This Competitive Global Economy
I was just reading an article in the New York Times about Germany’s emergence once again, as a global engineering powerhouse (German Exports). The Germans have always been known for their solid engineering, but the economy took a downturn when East and West unified. The transition was difficult both economically and culturally, but they seem to have fixed the problem.
So, what is Germany doing? According to the article, “The crucial factor in Germany’s success, is that it churns out global niche products: sophisticated high-technology tools that have worldwide but narrow markets. Fast-growing developing economies, like China’s, are keener to buy such rarefied products than to make them”. Examples of these sophisticated high-technology products include, lasers used in medical devices and chip factories and sensors that steer satellites.
As I was reading this article, I started thinking about how this Global economy is being defined and what that means for Africa. It’s becoming increasingly clear that economic growth is going to be fueled by:
a) Science & Technology:
Countries like Germany and maybe China that have well educated populations that can design, produce and manufacture these sophisticated high-end technological products. So, if you are a well trained scientist or engineer, this is great for you because you will never be without a job.
b) Creativity & Imagination:
If you are not a well trained scientist or engineer, then you have to be more creatively oriented. I’m thinking about the woman who wrote the Harry Potter series. She’s a billionaire and it’s all come from her artistic creativity. I saw an excellent movie last weekend called, “The Namesake”, the movie is based on a novel written by the Indian author, Jhumpa Lahiri, again, this is art. The producer, Mira Nair, is married to a Ugandan of Indian descent and actually spent the last 11 years living in Uganda. She also produced the movie Mississippi Masala. She’s started a program called Maisha film Labs to encourage other writers from East Africa to pursue more artistically oriented careers.
I think there’s been more appreciation for the arts in Kenya, especially with all the home grown musicians (I particularly like Suzanne Owiyo because you can hear that authentic creative talent in her music) The “rappers” in Kenya are just not going to make it anywhere else. How are they going to compete with people like Jay-Z and all the other aspiring rappers coming out of the Bronx and Compton? and it’s just not unique. It all sounds the same, except one is in Ebonics and the other is in Swahili Ebonics (aka Sheng).
I just thought of someone else as I was writing this: Ismael Beah. He was a young child soldier in Sierra Leone who was rescued by UNHCR and relocated to America. He’s written a book about his experiences as a child soldier and his book is now number one on the New York Times bestseller list. The book sales will bring him millions of dollars in revenue and I’m sure a movie deal is in the works.
A lot of Africans think writing is not “real” work, but most artistic ventures begin with the written word and it takes a certain amount of creativity and imagination to be able to translate your thoughts into a cogent and interesting story or even an interesting song.
c) High-Finance:
It’s increasingly clear that those who are engaged in fields where they can put together sophisticated financial transactions across borders are also well suited for this global economy (coldtusker – this is all you)
Conclusion:
Whenever I talk to Kenyans who are looking to start a business, it usually involves some kind of re-selling. That means, flying to Dubai, Hong Kong or China, buying various goods like jeans, shoes, hand-bags and re-selling them in Kenya. In other words, there’s no creativity involved. It’s just buy, sell, buy, sell and everyone and their mother is doing it. I’ve tried this re-selling thing myself over the internet (without much success) and I’ve just come to the conclusion that, that’s not where the real action is.
It looks like you either have to be more creative than that (i.e. writing your own songs or books, designing your hand-bags, etc, etc) so that there’s some kind of unique creative spark behind the product. Or, you have to concentrate on more sophisticated work in fields like finance, software, trading or engineering (and I suppose if you have strong math skills, this would be a good place for you).
It’s becoming increasingly difficult to just vacillate in the “boring” middle in a world full of mass produced, generic goods that have no soul. Then of course, how are you going to compete with the world’s mass generic producer: China!
I agree with a lot of what you have said. I’d like to talk a bit on the re-seller aspect though,
I read an article recently that was talking about how the worlds economy had transitioned through three ages and was not in a fourth age. The first three are the Agrarian age, the industrial age and the technology age, the one that we are entering now is the creative age where those that are best able to harness originality will be at the forefront of the economic race.
I tend to think however that not every economy in the world has moved at the same pace through these ages and not all are in the same age. With specific regards to Kenya, I feel like we are getting shock therapy in that we seem to be experiencing all four ages within 40 years rather than the usual 400. This makes for greater overlap between the different ages.
This is why I am as much for the reseller as I am for the creative, they support each other and I would like to see both approaches flourish.
Awww… (Blush)
Talking of which… I am trying to help a local manufacturing firm raise funds to commission a new plant… and a cross-border acquisition if it makes sense…
You are RIGHT, the trend has to be “niches” unless you are a low-cost producer…
African firms have to have niches… We do not have the heft to compete with China, India or Vietnam…
African countries need to stand up & fight the subsidies that give other countries’ firms an advantage over our firms…
China does (insidiously) subsidise their exporters by degrading the environment, subsidising electricity & water.
Egypt does the same as does S.Africa to a certain extent… Egypt even transships Brazilian sugar into the Kenyan market!
Kenya can become the “center” of excellence for non-manufacturing esp for medical services for other African countries…
Hometofindit:
Your analysis is interesting. I suppose re-sellers do make money, otherwise, they wouldn’t be doing it and at the end of the day, if you are making money, who cares how you do it. I get that part.
What I was noticing is that as a re-seller in a country like Kenya, that doesn’t have a large consumer base, how far can one you go with that? if you are just doing it to put food on the table for your kids, then I suppose it can work. However, beyond that, I don’t think it you can go very far with it. Wal-mart could be described as a re-seller, but they are selling goods in the largest consumer market in the world and that makes a big difference.
I agree with you that Africa will “leap”. They did it with the cellphones and they’ll do it with broadband. However, I still think that at the end of the day, creativity will always win out.
CT:
No country will give up it’s subsidies. The sooner Africans accept this fact, the better off they’ll be and the sooner they can start making the necessary adjustments to their economies. If you vote against farm subsidies in states like Iowa and Illinois, you’ll never win an election!
Explain the medical services opportunities you are talking about. Isn’t SA already the “top” destination for that in Africa?
You inspired me to put out a post… Yes, SA is tops in Africa but they will face problems going forward as the SA govt dithers over the political issues… The next president may be a populist…
For some reason, SA politicians are fixated on AIDS/HIV being a “plot” of Western countries… that includes Mbeki, SA health minister & the then VP (zuma) who claimed a hot shower will prevent HIV infection!
Will these “feelings” cause for lower safeguards against HIV infected blood?
Kenya has the means to expand Medical Tourism esp from UK… The NHS & Insurance firms have started “outsourcing” some procedures to India… so why not Kenya?
Kenya is 8 hours away from the UK & has a great climate (Nairobi) to aid recovery! There are many Kenyan doctors who have trained in the UK… thus there is a level of comfort…
Great post! My thoughts on the issues:
1) Science and Technology: Africans for now will have to focus on the low end technology spectrum and create a niche by being second tier or third tier service providers. Once again, I don’t believe the pot of gold is in going head to head with the heavy weights i.e. India and China, the pot of gold is in servicing India and China’s overflows. A quick example, the IT companies in India and China that control the market are large corporations, the SMEs in those countries are struggling for the scraps. Africa can create a niche by providing low end IT services for those smaller and medium sized companies so that they can concentrate their energies and resources on either competing directly against the large corporations or pursuing their own niche markets. This is how the whole BPO thing started anyway……..it started with Indian firms targeting American SMEs way, way, way before the huge multinationals like American Express et al became even remotely interested. Secondly, it dovetails nicely with the Asian agenda anyway. I read the best assessment of the Chinese hidden agenda recently, the Chinese know full well that their SMEs cannot go head on with Western counterparts so instead of wasting time trying, they are funelling them all to Africa, Latin America etc so that they can incubate and develop products and services in those markets that are lucrative for low income consumers before perfecting standards and performance for high income markets. Case in point, South Korea’s development of the Hyundai, Daewoo brands……..they were developed and tested in the Third World first.
2) Creativity and Imagination. Definitely a requirement of the ‘new global economy’ and I second what was said about leapfrogging. A belated realization is sweeping the continent that ‘SERVICES’ is where it is at. From the mega success of the mobile phone industry to ventures like MamaMikes, Africans are finally getting it. And I believe that’s why you are seeing more and more service oriented businesses flourishing, there is a thirsty market out there! No pun intended, but I was just reading about the proliferation of gourmet coffee houses in Kenya. The owner of JavaHouse made a fantastic comment I think, he said that one thing he has learnt is NEVER underestimate the purchasing power and consumption tastes of Kenyans…….he will be grossing $ 1 million a month in sales by the end of this year
Another example is the booming entertainment business in Kenya. Here KE, I beg to differ with you. I doubt highly that Nameless et al are trying to compete on the level of JZ, they don’t have to! The Kenyan market has already made many of these wannabes quite wealthy so unless they want to make the Forbes list, all they need to do is keep churning out a service that meets the demand of their target market which is Kenya, East Africa or whatever. You’ll be amazed at how much Code Red and Homeboyz gross a month………
3) High Finance……..the last untapped financial goldmine, providing financial services to the billions of low income customers profitably. It will take a while before the continent earns the bonafides for high finance, in the meanwhile we should focus our energies on the low margin, high volume model. There’s no reason why we cannot do with Finance what Asia did with manufacturing but with a domestic market focus rather than an export oriented one.
Bottom line, I think the last thing we should focus on now is striving to meet the consumer standards of the Western World. At this point in time our best will not be good enough, and frankly with our current capacity there are much more lucrative markets in the developing world. Again, we should learn from the Chinese! Punch at your weight level first before pining for the heavy weight title……….we underestimate our domestic and regional markets, and are constantly striving for the elusive ‘Western’ ones that are beyond our reach. We can burn a path much faster if we focus on markets that are similar to us in cultural, social and economic composition.
Sijui:
You made good points, but you always do. However, what got me was Java houses monthly revenues – $1 million dollars a month?!! Holy mother of Jesus! I’m about to pee on my pants. Send me the link, if you have it, where he cites these figures. Then of course, the labor costs in Kenya are very cheap, so his probably banking a lot of that money.
You are right on the services industry. That’s big in America too. I had thought about it and would give an example of ebay support stores that have sprung up to help ebay sellers package and ship their goods, in exchange for a cut of the sales price. A total service industry that was created out of thei new e-auction business.
CT:
Don’t Europeans already have “free” healthcare? Americans don’t have free healthcare, but there’s no way in hell they’ll go anywhere in “Africa” for surgery or any other kind of health care need.
What do they call that health minister in SA? isn’t she called” Dr. Beetroot” for suggesting that people could cure AIDs by drinking a cocktail of beetroot juice, lemon and garlic? Black South Africans remind me of black Americans in their conspiratorial theories on white people.
So inspirational the thoughts you guys churn out here. For the last couple of months I have been out in the internet trying to discover/learn some of its newage business opportunities. I hope to make some headway.
Last week I was just about to buy some e-book on ebay only to be told I cant use my kcb visa debit card because I cannot open a paypal account, because I am from Kenya, which country is not yet compliant.
Sijui:
Could you clarify whether that was $1 million dollars a month or $1 million shillings? big difference.
Entrepkik
Good. Don’t waste your money on e-books. I made that mistake and realized what a fraud it was. They just compile all this free info you can get for yourself from the web and dump like 400 pages worth of it into what they call an e-book to make you think that you are actually paying for something worthwhile. in 99% of the cases, the info can be derived by taking the time to read on your own.
No, KE you read right. Java is grossing right now, KSH. 53 million a month……..in a year’s time they hope to hit Ksh. 70 million.
“Unlike others who have been in the business for ages, Java is a toddler. From a humble beginning of one coffee shop at Adams Arcade on the outskirts of Nairobi, some seven years ago, Java House has grown to be one of the leading coffee shops in the country.
More than any of the other two, they have revolutionised the way we look at coffee outlets and are hunting for new locations to plant their coffee shops.
Mr Jon Wagner, the managing director, says the next Java House will be in Westlands once the West Gate Shopping Mall is opened. Here, they will open a branch on the ground floor, and hope to open another branch in Nairobi’s down-town by next year.
And this is not only about opening an outlet. Mr Wagner says they always look for the potential of winning over new customers.
“We do not assume the spending power of Kenyans, they have taught us better,” he says. Opening a coffee shop for Java is serious business. Depending on the size of the branch, a new branch can cost anything from Sh25 million.
“We have expanded without borrowing,” says Mr Wagner.
In the past five years, Java has experienced an average of 30 per cent growth per year, pocketing up to Sh50 million gross every month. Last December their annual gross earnings grew to Sh53 million.
“We hope to be grossing Sh70 million in a year’s time,” Mr Wagner says, unperturbed that others are eyeing part of his share of the market. Of their seven branches – Mama Ngina, Koinange, Junction, Gigiri, JKIA, ABC place and Adams – the Junction branch leads, while all the other branches compete with each other. ”
Full article:
http://bdafrica.com/index.php?.....temid=2756
P.S. This brings me back to what I said about “getting rich in Africa”
The quote you supplied above says:
“Last December their ANNUALl gross earnings grew to Sh53 million”.
So, it looks like they are grossing $1 million a year, not a month.
$1 million a month would be too high for Kenya, even a starbucks in Manhattan doesn’t gross that, but I get your general point. $ I million dollars a year for a coffee shop in Kenya is very good.
The “confusion” in the numbers is due to the poor reporting by the newspapers!
So, which is it? a month or a year? If it’s a month, then I’ll go back to peeing on my pants.
Guys this brings us to the arena of ’speculating’ due to shoddy reporting…now let’s see, the guy has seven outlets….Ksh. 53 million a month amounts to per capita gross of Ksh. 7.6 million per branch.
Ksh. 53 million per year amounts to Ksh. 7.6 million per year per branch with means a monthly gross of Ksh 633,333 per branch.
Hmmmmm……Ksh. 633,333 versus Ksh. 7, 600,000…….CT you’re the closest to the ground, what do you think?
My mom visits the Junction branch like a religion so my perspective is skewed.
Interesting… OK… say I go to ABC Java… and have a meal… it can come to 400/- (easy!)…
But many just like their coffee… so even with an average 200/- per capita spend that amounts to 20,000/- for 100 customers.
They open daily thus 600,000/- per month = 7.2 Million per year per branch = the approx KShs 50 Million quoted. The 53mn was in Dec… a “busier” month?
The KShs 50 Million per month means an average of 1,000 customers daily. I think that is a tough call for them… for now…
If you ask me… there is error in the numbers reported… I think their sales per month range from KShs 8mn to KShs 12mn per month excluding sales through other channels.
Or ask the KRA!
Robbi buy phentermine Willams…
Thats it….
Toresbe: i deopped myself. At all costs….
Saudi Arabia and Libya were the source of about 60 percent of the foreign fighters
who came to Iraq in the past year to facilitate attacks.
I agree, for Kenyans to really develop, we must start ‘creating’. Not just buying and selling.