When will developing countries stop importing knowledge?

It is lamentable that, in spite of setting up hundreds of universities and research institutes, developing countries continue to import knowledge.  For instance, African countries are not just importing equipment and finished products from the West and East but also importing knowledge in the form of prescriptions on how to use those imports. Each imported piece of machinery comes with a manual demonstrating how to use it, not how to build it from scratch.  When an African country imports agricultural machinery from China or Germany, it is importing knowledge that it cannot control because the hidden formulae and intricate processes used to produce the machinery remains in China and Germany. What accompanies the machinery to Africa are manuals and, to some extent, engineers whose main role is to set up and manage assembly plants in Africa.

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There is an imbalance between the knowledge developing countries import in the form of products and services and what they export in the form of raw materials. The current balance of payment challenge does not just result from the importation of physical products but the fact that developing countries continue to import knowledge which they cannot control. Matching the amount of raw materials and human capital exported from Africa with knowledge and products imported into Africa shows a negative balance in favor of where knowledge and finished products are coming from. A country that imports finished products often lacks knowledge to produce those products locally. However, with knowledge, a country can mobilize resources to product diverse products.

Surfacing invisible commodities and related knowledge

Research institutes and universities in developing countries are squandering opportunities to generate and adapt agricultural knowledge in ways that respond to local needs. Food commodities that are being ignored by these knowledge workers include pearl millet, rapoko, indigenous rice, guinea fowls, indigenous chickens, turkeys, ducks and rabbits, to mention just a few. The majority of universities and researchers want to be associated with hybrids whose knowledge is largely imported. There has not been consistent efforts to produce diverse by-products like confectionery and breakfast cereals from indigenous small grains, for instance. These commodities still remain on the sidelines with a few NGOs trying to promote them through annual food fairs. There is no meaningful commercialization to ensure farmers earn better income from these important commodities with consumers accessing better nutrition.

 Missing the advantages

Formal and predictable markets for indigenous commodities are taking years to mature and become mainstream.  This is worsened by lack of branded by-products from these commodities that are mostly indigenous and have indigenous roots.  These commodities are also losing space and significance in the market despite several advantages that include:

  • In a changing climate, indigenous and local commodities represent resilience.
  • Being closer to natural and organic identities, these commodities are associated with good nutrition and healthy eating.
  • Their cost of production is low because they are relatively cheap to produce. You do not need foreign currency to produce guinea fowls, road runners, pearl millet or Murunjurunju
  • Since they can be produced without chemicals like growth hormones that can cause side effects to consumers, they are considered safe food by many health conscious consumers.
  • There is a huge untapped market in the form of the young generation who grew up not eating this food and are ready to taste these commodities.

Colonial hangover

The old generation of Africans grew up under a colonial food system where diets were prescribed and forced from formal work places and cities to ordinary households. Most settler farmers who controlled agricultural production leaned on hybrids because they did not understand indigenous crops and livestock. These farmers produced much of the maize, wheat and other hybrid commodities that fed urban processing industries where many indigenous people sought employment and ended up consuming what was cooked in canteens at their work places. This led to forced demand for products, for instance, in the form of food hampers and meals designed for hospitals and other public institutions. Supermarkets were also stocked with processed food produced by big commercial farmers, linked to colonial seed companies and researchers.

To a large extent, there was collusion along the entire food chain at the expense of indigenous food. Technology and knowledge for producing maize, wheat and other exotic foods was imported.  Research in exotic chickens, beef and horticulture was also imported.  The West has closed formulae for the products exported to developing countries.  For instance, Brahman cattle eat stock feed from processing companies linked to seed companies.  Indigenous chicken eat small grains but African countries have not developed companies that produce small grains stock feed and seed companies that specialize in small grains seed.

Lack of knowledge development

Indigenous knowledge surrounding indigenous food is still passed on either by observation or word of mouth because local universities and researchers have not bothered to develop strong research pathways around it. Demand for our indigenous food like small grains and indigenous vegetables is not yet fully influenced by tastes and preferences but by circumstances like health. People start eating small grains in response to recommendations by the doctor or health institutions. This is more of forced demand.  Many consumers who produce and eat finger millet in urban plots are doing so due to recommendations from their medical doctor.

Religion is also playing an unfortunate role in reducing the potential demand for indigenous foods like rabbits, pigs and ducks whose consumption is forbidden by some religious sects.  Some indigenous foods are negatively associated with African culture. For instance, people who love finger millet are regarded as being possessed by spirit media, which some religions frown upon.  The same reasons are being used to deny African medicinal herbs space on the market, to the advantage of Eastern and Western medicinal herbs. While Zumbani and other traditional herbs have, for generations, been known to treat certain human ailments, the moment a traditional medical practitioner touches them, the herb is stigmatized.

Preventing the slow death of Indigenous Knowledge Systems

Indigenous Knowledge Systems are dying as developing countries continue to depend more on outside knowledge which is too risky because poor countries cannot control push-cost inflation for knowledge they do not fully know and own. Every country that imports fertilizer or chemicals is importing formulae/knowledge which it cannot control.  Local research institutes and universities have failed to develop indigenous fertilizer combining animal manure, ant hills and leaves from different trees (Murakwani).  The contents of slurry from several biogas projects are not being carefully and consistently studied to mass produce local fertilizer.  What would it take for local universities and research institutes to convert animal manure into formulable products like one bucket of manure equivalent to a certain number of crops in the field?

Instead of undertaking thorough livestock research and development, Western educated Africans are busy condemning indigenous cattle and goat breeds in terms of size yet these animals have more sustainable  characteristics for a rapidly a changing climate. African countries are being encouraged to embrace exotic breeds and processes like Artificial Insemination (AI) which are too scientific and not relevant to local contexts. Also being promoted are feedlots in which cattle are fed imported grasses and chemical additives. Why are local research institutes and universities not researching and improving on local grasses and pastures?  A lot of money is going towards research but researchers are waiting for the natural processes to develop pastures and leaving animals to make their own choices in terms of good grasses that could be nutritious for them. There is no reason why researchers are not being informed by livestock choices to select and research on the best pastures with medicinal or nutritional properties for different types of livestock. Such initiatives could lead to setting up of plantations of natural thorny bushes and grasses that are good for livestock, the same way some indigenous fruit trees are being domesticated.

 Persistent loss of intellectual property

Many developing countries are losing their intellectual property in various ways as the West is quickly patenting Indigenous Knowledge Systems. Several medicinal and food products in the world have originated from African economies but the West and China are quick at gathering and processing information and knowledge to their advantage as well as rush to create brands and patents. While Marijuana, which grows very well in a few African countries, is being smoked under illegal conditions, its medicinal properties are gaining prominence in the West and very soon they will commercialize it before local research institutes and universities have acquired the most useful knowledge in producing related medicines.  Once they export it without adding value, as is the case with cocoa, tobacco and others, producing countries will start buying back medicines from their Marijuana at exorbitant prices.

Mechanisms have to be put in place so that if indigenous knowledge is institutionalized in universities and research institutes, it has to have end users who can turn it into goods and services on demand.  Some local people have been trading indigenous commodities for more than 30 years. They have cultivated their own invisible markets together with related knowledge, passed on from one generation to the other.  Unfortunately such knowledge is not documented into conventional curricular.  The majority of people who continuously produce and trade indigenous foods have valuable undocumented entrepreneurial skills. Research institutions and universities that capture and embed all this knowledge will enable their countries to save billions of dollars and change the lives of the majority.

 Translating literacy into goods and services

Countries like Zimbabwe are failing to convert their more than 90 percent literacy rate into knowledge that can be exported in the form of goods and services toward improving the nation’s balance of payment. The country is importing knowledge in the form of products with prescriptions, formulae and structures, with no idea of where the answers were arrived at.  For instance, the country’s health system is taking medicinal products prescribed from outside yet some of the diseases are contextual and need indigenous knowledge systems. By not paying attention to what matters, developing countries are letting indigenous knowledge systems and indigenous foods head for extinction at a time climate change is worsening. The main reason is that most developing countries are biased towards importing knowledge and goods.

With everyone trying to import, the global market on which some countries are fond of relying on will soon have nowhere to go since they have shunned their source of distinctiveness by destroying their local food systems. Countries that ignore their local foods can easily become 100 percent food importers. Why should youths in dry regions be supported to grow tomatoes instead of indigenous chickens suitable for their area and require low start-up capital? Given the diversity of local commodities, it is sad to see copycat projects where young people go for the same type of enterprises, leading to loss of income through gluts. Why should a country’s Grain Millers Association focus only on maize and wheat when it should broaden its scope to cover all grains such as pearl millet, indigenous rice, sorghum, finger millet, sesame and others?

 

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

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More reasons for decolonizing banking systems in developing countries

While some developing economies are evolving rapidly, local banks are clutching onto colonial identities. For instance, in most African countries banking as a practice has kept colonial labels such as Commercial Bank, Merchant Bank and Building Society, among other categories whose meaning and differences are not clear to ordinary people. This identity crisis, with colonial origins, is visible to ordinary people who continue to raise questions like: What is a savings bank? What is a merchant bank?  Is a building society only concerned about housing?  If agricultural traders are merchants, why are they not getting financial support from existing merchant banks?

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Unmasking the dilemma in African financial systems

A major dilemma in most African countries is the prevalence of several financial institutions whose roles, responsibilities and differences are not clearly understood by ordinary people and potential borrowers.  Conversely, the financial sector has not done much to clarify and explain distinctions between diverse financial actors in ways that inform intended beneficiaries and potential clients.  Each financial institution continues to market its products and communicate its mandate separately. Financial authorities do not sufficiently share financial policies with different target groups, leading to many unanswered questions.  In most countries, major sources of finance include government through the fiscus, the reserve bank, different types of banks, development agencies like the UN system, international NGOs, Micro Finance Institutions (MFIs) as well as Internal Savings and Lending (ISALs), among others.

Unfortunately, there is no clear definition or explanation for potential entrepreneurs to make sense of all these institutions from a financial policy perspective. As if that is not enough, most African countries have not built pathways along which the financial sector can adequately inform socio-economic development. Boundaries and overlaps are not clear. For instance, government can finance farmers directly through input schemes instead of empowering an agricultural bank to do so. The reserve bank can also be seen financing some economic activities directly through its subsidiaries. Not to be outdone, UN agencies, international NGOs, the World Bank and MFIs are also often seen extending different forms of funding directly to diverse classes of beneficiaries. Besides lacking coherence, such interventions by several financial actors are not based on consistent pathways for financing growth patterns. Gaps and opportunities are often not clear.  Many financial institutions end up competing to give loans to formerly employed civil servants on the basis of a pay slip.  Traders and other economic actors with more authentic need for finance are denied finance due to absence of pay slips although their businesses are viable.

 Shifting mandates and the power of clear identities

Traditionally, banks were meant for safe-keeping money.  Depositors would take their money to the bank mainly for safe-keeping. Banking money was also an investment opportunity because depositors earned interest. Banks were also conduits for building official business performance transactions, for instance, through gathering records on sales. Such evidence of a business’ performance was part of a transaction  history that would later be used to get a loan since the records spoke for one’s business, showing how much your business was worth.

Clarifying financial categories and identities can enable strong synergies between financial institutions and active economic actors like Micro, Small and Medium Enterprises (MSMEs).  With proper definition and clustering it becomes possible to arrange financial facilities in line with each category. That way, smallholder farmers do not waste time applying for loans from financial institutions where chances of getting loans are close to zero. Traders and processors can be aligned with appropriate sources of finance.

Currently, African banks do not seem to have their own formulae for developing their SME departments. For instance, the difference between a bank’s SME department and an independent MFI is not clear. There should be a distinction or link between these institutions given the fact that a bank’s SME department and MFIs are often fishing from the same pond – try to serve the same clients offering similar services. On the other hand, development organizations that want to support SME growth through youth and women in agriculture seem to lack friendly channels for extending such facilities without attaching their facilities to formal banks’ conditions. Funds from development organizations targeting socio-economic development are forced to pass through formal banks where they attract all conditions for private funds. Once this happens, it is no longer development finance. Given that development finance comes at concessionary rates, banks do not often prioritize it, preferring their own expensive commercial funds. Since banks are for profit while development agencies are for development, it is a conflict of interest to expect profit-oriented banks to offer non-profit development finance.

Socio-economic transition and death of benefits

Over the past few decades, in countries like Zimbabwe, people have lost trust in banks because depositors can no longer earn interest from their deposits. Instead, interest earnings have been converted into bank charges, to the benefit of banks. There is no longer any incentive for depositors like MSMEs to bank their money in formal financial institutions.  On the other end, a performance history is no longer enough for a business to secure a loan as banks now emphasize other stringent conditions like collateral in the form of immovable property, which may not be related to the business at all. For instance, a house has no relationship with trading in agricultural commodities. The collapse of large corporates has also given birth to a robust SME sector that is detached from banks which no longer provide traditional benefits.

Banking as a practice and profession is dying a slow death and in its place a new fluid financial economy that responds to immediate cash needs has germinated. SMEs no longer see the need for their business performance evidence to be institutionalized in banks. MFIs have come in to fill that gap by starting to engage MSMEs from scratch, building transaction and business track records that enable active enterprises to get loans without having to produce bank statements. In addition, MFIs and MSMEs are forging their own business performance evidence through internal systems.  They have realized, they do not need to save or bank their money but money has to be kept within the enterprise so that loans are repaid as income is generated within the enterprise.

MFIs and MSMEs now innovating collaboratively

In the spirit of building relationships, MFIs have responded by adjusting interest rates in line with the rate of business in the MSME sector.  For instance they have structured repayment period to within a week to six months. This is in line with the speed of transactions among MSMEs which generate quick turnaround for loans. MFIs have also reduced bureaucracy by processing loans quickly unlike banks where it can take at least one to two months for a borrowers to get a loan. By the time such a loan is availed, opportunities and original intended purposes for the loan will have evaporated – leading to the burden of defaults.

MFIs are also warming up to the fact that innovation is no longer about business history but recognizing an innovative idea. Where banks use terms like green field as an excuse for not funding new business ideas, MFIs embrace green field ideas as opposed to supporting copycat businesses that are preferred by formal banks. New ideas or green fields are found within Communities of Practice (CoPs) such as informal markets. Instead of focusing on an individual enterprise, understanding the new economy is about assessing the potential of the entire business cluster or sector. Whereas banks are more interested in loan repayments with little attention to value added services, MFIs are providing additional benefits like training in entrepreneurship, financial literacy and business management. This enhances business performance and reduces default rates.

Unfortunately, policy makers are reluctant to recognize this new economy. Frustrated by the rigidity within formal banking systems, many bank executives are forming MFIs through which money from banks is being channeled to innovative business ideas. Insisting on financing already existing enterprises and traditional forms of collateral in an economy where over 60% of enterprises are dominated by women and youth is to completely miss the mark.  Supporting old businesses and ignoring active economic actors whose only limitation is lack of collateral in preference for financing businesses that have exhausted their economic runway and are on the verge of phasing out due to lack of innovation is failure to predict the future. Financiers that refuse to recognize and support green field businesses are blind to the importance of building a base for future socio-economic growth. Such decisions are also tantamount to unwillingness to tap into innovations by women, youths, MFIs, ISALs and others at grassroots who are critical sources of socio-economic business models free from colonial appendages.

Mobile money is accelerating the demise of traditional banking

Although the proliferation of mobile money is being celebrated in many African countries, it is creating more challenges than solutions for banks and ordinary people.  There is currently no clear justification for one to have a bank account and a mobile account. If SMEs can keep their money in a mobile wallet and transact anytime, what role does a bank account play? Why should someone transfer money from a bank account to a mobile wallet and what are the advantages of such actions?  Rather than creating a false sense of convenience, there should be one form of keeping money and transacting. SMEs are realizing that there is incentive for keeping the same money in the bank and in the mobile wallet. Costs of moving money between a bank account and a mobile wallet eat into the amount of money that should be circulating in the business.

Since banks no longer keep business performance records for clients, SMEs now keep their business records in their mobile phones. Banks are becoming increasingly irrelevant to the business needs of MSMEs. They urgently need to find ways of reviving their role in anchoring business growth patterns. The new economy is forming its own new roots different from the former colonial roots. It is building its own foundation starting from the micro levels anchored on MFIs which are part of the socio-economic context. Most SMEs and MFIs tend to be confined to their niches due to lack of resources. Supporting such institutions will spur more outreach. Where MFIs where only financing smallholder farmers, with the right pathways, they can start extending their tentacles to other business levels like processors, restaurants and others. As long as they remain micro, their clients will also remain micro.

Upward economic mobility

Traders are initiating upward mobility, growth and transition for most MSMEs.  It is the trader or buyer whose activities are pushing farmers to produce more as the market increases its capacity to trade.  That is why the market should finance production. When government and financial institutions start by financing agricultural production, they create gluts and mismatches between demand and supply – leading to frustrations among farmers. On the other hand, financing the market creates and broadens demand. Those who access finance through the market have entrepreneurial mindsets. That way the market becomes a screening process where levels of participation in the market determine how much an actor gets from US$100 000 circulating in the market.

Building a medium scale market requires a robust screening process that enables traders to be reliable  aggregators for processors and for exports. Most market traders have stories that can inform appropriate financial inclusion pathways. They can also be pacesetters in financial inclusion from the market. For instance, they can support building of contract models from the market since they are powerful off-takers whose role is not understood by the formal economy. In the new MSME-driven economy, deep knowledge goes beyond a series of facts or information compiled in a brochure by banks. Critical knowledge embraces economic actors’ true knowledge of their role and new business processes. Such knowledge leads to mastery of the entire business ecosystem. On the contrary, banks and other formal institutions continue to confuse knowledge sharing with road shows and conferences that are based on showing and telling. A road show trying to persuade traders to open bank accounts is a waste of resources without first understanding and articulating the concerns and needs of potential clients.

 

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 informal markets to shape a developing country’s knowledge agenda

The world over, many resources are spent on conferences, agricultural shows and summits like the recent Forum on China-Africa Cooperation (FOCAC) held in the first week of September 2018 in China. However, what happens before and after these events is more important. On the other hand, while funders and development agencies continue to determine socio-economic research agendas in most developing countries, grassroots communities of practice and informal markets are becoming fundamental sources of practical research ideas.

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Addressing under-representation in research

Researchers keen to broaden their knowledge of natural products have to visit informal markets where natural and wild food products are often found.  Such foods are often not found formal centres of commerce such as supermarkets. In a rapidly changing climate, research that does not extend its inquiry to natural and wild products generates lopsided solutions. Careful attention to what happens in local communities and informal markets can reveal issues that are under-represented in traditional research. It can also assist in assessing existing knowledge and translate it in ways that governments and local authorities can use to develop and implement policies.

Since government departments and development agencies do not have all the needed skills, knowledge, expertise and resources, leveraging the strengths of local communities and the private sector is critical. Unfortunately, policy making in most developing countries is based on passive documents and reports that are difficult to translate into a practical and usable body of knowledge. Changing consumer and health needs, growing public expectations, and ambitious new socio-economic goals are raising the bar for decision making institutions and systems to produce better outcomes and socio-economic value.

To address knowledge gaps, what is needed are high-quality knowledge systems that harness advantages in each given context. This means co-creating knowledge that is valued and trusted by local people as they respond to changing needs and situations.  Too much information is meaningless if it does not inform better decisions and improved standard of living.  To this end, researchers who want to improve the quality of their outcomes should not just rely on textbooks or peers but embrace alternative sources of experience and expertise.

 Knowledge quality assurance system

Just as there are institutions and processes responsible for enforcing the quality of goods, products and services in each country, there should be a dynamic quality assurance system for all forms of knowledge critical in driving a knowledge economy. This is different from the examination board which focuses mainly on certification within formal education systems. Without high quality practical knowledge and wisdom, a poor country will take several decades to transition into a middle income economy. A critical role of a national knowledge quality guarantee mechanism is building and specifying different levels of competences and experiences that citizens can access and anticipate.

Sources of better questions

African researchers can benefit from informal markets that are becoming sources of better questions which lead to better answers, which in turn lead to better conversations. Informal markets tend to be incubators of conversational wisdom in ways that enhance humanity, skills and awareness. Being human means farmers, traders, consumers and other actors share meaningful insights and connect on a more human level. This enables actors to talk more about their passions, what they love about their work, and what will make their work more meaningful. Being skilled means they go into conversations with head, heart and gut. They become more willing to share feedback, think about critical questions they would like answered, and ensure every conversation is a dialogue rather than a debate or monologue. Better conversations contribute to better quality of commodities in the market, better agricultural practices, better entrepreneurship and better socio-economic outcomes.

Raising and sustaining awareness

Through conversations in the market, some farmers become aware of new commodities they never thought existed and could grow in their community. Sharing what they notice in the market, telling stories and voicing their opinions builds the confidence of value chain actors to become true to their values and what is important to them. This can be a source of meaningful inquiry for researchers, leading to improved business outcomes, better ideas and practical solutions. Formal education is meaningless if researchers are not able to translate their research results into better socio-economic outcomes. In order to be considered credible knowledge brokers, researchers have to be coherent.

Major challenges faced by researchers in collecting and analyzing data range from information gaps to information overload to legal restrictions on data gathering.  In a world increasingly exposed to political extremes, fake news and disinformation, it is becoming increasingly critical to ensure agricultural markets get proper attention and expertise. Access to innovative capabilities in communities of practice such as informal markets has never been so important. Informal markets are good at harnessing every participant’s collective strength. Where formal institutions conduct research in silos, informal markets are more holistic in harnessing diverse worldviews from farmers, traders, consumers, transporters and many other actors.

 

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

Nine types of agricultural-related entrepreneurs in developing countries

eMKambo has invested time and effort in understanding and classifying different archetypes of entrepreneurs in developing countries. While this effort has focused mainly on agriculture-related entrepreneurship, it has also embraced diverse socio-economic sectors. Unless, development actors, policy makers and financial institutions characterize economic actors in line with their different roles, it will remain difficult to assess and achieve socio-economic impact.

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  1. Family unit (household)

The primary motive for a family unit or household to start an enterprise is to meet basic requirements or supplement and widen sources of income. For instance, a farming household can get into non-farming income generating projects like retailing. Farming may not be a business on its own unless it produces surplus to supplement other needs like school fees, health needs, transport and others. It is not a profitable venture but subsidizes other sources of income. The majority of micro enterprises in rural and urban are in this category.  They start small enterprises to supplement income and meet basic needs.

 

  1. School leavers and the young generation

Unemployment is a major push factor for this category. The only choice for school leavers and youths in most developing countries is to start a small business. This is not often motivated by a career path but by the need for self-reliance. A young person or school leaver say to himself/herself, “I can’t just be idle, so let me find something to do.” These entrepreneurs are not driven by passion but by circumstances where business is a stop-gap measure while looking for formal employment. Some youths end up being pushed by social factors like marriage which force them to work in order to take care of a family. There is often no proper process of building these entrepreneurs since they are just thrust into a situation.

 

Most of the youths in this cluster do not have innovations in terms of their own business ideas but copy what others are already doing. They copy through trial and error with no specific market and entrepreneurial skills.  This group, pushed into business by factors outside individuals’ control, should be carefully targeted with funding and capacity building initiatives. Instead of taking business as a stop-gap measure, they need to understand the entire economy. However, due to inexperience and lack of innovation it is often difficult for this group to get funding from banks. They do not start business by choice and it is not a career path for them. They are often standing with one leg and have not firmed up their business ideas – no vision for the enterprise.

 

  1. Retrenchees

These are pushed into business because their income sources have suddenly ended.  “What else can I do now that I am no longer formally employed?” Some do not have relevant skills in farming because they grew up in the city.  However a positive thing is that some have earned retrenchment packages around which they can be trained to start businesses. On the other hand, they are still looking for formal employment. Since their entrepreneurial skills have not been fully honed, they just have skills related to their former employer. This forces them to consider starting businesses in line with the former employers.  For instance, a former welder can buy his own welding machine and start doing what he used to do at his former employer. A former employee in a packaged goods retail shop can become a trader of the same goods through a tuck shop.

 

People in this group get into a trade in which they have inherent skills, potential markets and market requirements in terms of standards. Those with skills in producing door frames or agricultural tools know the requirements of the market. This group needs different types of support.  The main challenge is that their businesses are more skills-driven than market-driven. For those who may have abundant skills, the sector might already be saturated, leaving no room for extra skills toward demonstrating impact.

 

  1. Employed moonlighters

This category gets into business to complement wage income.  A positive thing is that they have a reliable source of income. What they need is a side complementary business for a major source of income. However, their main setback is that they are not taking business as a career path and can stop any time if the going gets tough. Their forays into entrepreneurship is not driven by passion. Commitment is not 100% – it is just an alternative undertaking. Even if the business does well, the owner is detached and at no point can s/he leave formal employment to focus on the business. They don’t have enough confidence in the enterprise and continue to consider wage employment as a sustainable source of livelihood. In most cases the business is not run by the owner but by employees, relatives or the spouse. In terms of planning and control the owner’s role is minimal since s/he is detached. This group has increased in many African countries like Kenya, Malawi, Tanzania, Uganda, Zambia and Zimbabwe in the past two decades.

 

  1. Entrepreneurs motivated by availability of resources in the form of pension and borrowing powers

This group comprises people with many forms of collateral requirements such as buildings and old boys club networks in the banking circles. They can walk in a bank and easily get a loan. Unfortunately, most people in this cluster are not driven by entrepreneurial desire but access to resources. This group often lacks important entrepreneurial skills and business development capacity. Many politicians and senior citizens are in this category. Some end up confusing symbolic power with power to execute a business and obtain markets. Due to easy access to money, they can borrow from one bank to repay a loan taken from another bank.

 

  1. External resource-driven category

This cluster is driven by availability of resources from government or development agencies. Such resources could be in the form of a women’s bank or youth fund, among others. Some development agencies can avail resources through affirmative strategies, targeting specific marginalized groups like women, youth and the disabled. When government sets up a women’s bank, more women can go to get loans not because they have good business ideas but because the facility is available. The fact that a youth fund has been availed, might see many youths applying for loans even if potential businesses are already congested. Where an NGO targets resources at vulnerable households, community champions with a sustainable role may be disqualified because support is for orphans, child-head households or youths.

 

  1. Passion-driven but lacking resources

These could be youths keen to start businesses as career paths.  Some agricultural graduates can be keen to get into commercial agriculture while engineering graduates may want to set up a motor mechanics workshop. This group is driven by passion, knowledge and skills but might lack experience, exposure and resources.  They can actually have more commitment. In many African countries, this group is being frustrated by lack of support.

 

  1. Those who decide to leave formal employment to start businesses

This rare group comprises people who feel they have contributed enough for their employer’s growth and should move on to more opportunities with potential for growth. Their advantage is that they have knowledge, skills and are driven by passion. They also know what the market wants. This group could be classified as ‘rebels’.  Those in the food processing industry can go and set up their food processing factory or restaurant. They can easily take away markets from former employers. Although this might be considered conflict of interest, they have a solid foundation from which to start. Their genesis could be businesses where the owner is detached and not able to fully exploit opportunities. They can cause the former employer to close down due to too much reliance on employees who decide to go and reproduce the business in other forms.

 

  1. Family businesses

These are cases where business owners decide to wean their children by giving them business branches or outlets to run as part of building self-reliance. For instance, an agro-dealer can give part of his business to his children.  This kind of inheritance-driven business can also be push-factor driven to run away from dependence towards self-reliance. It’s not like the children are proactive since they may not be driven by passion and career path. However, those who embrace the opportunity can flourish.

 

Beyond MSMEs

The above clustering shows it is not enough to describe businesses as MSMEs without going deeper to unpack different nuances at a granular level. In all these clusters, some enterprises are on the social impact side while others are on the economic impact. Social impact has an element of sustainability. As part of financial inclusion, the social impact group should be considered for development finance. Unfortunately, development finance does not look at social enterprise as a source of scale. In most developing countries, more than 60 % of businesses are social enterprises. They are a critical part of a hybrid economy with both formal and informal elements. However, their major strength is that their businesses are sources of livelihood and there is no way they will want such businesses to collapse.  They just want to earn an extra dollar for meeting basic needs like health and school fees. While they may not grow faster, they continue thriving for years, meeting critical needs like educational fees.

 

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