Posts Tagged ‘manufacturing’

The Informal Industrial Ecosystem: An Introduction to REculture

The Art of Seeing Beauty in Garbage, Kenya, September 2010

This article introduces and explains some things I’ve been seeing in the informal industrial ecosystem in the developing world context for almost a decade now. First noticed in 2009, I then named it REculture, a neologism to capture the vast and complex ecosystem I saw in the revenue generating facility of recycle, replace, repurpose, reuse and resale. Given contemporary interest in developed country concepts such as the circular economy, and other sustainable and ecological initiatives, I thought it timely to sit down and attempt to synthesize the past work before proceeding to write more on current events.

What is REculture?

I thought I’d start from the beginning – is there, for example, a difference between “the entrepreneur” and “the producer”, “the creator” and “the innovator”, if at all? And if none, then perhaps start to fill in some few blanks based on our earlier thinking on the BoP “consumer” and their mindset, worldview or value system.~ June 2009

In July 2009, I was inspired by my observation of a man sitting under a tree in the administrative district of New Delhi with a visibly large bag of buttons by his side. His service, to the civil servants rushing to and fro from important governmental meetings, was to quickly repair a missing button from their suit jacket or shirt. Not unlike a shoeshine boy, this gentleman’s service was on demand, while you waited, his fingers flying rapidly with the needle as he sewed a reasonable facsimile of your missing button back on for you.

Look at the unusual yet welcome niche he had found for himself! A repair service that could only work in this part of the city where the common uniform was a suit and tie and important visitors the norm.

Once he opened my eyes to what it was I was seeing on the streets – the entrepreneurial opportunities squeezed out of the margins of daily life – I began noticing such services more and more. Repair, re-use, re-purposing, resale, and, in their own inimitable way, recycling of used up or abandoned products of industrialization were turning out to provide a significant chunk of the revenue streams of many of the informal sector’s service providers who now became visible to me.

In June 2009, I wrote:

…many other such observations got me thinking about the whole RE culture among the BoP. Stepping back, if you take the broad space of REuse, REpurpose, REpair and REcycle – its the low hanging fruit for the BoP entrepreneur’s opportunities for income generation. In fact, REpair is an entire professional service area in its own right, perhaps a subset of the opportunity space in the informal economy with varying degrees of skill and ability required.

But coming back to the other three, it seems at first glance that they look to be more or less the same thing i.e. how different is it to reuse a plastic bottle to contain some liquid from recyling it? particularly if the manufacturer had intended for it to be a disposable container? Yet, from the big picture perspective, one can say (and it has been said before) the whole concept of recycling is a cost in the OECD world whereas its actually a source of income, in a myriad ways, among the BoP.

The second thing that struck me, when I pondered these signs of a post-consumption economic ecosystem, was that the actors in the informal sector – whom we now discuss as traders, fabricators, service providers – were still then thought of as the “Bottom of the Pyramid” or the BoP – the economically vulnerable, the marginalized, the low income barely making ends meet on a dollar or two a day. There was no attempt at segmentation, this was the lumpen mass of the next 4 billion. Even though the late CK Prahalad had called them out as micro-producers, creators, and innovators, in his seminal book The Fortune at the Bottom of the Pyramid, those who had grabbed the label with both hands and run with it were still thinking in terms of consumption. “How do we make products profitably for the poor?”

What about the creators, the makers, the innovators, and the producers in the informal economic ecosystem?

Again, back in June 2009, I wrote:

I am attempting to evaluate whether all our previous observations and learnings viz., “Life is hard” (the mindset and values of a customer at the BoP particularly one living on an irregular income) can help us begin to understand the other side of the coin, that is, the “innovator” or “creator/maker” or simply, the “informal business owner or service provider” at the BoP.

At this point at least, it seems to me, that rather than quibble about each individual word choice to describe “who” or “what” they are, perhaps we’re better off looking at the “why” and “how” – by this I mean, that the driver of motivation is to generate an income stream (the why) and the gaps observed, as mentioned above, are the opportunity spaces (the how). That is, the BoP seem to display more of a tendency towards ‘opportunity spotting’ (not quite the same as the word opportunists, though that may also apply in many cases or situations), filling the niche quickly with a service or product. Some of these services have arisen spontaneously around the developing world, mobile phone repair comes to top of mind.

It feels as though its a far more active than passive quality – poverty and hardship can be a powerful motivational driver in itself, though we tend to overlook the ingenuity and creativity involved.

That is, back then, just over 9 years ago, I connected the dots I was seeing in this space – the mindset and values of the low income customers and their post consumption behaviours, taken together with the “RE” space where visibly they were earning income – and framed it so:

That is, the lower income market tends towards maintenance and extending the lifespan of the products (through repair or repurposing it) they purchase rather than disposing it for convenience or replacing it for a trendier style. All very obvious, you say, but its this very same quality that leads to the wide variety of opportunities for the entreprenuerial or the innovative to make some money (or even a living). From the very basic, in terms of skills and ability such as the button repair guy to the complex, such as the mobile phone hacker, all of these services meet an ‘unmet need’ in the market, an opportunity gap which they can fill.

However, what’s interesting about this is the fact that these opportunities would very rarely be either a) spotted as one in mainstream consumer culture; b) not be a gap per se due to a difference in mindset/worldview OR even c) not be profitable enough, given the comparative cost of labour vs the price of the product involved. These conditions for making money, and more so, making money that is deemed a valid ROI seem only to be available among the lower income demographic and in the developing world.

For the precondition to their success is also a sufficient customer base seeking such a service and their willingness to pay for it,  and that, imho, emerges from their mindset as BoP consumers, one quality of which is their need to Maximise the return on their investment (purchase). This shows up in this context as a wish to REpair, REuse, REsell (for REpurpose or REcycling or whatever along those lines) – I doubt if they’ve stopped coming by from door to door among the ‘consuming classes’ in India to buy old bottles, newspapers and other sundry junk. (A sign of development if it stops?)

Once I could “see” the entire post consumption entrepreneurial activity in the informal sector, I went back to my research documentation conducted in rural Philippines and India for the original ‘prepaid’ economy work, and pulled out the patterns seen in the photographs that, when fitted together, showed all the evidence of an entire industrial ecosystem. As a working title for this seemingly vast economic space within the informal economy across Asia and Africa, I had called it REculture – the group blog went on spawn a magazine.

An entire industrial ecosystem within the informal economy based on the discards of the consumer lifestyle

A discarded Kraft cream cheese bottle would be picked out of the garbage by a waste picker and sold to an intermediary who would clean and sort these by colour and size and sell them on to a fabricator, who in turn, would convert these into affordable – and handmade mass produced – kerosene lamps, completed with spot welded wick tube.

An entire industrial life cycle from “raw material” through to “mass production” supported by distribution and retail. The only difference? The informal nature of the entire value chain and the post consumption adaptation of the materials and discards.

My concluding thoughts at the stage in which I’d left my explorations almost a decade ago can be summed up thus:

So, at this point, early stages of exploration though it is, one could say that the whole area of “post consumption” consumer practices – most of which have withered away like the appendix in the ‘rich’ world – forms one major  basis for both products and services, with value addition to varying degrees, in the ‘informal economies’ of the developing world.

There are insights to be teased out here on flexible, adaptable, ‘on demand’ business models ~ but applied outside the virtual world. Scarcity of resources and circumstance force lean overheads and inventory. Constraints of demand and customer purchasing power create their own flows in the chaos. Is there a pattern to the flow of the informal after all?

What next?

I summed up this history so as to provide me with the foundation and backdrop to pick up the threads of this conversation, now with the added insights of the past decade, and the increasingly sophisticated frameworks of framing the informal economy as a commercial environment in its own right, populated with entrepreneurs and niches that the mainstream overlooks.

As the topics of sustainability, resource conservation, and the circular economy become top of mind and critical, the early lessons from the developing world will only become more important going forward. I’ll be writing more under the category and tag “REculture” for old times’ sake.

Designed in China, Made in Africa.

In Ethiopia, Transsion Holdings, a Chinese company, is manufacturing handsets costing as little as $10 in an industrial park outside Addis Ababa. Mobile phone models from Tecno, Infinix, and Itel brands, which all belong to Transsion, to be Made in Africa.

Almost 13 years ago, in December of 2005, I wrote my first column for BusinessWeek which began with the sentence “Designed in California, Built in China.” That referred to Apple’s iconic iPod, the MP3 player that industrial design made into a household name, one that led to a whole new medium: podcasting.

Imagine the scale, depth, and level of change that must take place in production planning and control, not to mention supply chains and global value chains, for this continental shift in design and manufacturing to have taken place in less than half a generation.

What will it take for African-made clothing to become available for mass market?

When we talk about fabric in West Africa, there is no doubt that wax (also called ankara) is one of the first thing that comes to mind. Vlisco, the Dutch fashion textile brand, has been for long THE fabric par excellence bringing prestige and elegance to those who wear it. As 2016 marks the 170th anniversary of the brand, a celebratory campaign has been launched in several West African countries to share the history of the brand, re-print classic fabrics with a modern touch and weigh on the stakes for the future.

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Vlisco’s campaign with 8 brand ambassadors

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Cocktail for the launch of the celebratory events around Vlisco’s anniversary in Cotonou

Speaking of stakes, competition from China has been the most damaging to Vlisco’s sales and image. Cheaper Chinese fabrics that happen to be look-alikes of Vlisco patterns have created two shifts in society:

  1. wax has become widely available to working class who can now frequently purchase fabric; and
  2. a rise of fashion labels creatively using wax for accessories, clothing, and shoe apparel.

Fashion labels using wax have flourished, at low scales, remaining more custom made than ready-to-wear. Yet whether they are designed with Vlisco or cheaper wax fabric, prices remain high. Let’s have a closer look:

Case 1: Woodin, part of the Vlisco group, boasts to be the “first African brand offering a contemporary and wholly African fashion range”. Vlisco owns two textile factories in Ghana and Côte d’Ivoire yet ready-to-wear designs remain expensive, according to consumers. Prices range between $50 and $120. Interestingly enough, Woodin aspires to produce ready-to-wear collections accessible to all.

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Case 2: newly launched clothing lines that produce small scale collections with (cheaper) wax prints. Designers work with tailors and seamstresses to produce their clothing/accessories items. Volumes produced depend on demand from customers, personal funds (access to funding) or requirements for expo/private sale designers are attending. Prices are also deemed expensive and closely mirror those of Woodin.

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Left: Nanawax from Benin who aspires to be the Zara of Africa; Right: Dakrol creation from Togo

Admittedly, despite the current trend in wearing wax, African consumers still have a hard time purchasing ready-to-wear wax prints because of alternative options such as buying fabric and sewing preferred design directly with a tailor or seamstress or second hand clothes. However, mindsets are changing and demand is rising, especially from the middle class.

So, despite the democratization of fabric, both cases highlight important points:

  • Cheaper fabric, even when produced locally, does not significantly reduce cost of clothing
  • Labor costs remain expensive
  • Economies of scale could be reached if demand rose significantly so mass market clothing in wax (or other locally made fabric) could be readily available

This begs the question: will manufacturing enable reducing the cost of ready to wear Ankara clothes and accessories in Africa?

Economic ecosystems tie the fortunes of informal sector to health of formal business

The story of Ghana’s “pillow city”, Juapong – a small town in the North Tongu District in the Volta region, offers us insight on the inter-relationship between formal industries and the ecosystem of informal businesses that spring up around them.

Juapong is said to be losing its identity as the pillow capital of Ghana.

A few years ago, a common feature on the main road leading to Juapong from the Adomi Bridge was the display of beautiful assorted pillows. Local women depended on waste cotton or materials from the textile factories to produce pillows and mattresses. Today, cheap imports from China have affected Ghana’s textile production.

The Chief Executive of Margico Enterprise, Auntie Margaret Okyere, who sells pillows on wholesale, lamented that the pillow business has collapsed. Madam Okyere took over the trade from her mother in 1991 and had trained several women to make pillows.

She revealed that the business was one of the lucrative ventures in Ghana and recounted how in the glory days of the business, traders from Tema, Accra, Kumasi, Koforidua, Tamale and Togo travelled to Juapong to buy pillows in large quantities. That, she said, enabled them to make a lot of income to support their families.

Madam Okyere, who was making a few pillows to feed her shelf with the help of one of her workers, said fortunes in the trade had dropped because the raw materials were no longer available.

“Previously, if you came to this town, you would find pillows arranged beautifully all over and it created a lot of jobs for the youth. We even supplied some hospitals as well. I did not make less than GH¢300 profit a day,” she said.

And its not just the women who make and trade in pillows feeling the effects, the young men who helped load and distribute the pillows are leaving town in droves to look for work. An entire ecosystem has felt the impact of that butterfly’s wing out flapping on the other side of the world. Industries benefit far more people than just those employed at the factory directly.

Book Review: Adventures in Stationery by James Ward

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I read this book in one sitting yesterday. Now I’m here writing on it.

Any adult who’s furtively indulged in scented erasers, colourful gel pens or handmade paper, to be shoved secretly down the lowermost drawer in the desk will love this book.

Pens and pencils, paperclips and pushpins. James Ward lovingly describes them all, interspersing a well researched narrative with joke bombs dropped in with the straightest face.

My only issue with his writing is that it made me feel old. He writes as though he’s middle aged yet refers to the era when I sat for my O Levels as the dim mists of history. Other than that, go find this eminently readable book. Especially if you’re a designer. Ward knows what he’s writing about and does it engagingly well.

“This book is the Salt of office supplies”

 

African consumer market insight from Chinese flip flop manufacturer in Tanzania

This recent interview of the Chinese owner of a flip flop factory based in Tanzania offers some interesting insights into the mindset of the East African consumer.

Trade in commodities has been the dominant feature of China-Africa relations over the past 20 years, but many traders, particularly those who arrived in Africa early, are now well aware that there must be more to the relationship than that.

“It’s very important to set up a factory in Africa to ensure that one’s products have staying power in this market,” says Wu Quanman, owner of Li Lai International in Dar es Salaam, which makes flip-flops.

He first came to Africa in 1998, to Rwanda, and moved to Uganda in 2000, and set up the factory in Tanzania in 2006.

With a bit of search, I was able to dig up this BBC article from 2006 about the state of the flip flop market in Tanzania.

But at Tanzania’s only flip-flop factory, these are dog days.

A few years ago 3,000 people worked at OK Plast and their wares were exported to 22 countries across the region.

Today the factory employs just 1,000 and Fadl Ghaddar, the Lebanese general manager, told me it was struggling to break even.

All but a few varieties of Africa’s flip flops now come from China and local companies cannot compete.

Yet, Mr Wu says they average a 100,000 pairs a day in his Tanzanian factory:

“If we wanted to grow this business, building a factory in Africa seemed to be the only solution, and it was certainly ideal for us. After thinking carefully about the possibilities, we decided to build the factory in Tanzania, given that Rwanda is landlocked and the Ugandan market was limited.”

00221917e13e164b82aa1fIt made me wonder whether he’d purchased the struggling factory mentioned in the older BBC article and how he turned it around? Even if he didn’t purchase that factory, his business was apparently booming as the interview quotes him on his plans to invest in local manufacture of the materials required for making flip flops.

The key seems to be consistency – of quality, of supply, a matter of reputation. As Mr Wu says:

“Another thing that prompted us to open a factory here was the significance of brand in the market. African customers are very keen on well-established brands, but previously our products in this market were very random, with various brands from China, so we need our own brand and reputation.”

One valuable lesson Wu learned in Uganda came directly from the customers. Wu says they complained every time they were given products that they were unfamiliar with, and it was decided that if the business was to be sustainable, it needed to sell a well-known brand.

There are a couple of insights here that are interesting. The first is the importance of a brand, or rather, a reliable way to identify a consistent product that had been “tried and trusted” i.e. the familiar and known.

This also makes me wonder why the original local factory was unable to compete and was struggling. Was it that they were accustomed to pricing high in a seller’s market and then unable to offer a wider range of patterns when the market first flooded with Chinese imports? Or was it that they had not invested in building an established brand? We may never find out but the snippet leaves me with the feeling there’s a story behind it.

The other interesting insight from this interview is the fact that customers “complained every time they were given products that they were unfamiliar with” … there is nuance in here whose further exploration will be critical for consumer product companies accustomed to pushing “New and Improved” every so often to increase their market share.

If this reluctance to embrace the unfamiliar and/or unknown is simply a matter of unreliable product quality – a common factor of bulk Chinese imports sourced primarily on price – then global brands can rest assured their systems are in place to meet the expectation of this emerging consumer market.

But if this preference is for the tried and trusted, the familiar and known, and may possibly imply that the consumers are not enamoured of the “new and improved” then this characteristic is worth noting for those seeking to enter these markets successfully.

 

Brazilian machinery taking the lead in East Africa


Dominic Wanjihia showed us this chaff cutter made in Brazil he’d picked up for 35,000 Kenyan Shillings (around USD400 or thereabouts). He’s using it to test and run his biogas generators at his workshop.

Brazil? Not Indian or Chinese? What about the jua kali makers, don’t they make one far cheaper?

Brazil, he said. They’ve got the best quality, the best materials and the best finish for the price – far better than anything I’ve seen out of India or China (here in the Kenyan market). And the jua kali makers don’t manage to balance it properly so the welded seams start tearing from the machine’s vibrations after a while.

We’ve read about increasing South South trade between numerous Sub Saharan countries and the emerging economies of the BRIC nations but this is something I’d have never imagined. Dominic was our guide through the informal manufacturing sector in Kenya when I’d first come in the Autumn of 2010 to take a closer look at innovation under conditions of scarcity. At that time, if the majority of the machine tools used were not of local manufacture, they tended to be imported from China, or used ones from India.

Brazil is certainly taking this emerging market opportunity very seriously if they’ve managed to not only enter the market but gain such a reputation in so short a time.