Informal trade is big business in Africa

By | January 15, 2015

On my way to Nairobi  from Singapore a couple of years ago, I had the opportunity to observe first hand the phenomenon of informal trade between China and the African continent. The energy and excitement of the traders, laden with goods on their way back, was a palpable part of the inflight experience. Today, I came across this bit of news showing that the airline recognizes the sizeable opportunity available in successfully serving this rapidly growing economic activity.

A Kenya Airways ticketing office at Tea Room area near the intersection of Accra and River roads has sent a signal of the growing significance of the informal economy to big companies seeking to grow their top line.

The Tea Room area is a hotbed of informal traders, who import vehicle spare parts, stationery, mobile phones and accessories, building materials and computers, among other goods.

The traders frequent favourite import destinations such as China, Dubai and Turkey, which offer relatively cheaper goods.

“Tea Room is a prime location, accessible and a central point for a large number of small-scale entrepreneurs in town. This shop will therefore offer opportunities to traders for direct interaction with our staff and this will enable provision of tailor-made services to this market segment,” said Kenya Airways managing director Mbuvi Ngunze in a statement. ~ Business Daily, 11th Jan 2015

This recognition of the important role played by the so called informal market for consumer facing businesses is one that will become increasingly visible. And, I suspect, its an overlooked opportunity for local brands to gain market share and first mover advantage. Here’s a complementary snippet from an entirely different industry:

To win his first mobile network operator licence, Zimbabwean telecoms tycoon Strive Masiyiwa based his projections not on “World Bank numbers” but by studying the informal sector.
Masiyiwa explained Mascom came to its numbers by recognising the strength of the informal economy and understanding the local market. “I understood the informal sector was real.”

He suggested that even knowing the number of cattle in Botswana can offer insight into spending power. “Cows represent wealth in Botswana.”

Like Masiyiwa, we’ve been able to identify indicators to assess size and value of a particular industry or segment, though it may be undocumented and considered informal.  Some are common across regions, like wealth in the form of the cow, while some need to be identified and validated for the task at hand.

Regardless, the fact remains that the true size of the opportunities still remain undiscovered.

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