Making sense of wealth distribution in the new networked economy

Just as they distribute commodities and knowledge to all classes of people and income levels, informal markets in developing countries continue to play a central role in redistributing wealth. African economies have traditionally been characterized and driven by community knowledge sharing and individual innovation. While individual innovation was privatized, local ideas were shared through the community in ways that fostered wealth distribution through shared skills, knowledge and natural resources. Common pool resource sharing was also a powerful means of rationalizing and distributing resources like land, water, pastures and different forms of capital at the time. Taking all these dynamics into account, it can be argued that traditional economies had a more even wealth distribution pattern. Unlike the current scenario where Africa economies are dominated by a few millionaires, the gap between the rich and poor was not as wide as it is at the moment.

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Demerits of employer – employee relationships

The traditional economy had an effective system of passing on knowledge from one generation to the next and this ensured community cohesion. Conversely, the advent of the formal economy brought new ideas and technologies which became confined in formal enterprises.  An employer-employee relationship was created where employees were just supposed to have knowledge limited to their tasks in the production chain. Such surface knowledge would only sustain their families since it ensured they stayed employed, earning an income. The work environment was structured in such a way that employees became conversant with surface knowledge and had no access to deep, back end knowledge.  For instance, an employee would master how to operate a processing machine or drive a tractor but not know enough to make his/her own machinery or improve on what has been invented so that it meets the context.

This scenario had led to pockets of privatized knowledge within a few private companies or individuals.  Also created was a knowledge hierarchy and skewed ownership structure where those who own innovations and capital ended up owning most of the resources available for exploitation.  For instance, adding value to timber, minerals and agricultural commodities was based on skills and knowledge confined to the owners of capital.  Employees just contributed labor and knowledge but could not use that knowledge to create their own enterprises.  An employee’s contribution was owned by the company while knowledge from the company was privatize property that could not be used elsewhere. While innovation by individual employees focused on improving the quality of products and services, the employer-employee relationship created a wider gap in wealth distribution with much of the wealth being accumulated by employers.

Lower barriers to entry and new levels of innovation

The current informal, networked economy has less restrictions and barriers to knowledge sharing compared to the formal economy where recipes and formulas were protected for exclusive exploitation.  There are now more direct relationships between manufacturers and consumers with consumers contributing to the quality of products through continuous feedback. In fact, consumers are becoming co-creators of processed products. These dynamics are improving products and services and increasing incomes for SMEs.  However, there are still cases where privatized knowledge continues to be used in producing some products in ways that limit innovation.  For example, you cannot improve someone else’s seed or equipment.

Most SMEs who were previously formally employed are now using their previous knowledge to produce goods and services that were the preserve of their former employers. The context has changed from legislation and copyright laws which used to protect the interests of the few through prohibitive policies.  In the informal networked economy, an open competitive environment prevails in favor of those innovative enough to convert challenges into opportunities.  This is translating into increased products, diversity, resource utilization and wealth creation.  For instance, in Zimbabwe the formal economy had mining claims where one would keep a piece of mineral land for exclusive use even if s/he was not willing to exploit it immediately for the benefit of the entire economy. One could also keep 5000 hectares of land lying fallow for years, merely because s/he had exclusive rights. This practice of locking resources to one individual is being challenged by the new network economy, giving way to effective rationalization of resources to ensure more players participate.

Since ICTs have revolutionized the economy, nothing can stop people from sharing knowledge within their communities and with the global world. Local people living abroad can easily invest back home while communities can globalize their entrepreneurial mindsets in ways that earn them income while in remote villages. On the other hand, local institutions have to re-invent themselves and revisit their traditional business models.  For instance, banking will no longer be what it was a few decades, thanks to the ICTs-driven mobile money phenomena. The same applies to markets. We used to have formal markets confined to particular producers, tied to strong niches between producers and the market. That is now becoming a public secret. A smallholder farmer who can meet the requirements of hotels, supermarkets and processors can easily enter that market and upset traditional balance of economic power. Models like contract farming were used as barriers to entry, with the effect of interfering with a competitive environment. Most actors who lobby for the introduction of barriers are afraid of competition.  Wealth distribution starts in the market as it moves money to farmers and commodities to where they are needed.  This is where ICTs are becoming a critical tool kit for distributing wealth.

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

The evolving role of smart intermediaries in African agriculture

While digital technology is threatening to diminish the role of intermediaries in African agriculture, there are signs that smart intermediaries will be around for some time. Although it is spreading connectivity among farmers, traders, consumers and policy makers, digital technology will always need people who translate services between value chains actors, most of whom may struggle to appreciate each other’s contribution.

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Digitization of agriculture and rural communities is increasing need for customized services that are too expensive or rare for farmers, traders or consumers to consolidate on their own.  For instance, very few farmers have the capacity and resources to follow their commodities along the entire value chain or ecosystem. On the other hand, digitization is accelerating the movement of commodities and information in ways that make it difficult for farmers and other value chain actors to keep pace with opportunities and threats.

Intermediaries as creators of value

As agriculture and food supply models become more complex, intermediaries that will not disappear overnight are those able to build sustainable models. Failure to do so means they will find themselves on the endangered list. The intermediaries that persevere will be those that adapt and produce unique value such as:

  • Consolidating each value chain actor’s comparative advantages in ways that prevent some value chain actors from falling into avoidable pitfalls.
  • Building relationships and providing a neutral space for competitors to share reliable information. Without such a space, competitors tend to mislead each other. There are circumstances where it makes sense for competitors to collaborate through facilitating information and knowledge exchange. Unfortunately, competitors often hide useful insights from each other because some will have incurred costs in gathering business intelligence and may not recoup such costs if such knowledge is made a public good.
  • Rationalizing the utilization of resources in order to avoid duplication of efforts. Farmers who get into a new market often require guidance from intermediaries. There are cases where traders may pretend not to have financial services when the opposite is true and they are only interested in testing financial facilities from new players in comparison to what exists. On the other hand, some farming communities may pretend they don’t have coping strategies in order to get free inputs and services when in fact they already have better ways of coping with challenges. All this requires intermediation.

Integrating ICTs into needs-based content development

ICTs are not independent of human skills and capacities in terms of efficiency.  Developing needs-based content requires an intermediary. For instance, what informs the development of a mobile application or a short message service?  The most important input is the quality of content that makes a short message service a conversational tool. ICTs can fuel the interpretation of invisible relationships into strategies that would otherwise remain locked within actors. Sometimes value chain actors preserve knowledge to their advantage in ways that hinder knowledge sharing and flow. Allowing knowledge to flow enhances competitive advantages.

For instance, Mbare agricultural market has its own knowledge which has to be consolidated and connected with knowledge from other markets, producers, consumers, processors and others. eMKambo is already using ICTs to accelerate and sustain this process. Just as commodities are pushed from producers to consumers, the same happens to knowledge. It is often difficult for knowledge to move from farmers to consumers directly. How can a rural farmer communicate with an urban consumer whose income and consumption patterns are hidden from farmers?  All these conversations have to stay fluid, instead of each of the millions of farmers trying to communicate with millions of consumers.  That is how trends become a consolidated value-added product for diverse value chain actors.

Information and knowledge are different from seed, fertilizer or other inputs. If knowledge is to be shared productively, many actors have to be involved. Some of the value is found at the extremes of value chains than in formal markets. Intermediaries become more critical in facilitating transactions between producers and consumers as well as interpreting high level patterns within the ecosystem. By monitoring and herding commodities and actors, they close gaps between disconnected value chain actors that require one another to survive. In many developing countries, most value chain actors do not have access to those they need in order to stay alive. As technology deepens connections between producers and consumers, smart and dynamic intermediaries will continue satisfying a high value function.

 

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

When is a disadvantage actually an advantage?

If it was true that more resources always lead to better results, African communities in high rainfall areas and favorable climatic conditions would be the richest and happier than everyone else. Development organizations and policy makers are slowly awakening to the reality that dumping resources on communities does not guarantee a beneficial end. For instance, projects set up over the past decades have not moved poor people out of poverty as expected. It looks like something more is needed.

Is there advantage in disadvantage?

Evidence from several African informal food markets indicate smallholder farmers and rural communities that are beset by disadvantages have ways of becoming competitive by compensating for their weaknesses. A typical example is how resource-poor smallholder farmers tend to bring more high quality commodities to food markets than large scale farmers who have many advantages like alternative sources of income. In the absence of quick answers, African smallholders force themselves to innovate and solve their own problems. That is why free inputs, under whatever name, are not a good idea. The majority of smallholder farmers produce high quality commodities because they pay closer attention to detail, knowing that agricultural commodities are their only source of livelihood.  On the other hand, those with alternative sources of income don’t care much about producing competitive products or developing sustainable markets.

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The urge to overcome weaknesses

eMKambo is not suggesting smallholder farmers and poor people should be denied resources as a way of nudging them into radical innovation. However, it seems scarcity of resources has a tendency to strengthen rather than crush smallholder farmers.  By working hard to know their disadvantages and taking action to turn them into advantages, many smallholder farmers consider disadvantages a permission to succeed. More support often paralyses African politicians who masquerade as farmers when all they need are free inputs whose outcome they do not even trace to the market.  On the other hand, farmers with disadvantages, beyond just unavailability of inputs, feel a strong need to overcome their weaknesses.

However, overwhelming disadvantages can hinder progressive growth. When rural communities fight poverty, malnutrition and socio-economic battles with less sophisticated weapons and tools, they are more likely to lose those battles. On the other hand, it is not enough to have sophisticated weapons in the form of good soils, farming equipment, good road network, access to finance and proximity to the market when one is not able to use those weapons and tools productively. Smallholder farmers can only exploit their disadvantages if basic amenities and resources are made available first.  In most African rural areas, some levels of poverty and squalor make it difficult for poor people to take advantage of their disadvantages.

 Disadvantages as a platform for creativity and innovation

Useful disadvantages like limited resources encourage competition and prevents complacency in ways that foster equitable growth and development. When farming communities clearly identify a disadvantage they will have successfully identified something they do not have that they want.  A degree of individual and collective resilience is necessary in order to take the disadvantage forward. These communities should be encouraged to further develop their strengths rather than waste time working on their weaknesses. That way, they will take stock of what they do well and cultivate critical skills and strengths for further success unlike continue believing they are poor and not able to do anything for themselves.

The power of random and informal conversations should not be underestimated.  By telling each other positive stories in the market, smallholder farmers tend to be the answer to many questions bugging their peers for decades. Some farmers hide their disadvantages until a courageous peer with the same challenges tells his/her story. Turning disadvantages to advantages enables farmers and other value chain actors to open their hearts to others.  Adverse conditions calibrate their abilities and strengths to inspire them to push against both visible and invisible barriers to success. Disadvantageous circumstances teach them to adapt and embrace flexibility with focus and tenacity. Struggling through disadvantage turns rote to reality.

So, should we continue blaming development organizations for initiating projects?

It might be unhelpful to continue blaming development organizations which start projects that become white elephants. The local community should ensure those projects succeed. Every new project is a chance for local people to succeed. When the NGO goes away, it is creating a strategic disadvantage in the form of withdrawing resources.  Rather than exploiting this strategic disadvantage and move forward, most communities go back to their original situation. Usually people outside the beneficiary group, who are naturally curious and innovative, are the ones who quietly copy and innovate. Metal fabricators are an example of people who take advantage of strategic disadvantage.  Most of them have not been trained in formal engineering but have taken that lack of training to become creative in turning those disadvantages into tangible outcomes.  Creating stumbling blocks is giving people a chance and permission to succeed.

 

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

Using evidence to connect with a bigger purpose

In their pursuit for survival, most value chain actors in developing countries do not clarify their contribution to a big purpose like economic growth.  For instance, instead of seeing how their work contributes to national food and nutrition security, most farmers and manufacturers tend to be interested in the colour of the money. That is why their first question to the market is how much is the market offering per a given quantity of specific commodities?  Ideally, money and better incomes should be outcomes from a much larger purpose. Those motivated by money or high prices will always struggle to achieve their goals.  There will never be enough money to satisfy all wants.

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The power of evidence and reflection

Everyone should ask themselves how they are contributing to socio-economic resilience and growth. For instance, those fond of importing goods into the country should demonstrate how their activities contribute to economic growth. Exporters should do the same. Why do importers of basic commodities think importing is the solution to the high cost of producing agricultural commodities like soya bean and fruits locally? It should be easy to bring farmers, processors, transporters and input providers together and explore each other’s level of effort in supporting socio-economic growth and resilience.

By taking 30% from farmers’ incomes, how do financial institutions and transporters think they are contributing to socio-economic growth? How do exorbitant interest rates charged by African financial institutions contribute to economic growth? While many African countries are full of development organizations, economic growth and resilience cannot be left to development partners. Are development organizations expected to be more patriotic than local value chain actors who seem more interested in money than long-term economic growth and future prospects?

Building a new evidence-informed mindset

For farmers who say they can’t accept low prices due to the cost of inputs, what is going to be the end?  What is the price of money that causes input providers to increase their price, leading to consumers failing to afford agricultural commodities?  Developing countries cannot continue blaming the international market for not accepting their products but focus on finding ways of making their commodities competitive on the international market.  Critical questions to be answered collectively include:

  • Who is causing our commodities to be uncompetitive on the local and international market? Is it the farmer, input provider, financier, transporter or policy makers?
  • Why are we failing to feed our people when we have abundant natural and human resources?
  • Why should consumers buy local food when imports are available and cheap?

Knowledge-intensive methods are critical in addressing these chicken and egg challenges. Instead of resorting to a blame game, every value chain actor should ask themselves whether they are contributing negatively or positively to socio-economic sustainability. When we see commodities come into the country through our borders we should ask ourselves whether we have reached such a crisis point that most consumers no longer have any choices or we just open borders willy-nilly. Naturally consumers should be allowed to adjust and exhaust all their options before resorting to imports. We would rather have temporary shortages causing local producers to innovate and benefit from that investment later on.  In most cases, when they don’t find what they want, consumers tend to adjust their preferences.  However, there are cases where compelling forces nudge consumers to go for cheaper commodities.  For instance, low disposable income can over-power the superior taste and organic nature of local products, prompting people to buy foreign food because it is affordable.

 

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