Archives for the month of: January, 2012

Despite the efforts to improve the “ease” of doing business within the East African Community, exporting goods to Tanzania is not getting any easier. There is a huge problem with non-tariff barriers:

[Tanzania] has added rather than subtracted checkpoints along the main export corridor within its territory; it charges imports of Kenyan plastics at up to 25 per cent tax, even though they are zero-rated under the treaty; it charges Ugandans $50 a visa, even though it should be free; and it has banned the sale herbal products at home unless they are Tanzanian. In a particularly astounding move, it won’t let cargo trucks from Burundi, Rwanda and Uganda move around the country, at all, after 6pm.

More at BeyondBrics (FT)

My supervisor calls them “institutions of hope” but most academics use fancier acronyms like ROSCAs and ASCAs, or terms like merry-go-round, saving clubs, business associations or insurance networks. Kenyans just use the word “chama” to define “groups” or “associations” that people voluntarily create to pull resources, help each other or find common “rules of the game” in areas where there is little legal enforcement.

Yesterday, during one of the awesome Kariobangi lunchtime conversations (that’s when the best observations always come out!), my table companions and I realized that it would be impossible to understand the dynamics of local markets without considering chamas. They are an “infrastructure” of regulation and financial support that shapes the way businesses function. Though, there are huge differences within the local market in Kariobangi/Korogocho: my impression is that the more businesses operate informally, the more they depend on chamas, the more business are formalized, the lower is their reliance on these social networks–we’ll see what the data says.

The best statements that came out during lunch:

  1. The informal economy would not exist without chamas.
  2. If the government effectively outlawed chamas, the informal economy would disappear (let’s hope that no politician is listening to us!).
  3. Chamas are more relevant today than they used to be for our parents.
  4. Everybody uses chamas, also the rich people.

I heard this complaint several times during fieldwork: people ask me to be different from “the others” (i.e. other researchers) and to advertise the Kariobangi industrial cluster in a positive way. I never thought about it too much, but today I had a conversation during fieldwork that clarified the issue.

Basically, some entrepreneurs feel that researchers focus only on the challenges constraining growth in the local economy. Some talk about rampant poverty and its effects, others  about lack of human capital, non-compliance with government regulations, tax evasion, low product standards, low productivity, corruption, criminality, evil ethnic networks and what have you. On the other hand, entrepreneurs get cheered for their resilience and capacity to survive despite everything. So they become the highly romanticized ‘survival cluster’ which is loved in the field of development studies but rarely attracts new businesses to work or invest in the area.

If the study is successful (according to the researchers’ standards) the situation gets worse. The effect is that the number of MA and PhD students in the cluster increases exponentially,  so entrepreneurs get to fill out a million other questionnaires and the cluster becomes a “hot topic” in development studies; and that’s usually bad news. Potential clients, investors or business partners are not only neglected in the process. They may even gradually shun away from the cluster: who wants to do business with someone known for poverty and low quality of their products?

This might be an unknown collateral damage of development studies: over the long term, being a “hot topic” is a form of negative branding for the cluster. The problem is even worse for an area like Kariobangi that it is considered relatively advanced in the local economy, but tends to be depicted in terms of informality and marginality in most academic studies.  This is definitely bad marketing for local businesses.

I went through Chris Blattman’s excellent reading list on “African Poverty and Western Aid”, and it entered  my top-10 list of “courses-I-wished-I-could-take-but-probably-never-will”. It comes just after Tyler Cowen’s Law and Literature course at George Mason University  (first compulsory reading is the Holy Bible and the last is the Thanatos Syndrome .. !)

Chris recommends one of Paul Krugman’s classic essays “The Fall and Rise of Development Economics” (he also blogged about it here).  For some reasons I hadn’t read it before, but I warmly recommend it to anyone involved in international development. There is also a comprehensive (and rather leftist) review here.

The essay basically divides the evolution of development economics in two phases: First, the so-called High Development Theory started from Rosenstein-Rodan “Big Push Model” (1943) up to Hirschman’s Strategy of Economic Development (1958), which he considers the “fall” of development economics.

the crisis of high development theory in the late 1950s was neither empirical nor ideological: it was methodological. High development theorists were having a hard time expressing their ideas in the kind of tightly specified models that were increasingly becoming the unique language of discourse of economic analysis. They were faced with the choice of either adopting that increasingly dominant intellectual style, or finding themselves pushed into the intellectual periphery. They didn’t make the transition, and as a result high development theory was largely purged from economics, even development economics.

The rise occurred in the late ’80s when rigorous models started to appear in development economics. The famous paper by Murphy, Shleifer, and Vishny (1989) created a very simple model made of  “three pages, two equations, and one diagram” and it explained the 50-years-old Big Push theory with the use of some math .. And development theory found a place in mainstream economics.

One of the most interesting passages is “The Evolution of Ignorance“, where Krugman compares development economics to the evolution of African maps between 15th and 19th centuries.

In the 15th century, maps of Africa were, of course, quite inaccurate about distances, coastlines, and so on. They did, however, contain quite a lot of information about the interior, based essentially on second- or third-hand travellers’ reports. Thus the maps showed Timbuktu, the River Niger, and so forth. Admittedly, they also contained quite a lot of untrue information, like regions inhabited by men with their mouths in their stomachs. Still, in the early 15th century Africa on maps was a filled space.

Over time, the art of mapmaking and the quality of information used to make maps got steadily better. The coastline of Africa was first explored, then plotted with growing accuracy, and by the 18th century that coastline was shown in a manner essentially indistinguishable from that of modern maps. Cities and peoples along the coast were also shown with great fidelity. […]

It should be obvious what happened: the improvement in the art of mapmaking raised the standard for what was considered valid data. Second-hand reports of the form “six days south of the end of the desert you encounter a vast river flowing from east to west” were no longer something you would use to draw your map. Only features of the landscape that had been visited by reliable informants equipped with sextants and compasses now qualified. And so the crowded if confused continental interior of the old maps became “darkest Africa”, an empty space.

Full paper

If you haven’t heard about Mocality, you should definitely check it out. It’s a Kenyan online business directory designed for promoting local enterprises (also the very small ones) and making them easily searchable on the net and mobile phones.

One of the (not-yet-implemented) ideas we have in Kariobangi is to encourage entrepreneurs to sign up with the website and making their businesses visible online.  I think that this will help them a lot. But this is another story.

I was shocked to read on Mocality Blog that Google’s new project “Getting Kenyan Businesses Online” (GKBO) contacted Mocality users and made up completely fake stories to steal their clients; until they got busted:

I’d like you to meet Douglas. On this call (first 2 minutes) you can clearly hear Douglas identify himself as Google Kenya employee, state, and then reaffirm, that GKBO is working in collaboration with Mocality, and that we are helping them with GKBO, before trying to offer the business owner a website (and upsell them a domain name). Over the 11 minutes of the whole call he repeatedly states that Mocality is with, or under (!) Google.

Between 10am and 1pm on December 21st, we received 6 others just like it (from 5 different Google Kenya employees) before switching back to normal service. We estimate that this team were calling 20-25 Mocality business per hour, since 7 calls over 3 hours, only 10% of calls redirected: 7*10/3= 23.3. calls/hour)

On all calls, the same script is followed – A Google Kenya employee calls a Mocality business and tries to deceive them into signing up for their competing product, by claiming that we are working together.

It gets worse: Here’s a complete transcript ( with translation of the kiSwahili portions) of a another call, in which the caller goes further, claiming that Mocality engages in bait-and-switch practices to try and charge businesses upto Ksh. 20,000 ($200) for their listings. Mocality has never and will never charge for listings. The irony: on the same call, the caller tries exactly that tactic for GKBO’s hosting fees.

Of course Google Kenya has to provide an explanation for its behaviour. For now I’ve only seen a scant mea culpa on Google+

We were mortified to learn that a team of people working on a Google project improperly used Mocality’s data and misrepresented our relationship with Mocality to encourage customers to create new websites. We’ve already unreservedly apologised to Mocality. We’re still investigating exactly how this happened, and as soon as we have all the facts, we’ll be taking the appropriate action with the people involved.

Not enough, I would say. But it’s a start.

Interesting new paper by Dinkelman and Ranchhod on the Journal of Development Economics (ungated version here).  Here’s the abstract:

What happens when a previously uncovered labor market is regulated? We exploit the introduction of a minimum wage in South Africa and variation in the intensity of this law to identify increases in wages and no statistically significant effects on employment on the intensive or extensive margins for domestic workers. These large, partial responses to the law are somewhat surprising, given the lack of monitoring and enforcement in this informal sector. We interpret these changes as evidence that strong external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.

I was very happy to see that many of my favourite international development blogs have published their end-of-the-year blog statistics (i.e. number of views, number of regular readers, most popular posts, etc). Though, looking at these numbers can be daunting for new bloggers who struggle to go beyond zero views per day.  So, in order to cheer up all of us new bloggers I have decided to publish the Kariobangi Blog statistics. Though, before laughing, please remember that Kariobangi is only a little more than 2 months old!

So.. the number of views is … 297 .. which makes it an average of 4.2 views per day. I know that the number is very small, but I am happy considering that I have started posting only at the end of October 2011 and parts of the blog are still under construction. I would like to thank all  the people who visited Kariobangi and I encourage you  to continue commenting and sharing.

Here are  the 2011 stats of more popular development blogs (at least the ones that I follow):

TOTAL VIEWS IN 2011:

Chris Blattman blog: 857,833

From Poverty to Power by Duncan Green: 291,712

A View from the Cave: 75,959

Marc Bellemare: 29,911

Haba na Haba: 25,118

And here’s a pretty histogram of the average daily views:

I know, I have a long way to go! Let me know if I forgot to mention other blogs (which have shared their statistics), and I will update the graph.

In terms of plans for 2012, I will try to increase the number of weekly posts and to build a new section entirely dedicated to the businesses operating in Kariobangi. The idea is to show the products made in the area, the spaces where people work and their stories. Entrepreneurs always ask me to do some positive marketing of the area (and free of charge). I’ll have to think a smart way of doing it. Suggestions are welcome!

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