customer demographic. Opportunity spaces for new products and services that can add value and enhance lives, not simply plug the gaps of unmet needs. Needs and wants are so many at the BoP that every decision to spend money is a trade off on the risks of a return of maximum value.

“There is huge diversity within the bottom of the pyramid. People have different aspirations, different needs, and one of the biggest mistakes for any company would be to think of it as a single market segment. Not bothering to investigate just how diverse this segment is, is something we see quite often as a classical mistake,” says Coetzer.

Further reading

Emerging Markets as a Source of Disruptive Innovation: 5 Case Studies – February 2010
The 5D’s of BoP Marketing: Touchpoints for a holistic, human-centered strategy – January 2009
The Fortune at the Bottom of the Pyramid Begins with Understanding : Targeting the BoP Customer (PDF) – Nov 2008
Design for the Next Billion Customers – April 2008

Semacraft Announces Africa Innovation Tour June 2011

As Africa gets connected to the world wide web, there is an increasing hunger for relevant content and services in local languages. This has led to the rise of developer communities congregating in openly shared community spaces where new applications, software and technology can be nurtured and incubated.

The mobile phone is the platform of choice and will continue to be so in the future. The total number of African mobile phone users have already surpassed Europe’s and penetration levels are no where near any significant numbers.

In response, Semacraft Team has pulled together an expertly curated programme for one week of intensive immersion in the most cutting edge local mobile technology scene in Africa today – Nairobi, Kenya from June 11th to 16th 2011 (inclusive).

Six full days on the ground including two days of workshops featuring experienced entrepreneurs, investors and venture capitalists talking about:

The risks and rewards of Africa
Insights on the local market and opportunities
Networking opportunities with important technologists, businessmen and entrepreneurs.

In addition, the dates have been selected to coincide with the first ever developer conference and startup competition dubbed Pivot25 where the region’s mobile innovators and investors will gather at the iHub, Nairobi. This is an intense week of complete immersion in the mobile tech ecosystem of Kenya.

RSVP to reserve space by 25th April – only 20 seats available.