How the knowledge economy is inspiring new roles and responsibilities

Developing countries that remain stuck in colonial governance structures and forms of business are sleeping-walking into all kinds of crises. Some of the colonial forms of business still being practiced in most African countries include sole trader (traditional enterprises), companies, cooperatives and partnerships which function through mutual agreement to pool resources and skills together for mutual benefit.

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While all the above are profit-oriented organizations, on the other side are non-profit entities like NGOs and government departments like parastatals. Some parastatals have more of a national security function than profit motive, especially those responsible for electricity, water, food security and public transport like railway systems.  Borrowing from colonial times, parastatals have traditionally been set up to provide affordable services to the majority who would otherwise be unable to access services like electricity if such services were fully commercialized. Services like water, public transport and national food security are necessities which have to be affordable to the majority.

 

Where parastatals like Zimbabwe’s Agricultural and Rural Development Authority (ARDA) earn profit, the main idea is to indicate that government services are not entirely free so that the majority do not become too dependent on government when they could fend for themselves. However, government safety nets have traditionally come in to cater for genuine social welfare cases.

 

Defining knowledge needs for the new knowledge economy

In the new knowledge economy, the above institutional arrangements and enterprises have to be revisited so that they become relevant to the context of high unemployment among youth and women, for instance. Many smallholder farmers and SMEs are striving to join the mainstream economy. While some of these bottom of the pyramid actors are in the process of commercializing, they have distinct characteristics such as lack of access to information and knowledge necessary for development.  Who is going to generate and share vital knowledge with these actors so that they are able to start and run their businesses profitably?

 

The government and parastatals cannot do so because they are more of administrators whose main roles include providing a conducive operating environment. For instance, the role of extension officers is to teach farmers to produce. They are not business people or business experts. Many government departments are not profit-oriented but get 100% support from the fiscus. They are motivated by budget allocations as opposed to profitability and market share. On the other hand, although parastatals may have some levels of commercialization, their mandate is providing key national services like water, energy and ensuring food security, for example the Grain Marketing Board. Parastatals are profit-oriented to some extent but they are subsidized by financial injection from the government.

 

The private sector does its own private things and purely for profit. NGOs and international development agencies focus on vulnerable households mainly to boost social capital. For instance, most international organizations and NGOs are not profit-oriented but have 100% access to free funds from donors. In most rural districts, NGOs select wards that have more vulnerable households and try to work with a specific number like 100 000 households for three to five years. However, there is no organization focusing on wards that have economic potential so that they anchor local socio-economic development.

 

The missing knowledge broker

Given the way information and knowledge tends to be siloed within different actors and institutions, as mentioned above, there is definite need for a knowledge broker who can generate and share knowledge that will uplift  people at the bottom of the pyramid onto commercial pathways up to the private sector. This role can be fulfilled by a social entrepreneur, who is currently missing in many countries. As a knowledge broker, the social entrepreneur will not only lift marginalized people out of the weeds and show them their future but, will also provide services that are subsidized with profit-orientation at the end.

 

Information and knowledge support services from the social entrepreneur will target groups at different levels of commercialization so that they get into the mainstream economy. Most smallholder farmers and others at the bottom of the pyramid will not be able to pay for critical knowledge on their own. Support from the social entrepreneur will not be permanent but will be stopped when a significant portion of those targeted are able to do meet their information and knowledge needs sustainably.

 

Using a socio-economic vantage point

As a knowledge broker, the social entrepreneur can see critical information and opportunities on both social and economic sides. As a result, the social entrepreneur will focus on integrating marginalized actors into  economic pathways while parastatals provide subsidized national services. Many smallholder farmers and traders in Africa are tearing themselves away from working with private companies that do not provide social services.

 

Development organizations and governments should identify and support social enterprises to avoid looking around for aid each time there is a challenge and promoting dependency.  Banks should also be keen to work with social entrepreneurs because that is how they can create a new bankable clientele base. In countries like Zimbabwe, more than 70% of potential bank clients are now in the SME sector, 40% of whom have been spat out by company closures and no longer have pay slips. Twenty percent (20%) of SMEs comprise the young generation who have never opened a bank account but started business with mobile money.

 

Another group comprises smallholder farmers most of whom have never opened a bank account although some could have had post office savings accounts which closed a long time ago.  All these are getting their money in cash through the informal market.  For Zimbabwe, there is also another cluster comprising A1 and A2 farmers who got onto the land more than a decade ago but have never been able to access  finance from banks due to the contested land issue. Many A2 farmers are also struggling to make 99 year leases bankable.  All commodities produced by these farmers over the past years are not linked to banks.  In addition, more than 95% of SMEs have been discouraged from formalizing by prohibitive company registrations.

 

Importance of unlocking entrepreneurship knowledge

Information and knowledge critical for entrepreneurship remains locked in institutions which cannot guarantee they will benefit from releasing their knowledge to clients. This is where the social entrepreneur becomes fundamental in brokering knowledge and skills from SMEs who are not working with banks and do not yet see the benefit of sharing their information with banks. When SMEs do not work with banks, they do not see the need to let the bank know their sales records.

 

When government supports parastatals and government departments such a budget is not converted into profit but is just spending. The same applies with NGOs which spend money and ask for more resources through budgets. Unfortunately, there is no pathway for extending free funds to the private player who is pursuing a profit motive but has to be cushioned in order to continue serving the under-privileged farmers.  This gap means there is no incentive for a private player to work in private-public partnership models. As a result, private players in developing countries continue to struggle on their own, government departments continue doing their thing, the same applies to parastatals and development organizations. Development organizations only come to the private player when commodities that they supported  farmers to produce are now looking for a market. Ironically, the private player is expected to come and buy these commodities, some of questionable quality, using his/her own money and transport irrespective of cost-benefit-analysis.

 

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

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Reducing the gap between formal and informal economies

Narrowing the gap between formal and informal economies remains a big challenge for many African countries. Instead of increasing interdependence between the two economies, in countries like Zimbabwe, the gap between the two economies seems to be widening. As if that is not enough, academia, politics and financial institutions remain detached from society and the informal economy.  For instance, while more than 70 percent of active economic actors are now in the informal economy, this economy lacks finance and enabling policies. The shrinking formal economy continues to be controlled by colonial systems and constraints yet it still gets most of the resources from government and financial institutions.

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Dominant characteristics of the formal and informal economies

The two economies can be defined by the type of actors who dominate in each of them as shown below:

Formal economy Informal economy
Financial institutions – banks.

Contracting companies.

Manufacturing and processing companies.

Food chain stores – supermarkets.

Government institutions like hospitals.

International NGOs on the development side.

 

Micro Finance Institutions

SMEs.

Smallholder farmers.

Informal market traders.

Local transporters.

Community- Based Organizations (CBOs).

 

The above classification clearly defines two economies. While the informal sector constitutes the bigger part of the economy, there are proper pathways for supporting it. Whoever is trying to assist the informal economy faces the same challenges faced by informal actors.

Challenges emanating from colonial systems

As long as developing countries continue to hold onto colonial systems and forms of business, closing the gap between the formal and informal economy towards a hybrid economy will take many years. The following are some of the colonial systems that have to be revisited and contextualized:

  1. Formality continues to be defined by registration with government institutions such as the registrar of companies or with an appropriate department if one wants to operate a Private Voluntary Organization, a Micro Finance Institution or a bank. In a dynamic world economy, formality should not be defined by prohibitive and tedious registration processes. If registration was everything, shelf companies would be doing productive work.
  2. Emphasis on referrals should be re-examined – For instance, asking a loan applicant to get a letter from a previous client or employer is a very old fashioned requirement in a dynamic and fluid economy. It does not make sense to ask someone to get a letter from a former employer because where the employee was doing very well, the employer will certainly not be keen to endorse loss of talent to competitors in the form of knowledge and expertise.
  3. Collateral – It is now evident that although they lack colonial forms of collateral, actors in the informal economy continue to drive the new economy. The knowledge economy demands new forms of collateral. Insisting on traditional forms of collateral is meant to favor actors in the formal economy who have run out of ideas but continue to receive financial support.
  4. Long application and approval processes – There is often no guarantee that loan applicants who go through time-consuming loan application and approval processes will get the funds. The application form is used as the only tool with no consideration for building relationships and trust as part of laying the business foundation upon which funding can then be extended. Everyone is given the same application tools irrespective of different business cycles, knowledge, ambition levels and vision for the future.
  5. Selective quality and standards – Everyone now knows that quality is important in a competitive world. However, where you get a high quality product there are definitely second and third grades. Unfortunately, formal contractors tend to ignore the other grades in preference for first grade as if it is possible for a farmer or SME to produce first grade only. When formal buyers do not provide alternative markets for lower grades, smallholder farmers end up refusing to work with formal buyers but creating their own market (informal) where all grades have a market.
  6. Prohibitive measurements – By stating that they start buying from 30 tons of groundnuts upwards, formal buyers create barriers to entry for smallholder farmers who cannot manage to supply such volumes individually. This requirement creates barriers to internal trade to the advantage of big formal actors who can easily get money from the bank to the disadvantage of small actors who remain marginalized.
  7. Payment modes – Sellers to formal companies are not given choices like payment in part cash. In what is tantamount to a take it or leave it scenario, formal companies insist on bank transfer as part of their policy.
  8. Payment terms – The payment terms are determined by formal buyers whose policy can stipulate that payment is done after 14 days. Even if your commodity is bought by consumers before you leave the supermarket or processing company, you will receive your payment after 14 days.

From business proposals to business cases

In the formal economy, there is still emphasis on proposals, business plans and financial projections irrespective of the fluid and dynamic nature of the modern economy. Unfortunately, by the time you present financials for funding the situation will have completely changed and that means financials for the previous two years may be meaningless is such an environment. It makes more sense to focus on business cases and adapt as things unfold than try to present a proposal complete with cash projections when what’s written on paper changes before the ink has dried.  Creating new legislation and laws which do not exist at the moment will go a long way in increasing overlaps between formal and informal economies.

Easy of doing business

Before considering creating an easy of doing business environment for external investors, it is critical for policy makers in developing countries to enable easy of doing business for internal actors. Bureaucratic systems that are part of the formal colonial economy will not be able catch up with fast and fluid economic fundamentals. That is why formal economic actors are having to rely on prohibitive government policy in order to compete with the informal actors.

 

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866

Balancing gender with technology and rural industrialization

Developing countries that have made commendable strides in using formal education to avail equal opportunities to men and women still have a lot of work to move beyond white collar opportunities. While scores of women are now occupying managerial positions that used to be monopolized by men, a formula is yet to be found for extending opportunities to women in low income jobs that are mostly labor-intensive.  For instance, agricultural technology has remained gender blind to the disadvantage of women who do most of the labor-intensive duties.

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However, the informal sector has done its part in generating women-friendly technologies and tools such as small scale peanut butter machines, soap making machines and machines for producing French fries for sale and household consumption. Although these machines and tools are still being improved, the informal equipment fabrication industry has revealed the extent to which mechanization and industrialization initiatives in most developing countries have ignored the needs of low income women and men whose economic contributions are in the form of manual labor.

Technological needs at the Bottom of the Pyramid

The majority of people at the Bottom of the Pyramid try to eke a living from agriculture. Unfortunately, national mechanization strategies have not developed close substitutes to the ox-drawn plough and the hand hoe which remain symbols of smallholder agriculture. In many households, men continue to use the plough for planting while women use the hoe to weed and replant when germination is poor. There have not been meaningful efforts to develop technologies that can enable men and women to cross traditional gender roles in agriculture. With most men leaving for mining and other opportunities, agriculture is now a domain for women and women-headed households but equipment manufacturers have not responded to this critical socio-economic trend.

Naturally, there are labor-intensive roles that can be fulfilled by men, for instance, on the agricultural production side.  Traditionally, there were also roles defined for women, for instance, winnowing and weeding while men focused on ploughing. These roles were defined according to the physical nature of men and women. Technological development has not addressed the physical expressions and requirements of men and women in ways that enable crossing of physical barriers so that women can do duties that were previously male-dominated.

Some women roles have remained locked in specific agricultural value chains like groundnuts, small grains and indigenous poultry. Unfortunately, technological developments have not followed these value chains which give women a sense of ownership and decision-making power.  For instance, the whole production, processing, preservation and marketing of small grains has not been improved from a technological perspective.  Women continue to face the same traditional burdens yet wheat, which is also a small grain, has become highly mechanized because it is a male-dominated value chain.

Technology as an expression of power

Where men become heavily involved, they end up exercising more power in decision-making because their input will be more than that of women. When mechanization and technology development initiatives support commodities like maize, wheat, sugar cane, tobacco and soya bean which need large land sizes, men end up controlling decision-making because they will be heavily involved. For instance, men can decide to buy machines like combine harvesters and sophisticated irrigation systems because they will be intuitively aware of what needs to be done in order to maximize production and productivity.

 Failure to recognize women as originators of recipes and innovations

In spite of women being originators of most food recipes, industrial technologies for adding value to agricultural commodities continue to marginalize women from the economy. As commodities go up the ladder, women recipes are hijacked by men who end up owning restaurants, food chain stores and beverage companies.  As if that is not enough, development organizations and gender activists whose main mandate is improving the status of women have failed to commercialize feminine ideas. They just support women to exhibit their recipes and ideas at food fairs and agricultural shows where men poach the ideas and commercialize them.

Women ideas are also limited in terms of finance where financial support to women still largely depend on approval from men (loan officers and husbands). Even if women own their own enterprises, once their husbands guarantee access to loans, the men end up controlling the business. It seems African countries have not done enough to enable women to independently make investment decisions without the approval of men and a whole male-dominated business culture. As if that is not enough, where technology is available, men tend to have better technology than women. For instance, the husband can have a smartphone while the wife has a lower class feature phone.  That means if 90 percent of women have feature phones, they cannot access or share information that requires a smart phone.

Toward women-centred value addition and rural industrialization

Modern rural industrialization should be about working with value chains within an ecosystem rather than transporting commodities from rural to cities and then export countries.  Such a colonial model has continued to lock women at production level and restrict their participation in value addition yet they are the generators of recipes.  Women cannot continue to be consumers of finished products processed outside when they could easily input their knowledge in the entire production and value addition process. Developing countries have to dumb the colonial value addition notion where agricultural commodities had to move from farming communities to districts, then to national levels and then exported to other countries. In the new fluid economy backed by data, commodities should move within Communities of Practice (CoPs) where different layers of value addition can easily happen.

If women are empowered through technology, they can produce and modernize different products and pack diverse natural foods. Urban industrial technologies have caused some commodities and sources to lose their identity, with the final product being associated with manufacturers while the original producers become invisible.  This can change if women are empowered with value addition technologies in rural areas where they stay.  At the moment it remains difficult for most women to follow their groundnuts or small grains to the city where more benefits accrue to male-dominated manufacturing industries.

Under the current industrial model, the price of value added products increases from urban to rural areas when it should be the other way round. For instance, potato crisps which can cost $1 in the city, cost $2.50 when they reach rural areas. Processing at source will reverse this pattern and ensure the price of finished commodities increase as they leave rural areas for cities and export markets.

How can technology tap into women’s intangible knowledge?

When society insists on knowledge being expressed through tangible assets like machines, it limits the expression of intangible knowledge which is mostly intrinsic in women. Male knowledge is more visible and tangible while feminine knowledge is more intangible and informed by intuitive wisdom. Intangible knowledge explains why women have powerful copying strategies. While men may be thinking about food in its physical form, women will be thinking about how to quieten a hungry child. In countries where social safety nets are absent or weak, social issues move from national to household levels where women are in the forefront of coming up with copying strategies using their intangible knowledge.

The promotion of Science Technology, Engineering and Mathematics (STEM) in many developing countries is a very noble idea.  However, to what extent will STEM address gender imbalances? Are there roots showing how STEM is going to assist ordinary women in the street and marginal communities? To what extent can STEM be informed by Indigenous Knowledge Systems in developing countries?  If not grounded in the needs of the majority, STEM will only go back to assist formal industries and reinforce the prevailing socio-economic injustices.  Rural women will continue to process small grains using pestle and mortar while men own and control processing companies.

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6