Nigeria pursuing deeper understanding of informal sector; now estimated at 57% of rebased GDP

Informal-sectorFrom the BusinessDay article dated June 25th 2014

Nigeria’s informal sector accounts for as much as an estimated 57.9 percent of the nation’s rebased Gross Domestic Product (GDP), Daouda Toure, United Nations resident coordinator/representative of the United Nations Development Programme (UNDP) in Nigeria, disclosed on Tuesday.

This, perhaps, makes the country the largest destination for informal activities in Africa.
[...]
Toure said the study identified lack of access to credit; poor technical know-how; inadequate training opportunities, infrastructure deficit, and incoherence of the formal and informal sectors, amongst many others, as factors which inhibit the growth of the informal sector in the country.

He noted that although the informal sector has been expanding rapidly in the 21st century, its specific role in the economic development of many countries is yet to be fully documented while relationships between it, economic growth, and poverty are not fully clear.
[...]
In his opening address at the workshop, Bashir Yuguda, supervising minister of the National Planning Commission, said the comprehensive study was the first on the informal sector of the nation’s economy in the last ten years.

He also observed that the potential of the sector in providing employment for the teeming population, reducing poverty and contributing to the nation’s GDP growth aspirations cannot be overemphasised.

He, however, raised the concern that despite these anticipated benefits, there are still knowledge gaps about the character and appropriate role of the informal sector in Nigeria.

He said it was in realisation of this that the study has not only assessed the contribution of the informal sector to the Nigeria’s economic development, but has also undertaken an in-depth appraisal of the characteristics of the sector, including issues of size, structure, processes and practices, while exploring the prospects for integrating it into formal economy.

I’m looking forward to seeing this research.

Posted in Africa, Assumption filter, Economy, Informal & Flexible, Nigeria | Tagged ,

Percentage of prepaid connections – global map 2013 data

Prepaid global development 2013Click on the image for the larger version. This is the mapped version of the latest data available on GSMA’s development website*, where you can sort through by region and country.

The last available global map didn’t really break it down by country so much as continents, and even now, due to this being ‘development’ related, the erstwhile first world nations are greyed out.

This is really how people manage their mobile phone budget across the world, isn’t it?

 

* A prepaid mobile connection (also commonly referred to as pay-as-you-go) is a mobile connection for which credit is purchased in advance of service use.

Posted in Airtime, Business Models, global, Mobile platform | Tagged

Analysing shifts in consumer household purchasing patterns – Milk ATMs in Kenya

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Uchumi Supermarket, Ngong Rd, Nairobi Photo Credit: @bankelele

“We are selling one litre at Sh65, but a consumer can get as little as 77ml at a cost of Sh5. All one needs to do is key in the amount they require, and the product is dispensed,” Gitonga, who procures his machines from Italy, said.

Flexibility is the key to survival, indeed. This quote is from a Kenyan newspaper article titled “Dip in purchasing power drives demand for milk dispensers” which covers the increasing visibility of these milk vending machines in Nairobi and touches upon some of the demand drivers.

Mr Gitonga told Business Beat he shares the profits equally with supermarkets and retailers as he is protected from other expenses such as rent, water and electricity.

He said the demand for milk from the machines is being dictated by changing dynamics in the local market, including the need for quality milk, depressed purchasing power and a surging population.

The prices for processed milk have increased since the introduction of VAT last September, which has prompted consumers to turn to raw milk. Currently, a litre of raw milk in most estates costs between Sh50 and Sh55, while a litre of processed milk averages Sh85.

“We are giving consumers who frequent outlets in estates that sell raw milk that may not be inspected a safer choice.”

What strikes me is the fact that this shift back to one of the fundamental purchasing patterns observed among the lower income demographic is not only an obvious sign stretched household budgets due to rising price of food, but a classic example of the flexibility required by those managing on irregular income streams.

That is, this daily habit to purchase only what is needed and that too by cash amount (5 shillings) or quantity, is the same purchasing model for kerosene, another household staple.

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Could this shift in buyer behaviour also be considered a signal of the fluctuating fortunes of the “floating class” identified by the African Development Bank as those who are part of the emerging middle class but their cash flow might not be as steady as for someone on a regular paycheck?

If so, then we’re seeing here an example of an innovative solution to providing a daily need – milk – to urban households without a cow in the backyard – by ATM entrepreneurs as a whole new market creation opportunity.

Not for milk per se, but for products and services which can offer the flexibility that volatile income streams require, and are still upwardly mobile or progressive consumables that the emergent middle class household needs for their shopping basket, in this case, pasteurized milk.

And the increase in demand might actually also be an increase in the population of those who are now part of “middle class with floating”… this could be one of the dividing lines. I’d keep an eye on the fortunes of these milk machines in supermarkets if I were interested in the African middle class market.

 

Posted in Africa, Business Models, Buyer Behaviour, Economy, Expenses, Flexibility, Income, Informal & Flexible, Kenya, Urban, User research | Tagged , , ,

The mechanization of donkey water, a symbol of economic progress

Bye-bye

There’s a snippet of interesting insight in this news article from Hargeisa City in Somaliland. Traditional donkey carts supplying water are being replaced by motorcycles and this has been framed as a sign of increasing development and economic activity by the journalist.

Bajaj Water tankers gradually negating Donkey drawn water distributors in Somaliland

Its a local invention, this “Bajaj Water Tanker” as its called, a prime example of the jugaad or ingeniously creative solutions to inadequate infrastructure and unreliable systems that one can see peppered across the developing world.

In his interview, Mr Fanax, shown above with his innovation above, answers a few questions on the difference between using this modern technology versus the donkey cart he used previously.

Q. is there any change in the price of water from your previous charges?

A. yes I used to sell a drum of water at 12.000 SL but now I sell at 9.000SL

Q. how long have you used the motor cycle, how many liter of water does the tank carry, how many liters of fuel do you use?

A. I have used the motor cycle for 3 months, the tank carries 400 liters of water equivalent to 2 water tanks. I use 4 liters of fuel per day equal to the food that is given to the donkey (grass and maize)

Q. how do you customers see the changes that you have done?

A. they are happy with the changes in terms of price, the faster way of getting water and even on the cleanliness

Q. what do you suggest to your friends who use donkey cart?

A. it’s a good question. Be ambitious and ensure that you change from using a donkey to a more modern way.

Interestingly, the price of water has come down, although one would imagine that a donkey might have been cheaper to maintain than a gas guzzling vehicle. On the other hand, he gets around faster and can make far more deliveries transporting double the volume of water and thus might still be making more money than previously.

What strikes me is how the concept of “modernization” and “progress” is perceived, in the context of the individuals daily life and operating environment, whereas to those of us accustomed to piped water, the need for water delivery might still be considered primitive or backward.

There’s a whole new vocabulary of aspiration evolving within the informal economies kickstarted by prosperity.

Posted in Africa, Bottom of the Pyramid, Business Models, Economy, Indigenous & Traditional, Urban, User research | Tagged , , ,

Prepaid services for water in Africa – survey

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An increasing number of African water utilities are turning to pre-paid metering in order to curb wastage, claw back lost revenues and extend service coverage. Do the rewards justify the high roll-out costs?

Chris Heymans, senior water and sanitation specialist at the World Bank, is currently undertaking a study of pre-paid services in eight cities in six African countries. He observes that while the investment is hard to recoup in domestic connections with low consumption volumes, PPS for public standpipes and large institutional clients are more likely to be financially viable because the high volumes of water sold can quickly repay the high installation costs of pre-paid meters.

The key constraints for institutional pre-payment meters are that governments need political will to stand by such systems, and some decision-makers have concerns about the ethics of putting strategic institutions such as schools, hospitals or police stations at risk of being cut off. In Lusaka for instance, LWSC made an exception for the city’s main hospital, which was simultaneously equipped with a PPS and a bypass system to ensure that it would not run out of water.

Source.

Posted in Africa, Business Models, Urban | Tagged , , ,

A design challenge for agric service innovation in rural Africa

Find a way to embed principles of sustainable good agriculture for the smallscale farmer in a socio-economically beneficial way.

drawing credit: herman weeda

drawing credit: herman weeda

How would we do this?

Where do we begin?

The answers to these questions and more will be forthcoming on this blog. I reach out and encourage you all to consider submitting your thoughts and opinions between 1000 to 1500 words in length. We will combine the thoughts of many voices together in this blog stream so you really should consider subscribing to the RSS feed.

Posted in Africa, Business Models, Buyer Behaviour, Cashless transactions, Culture, Design, Flexibility, Frameworks, Indigenous & Traditional, Informal & Flexible, Mobile platform, Rural, Rural Economy, Strategy, Sub Saharan Africa, User research, Value | Tagged , , , , , , ,

Part 4: The visual documentation of the original research on rural economic behaviour

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I have uploaded a PDF synopsis of the fieldwork conducted during the original Prepaid Economy research including approach and methodology.  Also documented are the different ways those in the rural economy manage their ‘investments’. These images support the observations documented in Part 2 and my thoughts on rural Indian cow ownership have been fleshed out here.

Also of interest maybe this paper from Purdue’s Agricultural Economics department on The multifunctionality of livestock in rural Kenya whose abstract states:

While many contemporary development programs with regard to Sub-Saharan Africa’s pastoralists promote improved livestock marketing as a way out of poverty, they also fail to take into account the multi-functionality of livestock within these communities, and thus are doomed to failure. While livestock are a main source of income for the pastoralist household, they also serve a purpose as a store of wealth, food source, and status symbol. Furthermore, cattle and smallstock (sheep and goats) fulfill each function to a different degree. Since livestock are so multi-functional, marketing projects could better achieve their objectives if they had a more accurate picture of what motivates household livestock sale decisions.

Posted in About, Africa, Airtime, Alternative currency, Assumption filter, Banking, Bottom of the Pyramid, Business Models, Buyer Behaviour, Cashless transactions, Culture, Economy, India, Indigenous & Traditional, Informal & Flexible, Livestock, Philipines, Project report, Rural Economy, Sub Saharan Africa, User research | Tagged , , , , , , , | 1 Comment