Fwd: [AngelAfrica] Re: Fwd: Africa Based Positions, US Based Interviews, Multinational Companies
Benin Mwangi WB
---------- Forwarded message ----------
From: Benin Mwangi WB <benin...@gmail.com>
Date: Aug 1, 2007 5:44 PM
Subject: Fwd: [AngelAfrica] Re: Fwd: Africa Based Positions, US Based Interviews, Multinational Companies
To: enterprising-afr...@googlegroups.com
Hi all, this is a thread from a discussion on Angel Africa about informal economies in Africa-how does one leverage them for economic development and growth?
---------- Forwarded message ----------
From: thebrownway < Thebr...@yahoo.com>
Date: Aug 1, 2007 5:42 PM
Subject: Re: [AngelAfrica] Re: Fwd: Africa Based Positions, US Based Interviews, Multinational Companies
To: benin...@gmail.com
--- In Angel...@yahoogroups.com, "Nvalaye Kourouma"
<nvalaye.kourouma @...> wrote:
I think the real challenge with the "informal sector" is that it is
very difficult to understand because of lack of reliable data and
identified drivers. I agree with you that it is certainly the largest
part of African economies. The sector is vital from both a
development and a business perspective. On the business side, cell
phone companies have found their way in with prepaid cards and that
makes Africa the fastest growing mobile phone market in the world.
On the development side, I think that providing more market
information, cleaning up the regulatory environment and bringing a
more realistic tax regime would boost the sector. But I don't know of
any experience where an african country is trying to leverage the
informal sector for development purposes. Does anyone do? Would love
to hear about it.
-----Original Message-----
From: "thebrownway" <Thebrownway@...>
Date: Wed, 01 Aug 2007 20:00:23
To:Angel...@yahoogroups.com
Subject: [AngelAfrica] Re: Fwd: Africa Based Positions, US Based
Interviews, Multinational Companies
njilademus,
I agree with you, right now if you look at the average African
economy,
the majority of it is made up of the informal sector and then there
is
a small portion of traditional sector and then a small formal
sector.
And for some reason people do tend to ignore the informal sector,
which
as you say is very unfortunate.
I think that people look at the formal sector and emphacize it
because
they see it as a short cut to full scale development. But, a few
weeks
ago, I attended an IBM summit focusing on economic development in
Africa. Most of the attendees were fortune 500 execs, then there
were
the academic attendees who were professors, then the smallest group
consisted of small business owners and small ngo founders. The
consensus was not crystal clear, but I think the majority of people
that I heard make comments agreed that the informal sector is "where
it's at". When you focus on the informal sector as a development
approach, you in the process end up addressing head on all of the
really tough issues that make doing business in Africa challenging.
I really don't have a quick solution, though for fixing this, since
it
is so much more difficult to communicate with large numbers of
participants in this economy...My slow suggestion, or I mean
something
that might take a long time to materialize into tangible benefits
for
this class is to somehow show the politicians how much damage they
do
to this economic class by trying to manage them through the
commodity
boards-like tea boards or cocoa boards that buy the produce from the
farmers at ridiculously low prices-like a middleman and resell them.
Instead the policy should be for governments to make it easier for
this
sector or just get out of the way of the informal sectors. I think
on
an individual level something else that might be good is just
recognizing members of this sector in our witings. Also think tanks
should be organized around this sector. I think that business
training
and in some instances exchanges of agricultural training for the
informal sector would make the informal economies of Africa a force
to
be reckoned with. I am happy about how the cell phone is also
empowering this generation of informal market producers by arming
them
with daily commodity price info so that they can do their own
negotiating without middle men. Do you have suggestions, Njilademus?
--- In AngelAfrica@ <mailto:AngelAfrica%40yahoogroups.com >
yahoogroups.com, "njilademus" <njilademus@> wrote:
>
> Dear readers, I must say I am very pleased to have joined this
group,
> there is at last light at the end of the tunnel. Many routes have
been
> identified for future investments on the continent, however I am
> coming from a very realistic point of view, have realy dug deep to
see
> how we can assimilate all these propsed investments with the
> individuals at grass roots or are we just about to ignore their
> existence intentionally. There is no way Africans are going to go
> forward without the inclusion of all from and of Africa, as a
> prerequisite for the African dream, quote. So, maybe we should be
> addressing the present situation to the groundlevel and assessing
how
> to ammeliorate these issues before even fathoming any investments
of
> our own.
>
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Benin Mwangi Brown
Consultant, Benin Mwangi Enterprises
http://www.linkedin.com/in/beninmwangib
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"New Frontiers Becoming New Realities"
--
Benin Mwangi Brown
Consultant, Benin Mwangi Enterprises
http://www.linkedin.com/in/beninmwangib
http://beninmwangi.com
"New Frontiers Becoming New Realities"
whythawk
professional area of expertise. A few comments:
Informal vs Formal is subjective, technically we're discussing third-
party property rights. By that I mean that, any contractual dispute
(whether about the ownership of property, ideas or products, or a
legal wrangle) can be sorted out by a recognised third-party whose
decision is recognised and respected by both. Normally that is a
government. When the government is not respected, or when the cost of
getting the protection of that government is too high, then the
relationships between market players breaks down. An informal market
is really a fragmented localised market where only people who trust
one another directly are prepared to trade with each other.
The epitome of this is the stokvel / gooi-gooi / group saving schemes
that prevail in informal markets. They allow for small groups of
people to pool their resources and negotiate for cash for goods with
other people who would not trust them or allow them credit.
We've been tracking the informal markets in South Africa and Zimbabwe
for the last year to build up a model of how it works. It is very
sophisticated but, at the same time, very fragile. It is amazing how
goods and services are communicated / distributed across a continent
given that - at each step - no-one is able to enforce contracts or
ensure payment.
There are a few good books on the subject: Hernando de Soto's Mystery
of Capital, and CK Prahalad's Fortune at the Bottom of the Pyramid.
Prahalad, in particular, has stimulated the thinking a small number of
companies that specialise in assisting the formal sector to invest in
and understand the informal sector. This is a very thin line of
endeavour at present, but it is slowly gaining ground since it - in
comparison to aid - actually works. Whythawk Ratings (http://
www.whythawk.com/) is pretty much the only company operating in South
Africa purely as a BOP company (rather than a charity or fundraiser).
Gavin Chait
Whythawk Ratings
beninmwangi
That was beautifully said, in fact it could easily be a forward to an
economic development book. Interestingly at the IBM Global
Innvovation Outlook on Africa, which visited Atlanta, GA a few weeks
ago (and will be in Jo'Berg in rougly three weeks I think) there were
so many US Fortune 500 execs seriously pondering the issue that it
would seem that it is a larger movement.
But I think you are right, so much of the discussion on African
economic development uses an either or approac-either aid or trade,
that those discussions somehow overshadow this one. A few weeks ago
Imnakoya of African Loft and Grandiose Parlor made a very sagelike
comment, he said something to the effect that informal markets in
Africa bring together many differnt aspects of socio-economic policy
and brings about a discussion where law, business, entrepreneursip,
infratstructure, and so forth are intertwined. After thinking about
his statement my attitude towards things shifted a little bit away
from the very narrow entrepreneurship focus[that is still my focus but
I am much more aware now of the relationship between that and some of
these other areas and awareness brings about subtle changes]. In
fact, Emeka made a similar comment in the comments section of the 2nd
carnival of africa enterprising, which is on african loft.
Mr. Chait, should the discussion be about how to get the informal
sector to become part of the formal sector or should it be how to
cater to the informal sector?
> comparison to aid - actually works. Whythawk Ratings (http://www.whythawk.com/) is pretty much the only company operating in South
whythawk
sector to become part of the formal sector or should it be how to
cater to the informal sector?"
Neither. I've said this before: the informal sector is a symptom, and
an important bellwether, of general economic conditions. Any central
state wanting to represent the interests of its people should be doing
its best to set up a fair and equatable legal and economic framework.
If corrupt politicians are rewarded and kept in office then no amount
of incentives is going to make businesses who abandoned the state come
back. Corruption breeds corruption.
What the state should do is ignore the informal sector and do their
level best to make the formal sector as powerful, dynamic, flexible
and simple-to-use as is humanly possible. If I have to spend five
hours in a queue to get a form to register my company, and another 12
months to wait for registration approval (if the form isn't lost) ...
guess what, I'm not going to bother trying to register in the first
place.
A state should realise that - as with any competitive environment -
business owners and investors have the choice not to participate if
they so choose. If you run a coffee shop and sell dreadful coffee
with poor service you don't send staff to go next door to the popular
cafe and bribe people going in to come to you (well you can, but that
seems very expensive and silly business). And, if you really do offer
bribes to come in, I'll take your bribe and I'll still spend the money
where I want to.
A "need" ... for jobs, for the informal sector to join the formal
sector, for a cure to cancer ... does not make it happen. People with
ability will simply take their abilities elsewhere. Africa has been
whining for decades about their "need" for investment but haven't
offered anything meaningful to invest in. So all they got was charity
which gets used up and wasted.