The character-building role of African ‘informal’ economies

People who co-exist with Kombi drivers in Zimbabwe, Matatu drivers in Nairobi’s traffic jammed roads, boda-boda motorcyclists in Kampala and similar situations in African cities have always wondered if those drivers are from the same mother. This is due to their character which is exactly the same. ‘Informal’ traders and MSMEs also share the same character which makes customers wonder whether they went to the same school.  If formal education systems had a long lasting influence on people’s character, economists who attended the same university and read the same books would have the same character.

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African ‘informal’ economies and character building

The above examples demonstrate the extent to which fluid and ‘informal’ business ecosystems shape people’s character more than external factors like money or formal education. These markets are able to build the character of farmers, traders, transporters, consumers and other value chain actors in ways that formal training institutions like colleges or universities cannot do. They are an open knowledge sharing institution where various ways of learning include observing, lurking and experimenting. This kind of knowledge acquisition and sharing does not always happen in formal settings. By teaching farmers and traders how they should show up, ‘informal’ markets are able to creatively build and shape the character of economic actors.

In a highly competitive world, character is becoming more important than talent or skill. While skills can easily be acquired, a dynamic character is difficult to acquire. Many farmers and farmer leaders can succeed at producing agricultural commodities but fail to perform in the market. While development agencies, government extension departments and private sector contractors spend money and time trying to develop farmer skills through farming as a business and other approaches, most of these efforts fall short in building the character of farmers and traders. In the ‘informal’ and increasingly digital knowledge economy, the most important thing about leadership is character, followed by talent and skill. This is mainly because informal economies are driven more by trust and relationships than by rules and regulations. Formal institutions like banks which operate based on guidelines and policies need to revisit their business models to embrace trust and relationships as critical pillars of lending.

Relationship between character and entrepreneurship

Evidence from African ‘informal’ economies indicate success in entrepreneurship is now more about character and critical thinking as opposed to talent, strength or skill. If talent was everything, economies with highly talented people would be self-sufficient. We are not saying countries should stop investing in identifying and cultivating talent. Character is becoming central to entrepreneurship.  As part of character building, informal economies compel aspiring and growth-oriented entrepreneurs to seek the highest good of others, speak the truth in ways that are useful to others and lead in ways that meet the needs of other actors and customers. They also obtain expertise in noticing strength in others and show generosity by using their talents to advantage others.  All these attributes are not obtained from formal schools and textbooks but from the business ecosystem. Instead, formal educational institutions promote competition rather than collaboration for the greater good of all.

Modern fast moving economies are about consistency in behavior, supply and participation in the market. To be successful, farmers and traders have to provide predictable signals to market demands. Consumers must know how farmers respond before they do anything. That means farmers have to show up in ways that seek the highest good of consumers and competitors. Character is not about talent or skill but consistency in behavior and predictable responses. A farmer’s character scores over talent in the long-run and helps in building his/her enterprise as a brand to be trusted for planned expansion and growth.

The market and consumers have to be rewarded from time to time with openness and fairness. Character is also easily tied to equity or justice so much that consumers will start associating a predictable farmer’s commodity with a unique, value-added lifestyle.  Through participating in ‘informal’ economic ecosystems, Kombi drivers, Matatu drivers, boda-boda motor cyclists, food vendors, traders and others actors have become aware that things that make them remarkable go beyond talent to the practice of humility and love.

Broadening the notion of formality

The way African ‘informal’ markets are evolving into hybrid economies, signals the need for policy makers and economic actors to broaden the definition of formality from paper work to how businesses and socio-economic ecosystems are structured or organized. Formality should no longer be limited to legal requirements like company registration or tax clearance.  Food ecosystems and MSMEs do not require too much formality as long as traders and other actors produce commodities safely and as fast as consumers need them. Besides, most people’s markets in developing countries are formal in their own ways. Otherwise they would have stopped functioning a long time ago.  They have their own employees, time to open and close, use cash transaction and digital technology. All these practices exemplify formalism.  It should not just be about fixed aboard and certificate of registration that unintentionally end up punishing innovation at the expense of enabling growth.

 Individual character versus ecosystem character

Financial institutions have to realize that public engagement and financial inclusion is sustained by trust and relationships. Insisting on collateral and enforcing strict repayment processes has less power and sustainable meaning than trust and relationships. In business clusters like SME clusters, the character of the cluster is more significant than the character of individual SMEs. As shown through the case of Kombi drivers and Matatu drivers, for SMEs, the competitive environment and relationships control and influence the character of actors in the market. Everyone policies everyone so that the entire market ecosystem is not tarnished to the point of losing customers.  On the contrary, banks continue to ignore the entire ecosystem preferring to deal with individuals whose actions are apparently influenced by the ecosystem.

Formality should not be a basis for lending because it has nothing to do with a business’s growth pattern or the business owner’s character.  Rarely do the majority of customers inquire about registration in order to buy a commodity. The relationship between enterprises is more powerful than the need for formality. Otherwise shelf companies would be the ones doing more business than self-organized informal actors who focus more on delivering value than satisfying legal business requirements.  We are not advocating for the complete removal of legal processes and identities but the major question is: Which is more important legal identity or capacity to satisfy customers? If registration and legal requirements were more fundamental, consumers would insist on seeing a company registration from every farmer or producer before buying commodities.

Character and propensity of a business to grow should be major determinants in a financial institution’s decisions to extend loans. This will ensure micro and medium scale actors with capacity and room to grow are not denied funding in preference of large corporates who many continue to be prioritized for credit when their growth has reached a ceiling. Compared to formal institutions, in ‘informal’ economies knowledge feels much more alive and social, rather than just coming from a textbook or organizational manual. Traders and farmers benefit immensely from observing collaboration in action. Understanding the entire economic ecosystem can enable financial institutions, development agencies and policy makers to excel at planning, scaling and extending their influence as well as satisfying unmet needs some of which are hidden in plain sight.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Nudging universities in developing countries to harness community based inquiry

Contrary to prevailing formal approaches, knowledge sharing in most rural African communities is embedded in the way people work. For instance, knowledge sharing happens as farmers select seed or choose livestock breeds.  It also happens as they milk cows, plant crops, weed, harvest, store and market.  They do not stop and say, “Now let us share knowledge”.  They do not take agriculture as an event but a messy process.  That is why policy makers, development agencies and other formal institutions have to be continuously reminded to understand how rural people use knowledge assets in answering their needs.

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The role of colleges and universities in rural development is yet to be clearly articulated. These important knowledge filters and gatekeepers have not yet adequately awakened to this reality. Instead of creating pathways for students to learn from local communities, universities continue to encourage students, especially those going on more than ten months internship, to look for placement in formal institutions like parastatals and corporates. Unfortunately there is not much to learn from these institutions because practical knowledge and innovations have migrated to informal ecosystems like SMEs owned by people who used to work in formal institutions.  This is the situation in many African countries.

 Using informal networks and markets to inspire new knowledge interpretations

As if the above is not enough, the digitally-informed dynamic and hybrid economy is now increasing the demand for technological, social and emotional skills that cannot be found in most formal institutions.  For universities, informal networks and SMEs as knowledge markets provide opportunities for new theory development and knowledge interpretation based on real-time practical experiences. Academics and universities that tap into this resource can overcome the inertia of conventional tools, processes and learning habits that are not matching the pace at which people are innovating in response to the market.

Learning institutions like universities are being forced to rethink their businesses models and imagine how they can develop and put appropriate tools in ordinary people’s hands for better decisions.  Instead of waiting for society to demand data or information on ad hoc basis, universities should put their approaches, methods and tools into daily activities and processes of farmers, consumers, traders and other value chain actors.

The current dominant research techniques used by universities in developing countries take a narrow view of what constitutes quality evidence or knowledge.  This is ignoring and undervaluing unique local solutions to unique community problems. While scientific merit is necessary, it is not sufficient. Universities and other formal learning institutions should acknowledge the crucial role of alternative knowledge generators and users such as farmers, artisans and traders, among others whose knowledge has gained local legitimacy over time. Research should no longer be just for academic purposes.

The role of universities in building community knowledge retention strategies

A low hanging fruit for universities in developing countries is empowering local communities to retain and re-use knowledge so that they fully participate in the knowledge economy.  What is often considered the brain drain from rural to urban African cities leads to rural communities failing to function due to progressive loss of intellectual capital to cities. Universities can assist communities in building knowledge management systems which can retain and disperse expert knowledge within the entire community.  Such knowledge can also be absorbed by the young generation in ways that make it available when needed unlike would be the case if such knowledge is held by a few individual experts.

A university-driven community knowledge retention strategy can embrace the following steps:

  1. Analyzing the risk of knowledge loss in a community through the death of elders or migration of local experts to cities. Through student research projects, universities can develop methods for identifying where and how risks of community knowledge loss are greatest. A system can be put in place for doing this on a regular basis.  For instance, such a system can track knowledge loss along specific value chains like livestock production, crop production and food processing.
  2. Identifying and engaging community knowledge experts and convincing them of the importance of knowledge retention as well as associated risks of not retaining knowledge. Once knowledge management practices are embedded and retention is routine, this step becomes more efficient. Universities can assign intellectual facilitators to work with local community knowledge experts.
  3. Scoping and planning the retention process. This involves identifying topics that are unique to different community knowledge experts. Working with experts, universities can map out knowledge topics known by different experts and prioritize them for retention or transfer.
  4. Setting up a knowledge retention framework and ecosystem – This can be a series of activities to make sure critical knowledge is transferred to the young generation, it is documented in guidance, stories, procedures, checklists and university training or learning material.
  5. Documenting and structuring community knowledge. In addition to much knowledge being transferred directly to young people by elders through various means, some can be recorded in audio, video and text. Evaluation reports produced by several NGOs working in particular communities can be part of this resource. Universities can synthesize this material into usable forms or knowledge assets that can be included into university curricular, making it fluid.
  6. Embedding the documented knowledge within the community and university knowledge bases. A knowledge ecosystem that seamlessly connects communities to universities as fluid and interdependent knowledge sources and users is a very important output. For instance, bringing together university students studying pharmacy or medicine and community herbalists can inspire collaborative drug discovery towards expanding pharmaceutical ecosystems that are currently too narrow for the diverse health needs of developing countries. On the agriculture side, economists, extension officers, veterinary officers and other knowledge brokers can begin to be rewarded on the basis of how many farmers absorb and re-use knowledge shared as opposed to just counting the extension officer to farmer ratio and using that as a basis for providing incentives.

Addressing fragmentation of knowledge

Although development organizations and government departments know and interact with each other, agricultural and rural development initiatives in many Africa countries remain fragmented. By harnessing community-based inquiry, universities can re-define their core business in ways that influence development policy and benefit communities directly. Community knowledge platforms such as informal markets can be the most effective ways to accelerate learning and strengthen coordination in agriculture and rural development. Through focused and concerted efforts, actions of farmers, traders, health practitioners, consumers, teachers, extension officers, veterinary surgeons and other community actors can be byproducts of deeper connections and shared learning between universities and local communities.

If seriously motivated by acquiring new knowledge that makes a difference, universities, lecturers and their students should look for learning opportunities in local communities instead of flocking to cities where formal institutions cannot produce dynamic knowledge that inspires positive change and progress. Technology is breaking and scattering knowledge from many value chains in ways that formal organizations like universities cannot adequately master. Without effectiveness and well thought out knowledge management frameworks, universities and formal institutions will struggle to initiate and sustain meaningful engagement with the public, especially parents who are paying university fees hoping to get good returns on their investments.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Asking and answering fundamental questions through informal markets

Street markets or roadside food markets have remained a permanent feature in most developing countries. The fact that these markets continue to flourish alongside emerging shopping malls shows they occupy a unique position in commercial activities.  Informal markets were previously designed for disadvantaged, low income households with ad hoc incomes who were considered not able to buy from supermarkets and formal value chains.  However, spending years in the informal business has seen some of the traders and vendor upgrading their standards to cater for diverse consumer classes. Consequently, informal markets are now part of a business growth path comprising food chain stores, hotels, restaurants and formal institutions.  In order to stay in this game, traders and farmer have been compelled to acquire a certain level of tertiary knowledge, resources and entrepreneurial skills.

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On the other hand, this evolution in markets has brought its own challenges in many African countries where agriculture continues to be the backbone of the economy. The formerly employed and pensioners with reliable sources of income have been attracted to moonlight in informal markets, pushing out poor and low income traders in whose name informal markets were originally set up. Instead of being a domain for the poor, informal markets are now for every business-minded individual. Most of these markets have become part of solid business value chains able to ensure consistency in supply as opposed to ad hoc participation in the market.

Solidifying the aggregation role of informal markets

African food markets are no longer just seasonal events where farmers come to the market according to seasons.  Middle class farmers who have embraced farming as a business are now found in the market consistently since they have built niche markets that have to be continuously served. In order to consolidate its aggregation role, each informal market now requires resources to be able to ensure necessities like potatoes, vegetables, eggs, fish and other commodities are always available.

As niches become highly competitive, ad hoc traders and market participants are being pushed closer to the supply side like road side markets in farming areas and village markets. In these areas, ad hoc traders become small aggregators with just enough resources for pulling a few resources from farming areas.  Once in a while, marginal traders can go to big urban markets where they buy a basket of banana and a crate of tomatoes for selling in local markets where these commodities are not produced.

Need for middle class markets

With urban informal markets becoming part of regular value chains, the need for middle class markets, different from supermarkets or food chain stores has become more urgent in many African cities. New land uses, accompanied by investment in agricultural value chains by different classes of actors, are producing more commodities than can be handled by supermarkets and informal markets traditionally meant for the poor. This has seen many of the commodities overflowing into street sales, some sold from stationery vehicles and makeshift market stalls. Middle class markets from which food chain stores, processors and even exporters can get commodities consistently represent the future of agriculture in developing countries.

Almost everyone now knows how to produce commodities but very few know how to deal with perishables once they have been harvested. Neither are many producers able to anticipate the speed at which consumers consume and come back to buy or re-order.  Ministers, members of parliament, bankers, lawyers, accountants, university professors and other professionals interested in agriculture are all competing in producing and selling agricultural commodities through informal markets when they should invest in building a middle class market of their own.  How can a whole minister compete to sell cabbages in the same informal market with grandmothers struggling to feed orphans?

Need for careful characterization of markets 

In addition to congestion in most informal markets, there is limited differentiation in terms grading and quality. For instance, the prices of a box of tomatoes can range from $1 to $8 in the same informal market yet such a market should be for low income consumers and traders. A trader who sells fruits for $1, another  one who sets a price by counting the number of fruits in a pile and yet another one who sells for $10 for the same commodity quantity, are all found in one market.  While this is good for diversity, it inhibits definition of business boundaries.  Absence of proper clustering means you cannot separate classes or good products from bad products.

Clear characterization and classification can support the evolution of a middle class industry and ensure the definition of Micro, Small, Medium and Large does not just remain on paper.  Different classes should be in specific locations – building layers of one enterprises on another. Where these classes are all in one space, micro and small enterprises end up being over-shadowed by medium and large actors.  It should not just be about numbers of actors in one category but different capacities.  Some commodities can have differently entrepreneurial capacity, quality, standards, formality like registration and markets. For instance, those in processing industries may not want to see commodities being delivered in baskets.

Appeal to a broad section of the middle class

There is need for middle class traders, saving the up-market and farmers like pensioners with high capacity to produce more volumes. For most pensioners, farming is the next career step so they should have appropriate markets. Most pensioners have resources and need a market that can ensure good return on investment (ROI). Some have built networks in government institutions, hotels and even foreign markets. For instance former ambassadors in foreign countries need a market that acts as a holding centre before they connect and ship commodities to their networks in foreign countries. They cannot use informal markets or their farms as holding centres.

Agribusiness is no longer for the uneducated or illiterate. It is now export- focused and a career path for many people. With high literacy levels, it means a lot of ethical considerations like licensing, book keeping and other formal requirements are critical. Unfortunately, governance approaches in developing countries still focus controlling than enabling the growth of local informal economies. Public expenditure is also not taking these markets into account. Collecting and sharing evidence can assist in positioning informal markets for public expenditure. Government input programs tend to absorb a lot of the public expenditure but incentivize corporate industries. Informal markets are different from shopping mall-driven models where people are working long hours for low wages.  On what terms are smallholder farmers in developing countries participating in contract farming models and value chains?  In most cases they are just providing land, cheap labor and pushed into debt cycles for the sake of obtaining inputs. An integral part of informal food markets is the capacity of people to mobilize and exchange food commodities, informed by an intuitive cultural value of food.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Stimulating more value by tracking what is happening

Tracking local activities and keeping daily updates does not just enable communities to practice what they preach. It also helps them to increase awareness and value for the wider society. When farming and fishing communities are able to track local activities, they build their own capacity to analyze what is going on and identify next steps towards positive outcomes. The ability to analyze what is happening at local levels clarifies the nature and size of the local economy and surfaces progressive ideas.

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Pattern recognition

Inability to track activities limits the capacity of many communities in developing countries to know how to improve. Once they are able to track their work, they will know about their situation, behavior and prune future plans. Another key benefit of consistently tracking what is happening is heightened awareness, leading to pattern recognition. For instance, communities that track their production and consumption practices long enough are able to limit damaging practices like land degradation and maximize positive practices like water harvesting. Community intentions and opportunities become more tangible when tracked, leading to positive reinforcement. This does not just speed up change but enable communities to move from old agricultural models to new digitally-enabled ones. Unfortunately, in most African communities there is no one responsible for tracking collective incomes and expenditures.

Tracking can also reveal circumstances under which focusing on local activities can be too small to be viable and how an international focus can be too disconnected to local reality due to diverse interests.  It is through tracking changes in the local environment that communities can embark on activities that enable them to get local rivers flowing again and create a local movement to improve natural resources management. Without tracking, it can be easy for farmers and other value chain actors to focus on crops and forget grass, livestock and wildlife. The contribution of each farming community to national food supply can also be made visible through tracking volumes, seasons and other critical factors. For instance, in Zimbabwe, tracking commodity supplies into informal agricultural markets has made it possible for eMKambo (www.emkambo.co.zw) to persistently notice that more than 70% of commodities flowing into informal markets come from communal areas, except potatoes, oranges, bananas and cabbages which require bigger pieces of land for profitability.

The power of tracking agricultural production corridors through agricultural markets

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The charts (above) show that Manicaland province has remained a major source and supplier of sugar beans into Mbare, Harare maket over the past three years (50%), followed by Mashonaland East (26%), then Mashonland Central (18%) and lastly Mashonaland Central (6%).  More evidence shows that this trend has been driven by investments in irrigation facilities by government and development partners in Manicaland as well as suitable climatic conditions. The trends also reveal the potential of sugar bean to be  a key agro-economic driver that can influence rural industrialization in Manicaland province.

Assimilating local experiences into mainstream views

Tracking and gatherig local evidence can empower farming communities to influence change and get their worldviews assimilated into mainstream national decision-making processes. This can happen if these communities have skilled people who can recognize and capture strategic opportunities. A community that tracks its activities can establish a stronger foundation for scaffolding growth and set achievable ambitions. New grounds for interpreting local knowledge can be inspired through persistent tracking and updating local evidence.  Some of the most important insights that can be generated include existing food supply networks, driving forces, adaptability of food systems to dynamic environments and relationships between food and identity.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6