Posts Tagged ‘transformation’

A Unique Path to Development Seen for the Informal Economy

Just recently I stumbled over this slim book < 60 pages that analyzed existing data sources in order to frame an answer to the research question they posed:

How did the informal economy―markets and the private sector―develop in the absence of legal and administrative frameworks to support it?

Some of the most intriguing insights extracted here:

And they echo my own statements regarding the East African Community that its the informal sector that’s growing faster and responsible for employing the majority of the population. This makes integration and bridging efforts between the formal and global together with the local and informal even more critical.

The path to integration as described in the book may not apply to the African economies but holds some unusual insights for those in eastern Europe which may struggle with some of the same issues of top down planning and grassroots income generation.

All in all, the step by step approach over the past decade to recognize, and thus integrate the informal sector was much appreciated and if you’re interested, you can download the book here.

Dignity drives purchasing decisions for South African low income consumers

graph-1There is so much I was going to say when I came across this snippet in the news about South African consumer habits among the lower income folk for yesterday’s post. I am not convinced by the framing of the interpretation of the qualitative data but that’s an embedded SA problem with qualitative research in townships. So for now, I’ll just stop with the following quote:

Melzer says spending on clothing in South Africa is phenomenal. Talking to people about their spending patterns, the word “dignity” comes up again and again, she says.

Moreover, customers aren’t necessary buying what businesses think they are selling. A clothing retailer might think it is selling clothes, when in actual fact it is selling dignity or status.

“No Ordinary Disruption” – Africa’s Transformation

McKinsey consultants have released a new book – No Ordinary Disruption – looking at global mega trends and market forces that are forcing a rethink of the foundations of their intuitive knowledge. Assumptions are to be challenged and questioned, they say, as these changes impact a deeper transition in the way the world works. Even as all eyes are on Asia, the fastest growing region on the planet, it behooves us not to overlook the second fastest growing and often overlooked opportunities of the African continent.

“Well, there was a reason why: growth has moved elsewhere—to Asia, Latin America, the Middle East.”

B6vtjfTIYAAq1mfLet’s look at their key points and reflect upon Africa’s transformation.

McKOneThe first trend is the shifting of the locus of economic activity and dynamism to emerging markets like China and to cities within those markets. These emerging markets are going through simultaneous industrial and urban revolutions, shifting the center of the world economy east and south at a speed never before witnessed. […] Perhaps equally important, the locus of economic activity is shifting within these markets.

FG-Seizing-Africas-Retail-Opportunities-2Numerous reports are pointing out the immense potential inherent in African urbanization and population growth, for retail, for real estate and for opportunity. Not all 54 countries on the continent are seeing economic growth as its unevenly distributed, just like in Europe. Some points of note:

Nigeria became the largest economy last year, surpassing South Africa the traditional leader, after their economy was re-based. Kenya has just been ranked as the 3rd fastest growing economy. Rwanda is also expected to show similar growth – both are in the 6 to 7% range. Ethiopia is making strides in infrastructure and industrialization – attracting manufacturing as well as high street brands like H&M and Primark. China has been looking closer at the lower costs of labour on the African continent.

What is notable is that instead of the usual sources of wealth like oil or other natural resources, most of this emerging  economic growth is coming from modern sectors like telecom and services. Entirely new industries such as mobile gaming are gaining traction and e-commerce is another fast proliferating area. Cote D’Ivoire has gained visibility with its embrace of online marketplaces while the Nigerians’ penchant for shopping has captured attention at home and abroad.

All this urbanization means a boom in construction – transportation infrastructure, power plants, dams, houses and malls – cement magnate Dangote has already invested over a billion dollars across the entire continent while competition hasn’t dented LaFarge’s healthy profits.

mckTwoThe second disruptive force is the acceleration in the scope, scale, and economic impact of technology. Technology—from the printing press to the steam engine and the Internet—has always been a great force in overturning the status quo. The difference today is the sheer ubiquity of technology in our lives and the speed of change.
[…]
Processing power and connectivity are only part of the story. Their impact is multiplied by the concomitant data revolution, which places unprecedented amounts of information in the hands of consumers and businesses alike, and the proliferation of technology-enabled business models, from online retail platforms like Alibaba to car-hailing apps like Uber.[…]Entrepreneurs and start-ups now frequently enjoy advantages over large, established businesses.

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Source VC4Africa

The impact of the democratization of technology has already made itself visible. Incubators and tech hubs are popping up across the African continent. New startups are emerging almost every other day. One of my favourites is Cladlight –  a safety jacket with indicator lights to be used by motorcycle taxis.

Whether its Uber or grocery delivery in Lagos and Kampala – apps that leapfrog the lack of adequate infrastructure and distribution systems are disrupting their local markets. Technology, both at the front end and the back is expected to change the face of retail and service delivery.

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This is the Ethiopian capital’s new light rail system.

And its not just computers and smartphones – a variety of solar powered products, distinguishing themselves with payment methods and business model innovation, are lighting up the formerly dark continent, while China’s ambitions in high speed rail will soon connect the unconnected.

mck3The human population is getting older. Fertility is falling, and the world’s population is graying dramatically. While aging has been evident in developed economies for some time—Japan and Russia have seen their populations decline over the past few years—the demographic deficit is now spreading to China and soon will reach Latin America. For the first time in human history, aging could mean that the planet’s population will plateau in most of the world. […] But by 2013, about 60 percent of the world’s population lived in countries with fertility rates below the replacement rate. This is a sea change
Euromonitor-populationCall it the demographic dividend or the African youth bulge, but the cradle of mankind remains the youngest continent on earth. This is one of the reasons why Africa matters for the emerging future.
mck4The final disruptive force is the degree to which the world is much more connected through trade and through movements in capital, people, and information (data and communication)—what we call “flows.” […] “South–south” flows between emerging markets have doubled their share of global trade over the past decade. The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012. […]the links forged by technology have marched on uninterrupted and with increasing speed, ushering in a dynamic new phase of globalization, creating unmatched opportunities, and fomenting unexpected volatility.

aftzIncreasing regional integration for trade and commerce are changing the economic landscape of the continent. At the forefront is the East African Community, who have already issued a single tourist visa for Kenya, Rwanda and Uganda whilst pushing forward with infrastructural development and various trade related initiatives to tighten their financial and commercial links.

smdc-silkroad-21st-mapFlows of information mean increasingly connected consumers, as smartphone penetration and mobile subscription growth puts the internet in the hands of even the nomadic pastoralists. Social media use is moving beyond friends and family to become platforms for informal trade and banking. And mobile money’s ability to provide financial inclusion profitably is driving the continent’s telcos to overcome their competitive nature and join hands in interoperability.

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Afropolitan, Africapitalist, Afro futurism – all of these are ways to name the basic trend that Africans are finally reaching out to grab their turn on the global stage. Most recently Credit Suisse named Tidjane Thiam, originally from Ivory Coast as their new CEO. Africa’s future is being transformed by the global forces shaping the world and cannot afford to be overlooked.

As the authors conclude:

The fact that all four are happening at the same time means that our world is changing radically from the one in which many of us grew up, prospered, and formed the intuitions that are so vital to our decision making.[…] Yet we work in a world in which even, perhaps especially, professional forecasters are routinely caught unawares. That’s partly because intuition still underpins much of our decision making.[…] If we look at the world through a rearview mirror and make decisions on the basis of the intuition built on our experience, we could well be wrong. In the new world, executives, policy makers, and individuals all need to scrutinize their intuitions from first principles and boldly reset them if necessary. This is especially true for organizations that have enjoyed great success.