There is a radical change taking place in Africa, much of which is as a result of the emergence of the crowd economy. There are two key underlying reasons for this assertion.
1. Not only does Africa have a population that is forecast to grow from one billion today to 2.8 billion by 2060, it is also a population that will be in demographic transition.
2. Africans have a greater flexibility to adopt new technology and ways of doing things due to the relative lack of an established Old World-style infrastructure, with the likes of numerous bank branches, automated cash dispensers and landline telephone systems.
Let’s look a little closer at these two points. In most countries the age profile of Africa’s rapidly expanding population will change, so that the working-age population will outnumber children and older dependants. However for population growth to lead to economic growth it requires investment in human capital, through better education and health care, particularly for women and girls.
A lower level of infrastructure (than in the west) means that there is less for the plethora of new crowd economy-style ‘disruptor brands’ to have to disrupt to be adopted and grow. People – whether individuals, government, corporations or entrepreneurs – are less entrenched in established ‘western’ ways of doing things and open to new solutions as to how to bring about economic development at both micro and macro levels.
Evidence to support this includes the rapid growth in Africa of global crowd economy brands including Airbnb and UBER, plus smaller local services catering to niche market segments,
- In the last year the number of Airbnb listings just in South Africa tripled to approximately 20,000, and research among users found that 27 per cent of them said that if it hadn’t been for Airbnb they would not have visited the country. So Airbnb is boosting tourism.
- On June 1st 2016 Uber launched in Kampala, Uganda, its tenth city in Africa. There are plans to follow this with operations in Dar Es Salaam and Accra.
Other crowd economy initiatives include:
- SweepSouth, an on-demand cleaning service in South Africa that connects cleaners with homeowners who have ad-hoc requirements. This gives a valuable employment opportunity to women who want to fit work around caring for their own multi-generational households.
- In Rwanda, SafeMotos is a motorcycle taxi service which is the country’s most popular form of public transport. Software installed on the smartphones of the SafeMotos drivers tracks behaviour such as speeding, allowing poor performers to be flagged on the system and thus avoided by the more safety-conscious passengers.
- WeFarm is a social enterprise operating in Africa and Latin America. Using mobile phones, farmers can crowdsource solutions from other farmers to problems such as how to identify crop pests or animal diseases. It is a free service to farmers, and business pay to messages them. WeFarm also collates all the information they carry to identify and map trends and issues such as drought, disease or crop diversification. This enables farmers to be warned of impending changes to the weather and the better allocation of sometimes scarce resources by agricultural suppliers, governments and other support organisations.
However, years before the launch of these companies, particular circumstances in parts of Africa demanded some alternative financial solutions.
When US banknotes replaced the local currency in inflation-ravaged Zimbabwe there was a shortage of coins. Due to the lack of change, shopkeepers began to give their customers a few minutes’ worth of mobile phone airtime as an alternative currency. In several African countries including Nigeria, Egypt, Ghana and Uganda, the practice was reversed and transferring prepaid values of airtime on mobile phones became a way for consumers to pay for goods or generate some ready cash when required.
An initiative instigated by Vodafone in Kenya to use mobiles for the disbursement of micro-loans led to a limited regional trial in 2006 that showed people were using the system to transfer money between themselves. It was decided to develop the service to allow people working in towns and cities to easily send money back to families in rural areas. This was no small decision as it required the creation of a network of agents in the rural areas who would physically hand over the cash. This was the start of M-Pesa, named after the Swahili word for ‘cash’.
Today, two-thirds of Kenyans use M-Pesa to store money on their mobiles, make purchases and transfer it to others, and it is easier to pay for a taxi ride with a mobile phone in Nairobi than it is in New York. Kenyan banks can’t offer this service without charging users to at least cover their costs.
However, the telecoms firm involved, Safaricom, has a different business model and values it on the basis of increasing customer retention levels and reducing churn.
Exciting times for Africa. Join me at CSW Summit in Johannesburg, June 23-24th where crowd based business models will be the main focus.