Can Africa’s Informal Trade Ecosystems Provide Lessons for Navigating Uncertainty and Volatility in the post Pandemic World?

It is virtually impossible today to consider emerging markets without taking into consideration the vastly different operating environment of the majority of the countries in the global South. As the map, based on GSMA data, above shows clearly in bright red and blue, the clearest indication of this difference is in the way mobile telephony services are purchased and used. Decades of emerging markets focus – strategy, market entry, new product introductions and market launches, complete with events and promotions conceptualized and executed, and primary qualitative research for concept design and innovation – taken all together, has led to my firm conviction that this map also reflects the consumer mindset and worldview in addition to purchasing patterns and economic capacity.

Simply put, the darker the blue that denotes the higher the percentage of total mobile subscribers on prepaid plans (prepaid SIM penetration % in the legend above), the greater the proportion of the population of that jurisdiction is dependent on the informal sectors of their economy for revenue generation, income streams, and cash flows.

In sub Saharan Africa, whose consumer markets I have observed and studied (Bhan, 2014a) since the founding of my professional practice in late 2007, the vast proportion of mobile operators’ customer base – greater than 90% – are on prepaid or ‘pay as you go’ plans where they purchase airtime for data, voice, and SMS in fractionalized amounts in advance of use. It is clear that this preference (Bhan, 2014b) cuts across lines of relative wealth, white collar employment, education status, and other factors that traditionally distinguish the customer segmentation matrices of consumer brands. And, this aspect, imo, is what not only distinguishes the African market but also what makes market entry both an immense untapped opportunity as well as an immense challenge (Bhan 2014a, 2014b) in particular for scaling into rural markets or urban mass markets.

Today, the need to understand and address this market as a commercial operating environment in its own right is critical for lowering the barriers to African enterprise, industry, and in particular SMEs and microSMEs to bridge the chasm between them and the global economic ecosystem. In addition, as the current global operating environment faces its own moment of flux and uncertainty increasing the volatility of the economic ecosystem and thus the complexity; planning becomes more of a challenge, as do considerations of strategy and decision making.

The informal economic ecosystems, such as those of the East African Community’s (EAC), have long been operating under such challenging conditions, and the unpredictable nature of the pandemic have only increased the complexity of their operating conditions. Years of research, beginning with questioning the nature of the preference for prepaid subscriptions, provide insight on the informal sector’s navigation of uncertainty and volatility in their operating conditions. These lessons can now provide useful insights.

Early literature on the global pandemic’s impacts on international business (eg. Sharma, Leung,  Kingshott, Davcik & Cardinali, 2020) frames the challenge for this direction of research by distinguishing risk from uncertainty, which, according to the authors (Sharma et al, 2020) whilst extensively covered in the literature of international business has not until now made any explicit distinction between the two issues.

Going forward, we would need to look at how these businesses [“small businesses around the world”] can better prepare themselves so that they can become not only more resilient to overcome the uncertainty imposed by unexpected events but also be more agile to cope with these challenges by being flexible and innovative.

There are lessons for formal businesses, particularly micro, small, and medium sized enterprises (MSMEs) who must operate without the abundance of resources available to large corporations and multinationals, from further research into the business management practices of informal traders and micro-entrepreneurs, particularly from the viewpoint of resilience attributes, adaptive capacity building, and the navigation of fluctuating changes in their supply and demand ecosystems. Ongoing conditions of volatility and uncertainty require novel ways of thinking about management of resources and operations.

References:

Bhan, N. (2014a). How Africa is Challenging Marketing. Harvard Business Review.

Bhan, N. (2014b). Mobile money is driving Africa’s cashless future. Harvard Business Review.

Sharma, P., Leung, T. Y., Kingshott, R. P., Davcik, N. S., & Cardinali, S. (2020). Managing uncertainty during a global pandemic: An international business perspective. Journal of business research, 116, 188-192.

This entry was posted in Africa, African Consumer Market, Airtime, Economy, Ecosystem, Emerging Markets, Flexibility, Informal & Flexible, Mobile platform, Prepaid Economy & Informal Sector, Strategy, Work in Progress and tagged , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

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