I am sure this will be one of many posts.
Tanzania embraced socialism under founding president Nyerere begining the end of the 1960s- The communist powers of China and Russia went up against the west to exert influence over Tanzania. China contributed to aid development projects including Dar es Salaam's international airport- ultimately western powers won over and we know what happened- multilateral and bilateral aid organizations kicked in over the decades preaching deregulation, free markets and cut in government spending with a mixed success.
Meanwhile China grew to a major economic power it is today going head to head with western powers in the development game- I could go on about countless development projects that China has now undertaken in Africa in exhange for resources to meet China's growing demand- but I will touch on some to highlight new challenges and opportunities:
- Take a walk around the kariakoo neighborhood of Dar es Salaam and you will see many chinese residents living in apartments among the lower to middle class communities- in many cases, they are the only middle class in some areas. There seems to be no known estimates of how many Chinese residents there are in the city yet alone the country, but it is safe to assume it is on par or more than tradional westerners working at NGOs and multinational organizations. There are even quite a few tourists arriving recently.
- They are working at small businesses from car panel beating shops to flooding the market with cheap and often fake Chinese imports and even some higher value work such as contractors in construction and of course big factories too. You don't see any working at any NGOs or religious groups.
- Tanzanians remain welcoming yet growing cautious and suspicious, in some cases fearing them- as I noted they bring in cheap and often fake Chinese manufactured goods flooding the market. It is rumored that many of them are chinese political prisoners sent to Africa on projects. On a lighter note- thugs used to robbing white expats in broad day light have tried it o with the chinese and have been beaten- they now fear these "Kung-Fu" wielding people.
-Then there is the impact on wildlife- alarmingly elephant poaching is on the rise to meet a demand for ivory in china and other asian countries- reducing a 1/10th of populations. Recently seized ivory tusk DNA testing shows the majority originating from Selous Games Reserve in Southern Tanzania. It is thought these poachers are part of sophisticated Chinese and other Asian organized traffickers.
This illustrates that the Chinese are here and here to stay and well intergrated into the formal and informal parts of the economy, not in and normal ex-pat integration of NGO and multinationals we have seen over decades. It will be interesting to see how this affects the economies of African countries such as Tanzania- will we continue to deal with fake goods from mundane cheap electronics to life saving treatment drugs? Will the growing Chinese owned small businesses, provide greater employment opportunities for locals vs just the Chinese? How will Africa work with the Chinese for a sustainable partnership to protect resources, curb poaching and respect human rights?
-- Post From My iPhone
Tuesday, August 18, 2009
Friday, August 14, 2009
Running a franchise operation in africa
Franchise or retail/kiosk heavy operations are an obvious way to reach and deliver services to the masses. Cell phone top up vouchers are probably more widely available in parts of Africa than mosquito nets or a bottle of water. CFW shops are perhaps one of the most radical franchise/retail kiosk innovations I have come across- turning an inherently centralised service delivery method of hospitals, often crowded and inefficient, to a distributed lean operation empowering local entrepreneurs and distributing health services to rural areas.
These franchise approaches have the potential to innovate in everything from utilities, IT/telecomms and healthcare. Challenges are plenty though- start with the biggest- theft. Employees running any operation are likely to be tempted to steal given how much responsibility is put upon and especially if the turnover is high- take a popular bar with a large stock of drinks- it is inevitable that employees will sell drinks on the side or retain part of the sales for themselves- this extends even to other services, it is reported that vodacom in Tanzania lost millions of dollars through top of voucher theft until they finally made the distributors buy the full value of the vouchers for resell. Bottom line is it is hard to trust employees at such franchise or distributing operations without thought and some serious controls- some are obvious, but worth spelling out here:
- Make your operation process transparent and easy to account for service or inventory- don't assume employees will be fully trustful. This could be as crude as separating payment (with a manager you trust) from actual service or product delivery, new rank and file employees.
- reduce temptation by not having too much cash or inventory build up at each distributor or service location. Check and monitor operations regularly- show employees that you are detailed orientated to the very last penny.
- Hire the most trustworthy people and pay them enough to not be tempted to steal from you- provide enough incentives for them to stay around through bonuses and equity ownership. Too many businesses in Africa start without thinking about this- how will you grow and be successful if you don't give your employees a meaningful stake in the company and so are less tempted to steal but rather to work and improve sales.
- Finally, factor in up to 10-20% contingency for theft in business planning- established businesses have contingency for everything such a bad debts to potential lawsuits/legal fees. In an African retail or distributor operations- contigency for theft is just good business.
These franchise approaches have the potential to innovate in everything from utilities, IT/telecomms and healthcare. Challenges are plenty though- start with the biggest- theft. Employees running any operation are likely to be tempted to steal given how much responsibility is put upon and especially if the turnover is high- take a popular bar with a large stock of drinks- it is inevitable that employees will sell drinks on the side or retain part of the sales for themselves- this extends even to other services, it is reported that vodacom in Tanzania lost millions of dollars through top of voucher theft until they finally made the distributors buy the full value of the vouchers for resell. Bottom line is it is hard to trust employees at such franchise or distributing operations without thought and some serious controls- some are obvious, but worth spelling out here:
- Make your operation process transparent and easy to account for service or inventory- don't assume employees will be fully trustful. This could be as crude as separating payment (with a manager you trust) from actual service or product delivery, new rank and file employees.
- reduce temptation by not having too much cash or inventory build up at each distributor or service location. Check and monitor operations regularly- show employees that you are detailed orientated to the very last penny.
- Hire the most trustworthy people and pay them enough to not be tempted to steal from you- provide enough incentives for them to stay around through bonuses and equity ownership. Too many businesses in Africa start without thinking about this- how will you grow and be successful if you don't give your employees a meaningful stake in the company and so are less tempted to steal but rather to work and improve sales.
- Finally, factor in up to 10-20% contingency for theft in business planning- established businesses have contingency for everything such a bad debts to potential lawsuits/legal fees. In an African retail or distributor operations- contigency for theft is just good business.
Tuesday, August 11, 2009
Global fund Mismanagement in Tanzania
Classic Development 1.0- There is no point in donors providing funds when a recipient country does not have the capacity to handle it. A recent report shows that over $800k of ARV drugs have been mismanaged, some of the reasons mentioned include a weak supply chain and excessive bureaucracy.
http://www.thecitizen.co.tz/newe.php?id=14297
http://www.thecitizen.co.tz/newe.php?id=14297
Monday, August 10, 2009
Welcoming the new Saviours- Good luck- you’ll need it.
Development in Africa is getting a new lease of life- after decades of policies and billions of dollars by the World Bank and IMF with varying success. Efforts by NGOs basically turned parts of sub saharan Africa into a big helpless dependent- foreign aid accounts for up to half or more of some African countries' national budgets. Even though one can point to recent economic growth indicators, fact remains, the benefits have occurred to a few and not a majority of Africans. In many places, such as Tanzania, there are little signs of a growing middle class and a huge informal economy still exists. The main coastal city of Dar es Salaam contributes an estimated 85% of Tanzania’s economic activity yet with about 5M people, barely an 8th of the country’s population.
But now a new set of players are getting into the development game bringing a new set of rules with the promise to save Africa. Call it “development 2.0” we now have microfinance banking institutions lending to small scale entreprenuers and targeting women, new social enterprises, foundations and “philanthrocapitalists” with huge fortunes to spend and a new determination and focus. With Western countries reeling from a recession, China, India and the middle east are becoming more and more active in African development as they seek partnerships of mutual interest and bring new models and approaches to providing aid and investment to Africa. Even western donors such as the USA are demanding more transparency and accountability before aid is disbursed and in many cases playing favourites with African countries that “behave” and are making efforts in stamping out corruption.
Suddenly the African development landscape looks different- major recessions like the one we are experiencing creates opportunities for things to be shaken up- consider these points:
People- Brain Drain to Brain overflow
- Migrant workers are not only sending less in remittances back to their homeland developing countries due to the recession but may also return home and use the skills and any leftover capital to build real businesses and bring much needed employment opportunities in the private sector. From former London investment bankers joining African banks or raising development funds for small businesses to Silicon valley engineers building the next ISP or working on mobile banking.
- Talented new graduates from the top schools with less employment opportunities in their countries are turning to emerging markets and considering new career paths- Suddenly a team consisting of Chinese, European and American students in an energy or healthcare startup in Africa is not that far fetched.
I recently met two young American women working in an Tanzania energy startup who are living in the less afluent myananyamara suburb rather than the posh ex-pat heavy areas of Dar es Salaam's oysterbay- their experience and perspective will be very different if they lived in and brought families to the oysterbay peninsula as is the case with many aid development workers seeking a "cushy utopia" lifestyle and risk becoming out of touch with the people thy are trying to save.
Money new sources
- Traditional donor countries are slashing development budgets to focus on their economies- recipient countries are now forced to look for new funding sources from bond issues in capital markets to investments from china and the middle east.
- Private Equity and other investment funds looking for the next growth sectors and markets are now seriously considering investing in Africa.
- Philanthrocapitalism donations have been increasing to Africa. For instance the Gates foundation is disbursing up to $1B a year thanks to the Buffet contribution that is kicking in this year. All this money is good, but makes ZERO difference if the reciepient countries do not have the capacity to absorb these funds due to widespread corruption and incompetence on the ground.
These are just a few areas that will bring both opportunities and challenges to the next phase of African development. While many organizations' marketing and PR outlets will highlight on their successes (they have to in order to raise funds and generate interest), I want to bring balance in the discussion on what is going directly on the ground with development 2.0, I also want this blog to be a discussion resource to anyone new or considering moving to Africa to join this movement- I welcome comments and guest postings. Be warned that this is not the place to just trumpet your successes- I will take a skeptical tone and ask tough questions. So you want to save Africa? There are many reasons why 40+ years of aid has not worked, some of those reasons may form the same obstacles in the next 40 years no matter how novel the approach- the fact is change, especially originating externally, is hard.
But now a new set of players are getting into the development game bringing a new set of rules with the promise to save Africa. Call it “development 2.0” we now have microfinance banking institutions lending to small scale entreprenuers and targeting women, new social enterprises, foundations and “philanthrocapitalists” with huge fortunes to spend and a new determination and focus. With Western countries reeling from a recession, China, India and the middle east are becoming more and more active in African development as they seek partnerships of mutual interest and bring new models and approaches to providing aid and investment to Africa. Even western donors such as the USA are demanding more transparency and accountability before aid is disbursed and in many cases playing favourites with African countries that “behave” and are making efforts in stamping out corruption.
Suddenly the African development landscape looks different- major recessions like the one we are experiencing creates opportunities for things to be shaken up- consider these points:
People- Brain Drain to Brain overflow
- Migrant workers are not only sending less in remittances back to their homeland developing countries due to the recession but may also return home and use the skills and any leftover capital to build real businesses and bring much needed employment opportunities in the private sector. From former London investment bankers joining African banks or raising development funds for small businesses to Silicon valley engineers building the next ISP or working on mobile banking.
- Talented new graduates from the top schools with less employment opportunities in their countries are turning to emerging markets and considering new career paths- Suddenly a team consisting of Chinese, European and American students in an energy or healthcare startup in Africa is not that far fetched.
I recently met two young American women working in an Tanzania energy startup who are living in the less afluent myananyamara suburb rather than the posh ex-pat heavy areas of Dar es Salaam's oysterbay- their experience and perspective will be very different if they lived in and brought families to the oysterbay peninsula as is the case with many aid development workers seeking a "cushy utopia" lifestyle and risk becoming out of touch with the people thy are trying to save.
Money new sources
- Traditional donor countries are slashing development budgets to focus on their economies- recipient countries are now forced to look for new funding sources from bond issues in capital markets to investments from china and the middle east.
- Private Equity and other investment funds looking for the next growth sectors and markets are now seriously considering investing in Africa.
- Philanthrocapitalism donations have been increasing to Africa. For instance the Gates foundation is disbursing up to $1B a year thanks to the Buffet contribution that is kicking in this year. All this money is good, but makes ZERO difference if the reciepient countries do not have the capacity to absorb these funds due to widespread corruption and incompetence on the ground.
These are just a few areas that will bring both opportunities and challenges to the next phase of African development. While many organizations' marketing and PR outlets will highlight on their successes (they have to in order to raise funds and generate interest), I want to bring balance in the discussion on what is going directly on the ground with development 2.0, I also want this blog to be a discussion resource to anyone new or considering moving to Africa to join this movement- I welcome comments and guest postings. Be warned that this is not the place to just trumpet your successes- I will take a skeptical tone and ask tough questions. So you want to save Africa? There are many reasons why 40+ years of aid has not worked, some of those reasons may form the same obstacles in the next 40 years no matter how novel the approach- the fact is change, especially originating externally, is hard.
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