Price Arbitrage: the wrong way round

It's not for the first time I notice a difference between prices for Tech in Nigeria and the UK. But usually it's high cost England that's MORE expensive than Nija, that has to import everything and does so to a large extent from the former imperialists.

So imagine my surprise when I found while trying to buy a phone recently that it was actually cheaper (GBP 388) to buy it through a local website than buying it both in LHR duty free (cost: GBP 480) and on Amazon.co.uk (GBP420). Incredible. I wouldn't usually write about this but to me it's a sign of something bigger. 

 

Phone on Jumina.com.ng

Phone on Amazon.co.uk

Price converted

The website that ended up selling the phone to me for Madam to use (although I doubt she has), ended up being Jumina the Nigerian arm of the German based Rocket Internet company, which prides itself on efficiency of executing internet start ups in difficult environments. They have over 200 now, most of them with similar business models that were originally copied from prominent Western examples (ebay clone, Amazon clone, stuff like that). 

What that shows me is that the path to improvement is not necessarily as long as people think. What's required is standard improvements in procedures that increase efficiency and raise the overall bar. The required initiative doesn't have to come from abroad, in fact what I've seen in the past few weeks in terms of local entrepreneurship at places such as the CCHub and amongst Angel funding communities makes me cautiously optimistic that we're at the start of a very exciting wave for tech startups in Nigeria.

Jumina meanwhile hasn't proved its staying power yet but it's a glimpse of the potential that's coming this way.

It's not over

Today the government unilaterally announced a partial revocation of its previous fuel subsidy removal, as well as a few nominal concessions to tidying up government. It then put soldiers on the street to make sure nobody protested, shot in the air and fired teargas at protesters to keep them quiet, and temporarily closed down the CNN and BBC offices in Lagos. It had already paid off PENGASSAN, the oil union, not to go on strike as it had previously announced. The general labour unions first suspended street protests and then the strike in a climb down that did not represent the protesters feelings.

Though the totalitarian methods used surprised many, including governors, an ending with unfinished business was to be expected. The protests were of a scale never previously seen under a non-military government, and the awakening of a new, active, young, technologically savvy, middle class protesting group is likely the most important outcome. Discussions were ongoing about how this momentum could be preserved and used in the days ahead, right up to the next general election. There is certainly a lot for this group and others to work towards: Less corruption, better distribution of oil wealth, infrastructure investments, reduced government costs, better representation and reduced costs of living to name but a few. Groups like EIE and Save Nigeria are already uniquely positioned to carry on the protest movement, but others will have to be born to channel the energy.

Importantly the protest needs success: None of the demands expressed in the video below have been achieved. Citizens will now be watching with new found confidence whether the promises governments makes are implemented and sufficient. If our reforming instincts are met with even some success, then the protesters of today will be uniquely positioned to lead change through the 2015 elections.

A new dawn?

I'm way behind on this one, I have to apologize. In part I've been holding back, observing: This is not my battle no matter how much I support it. In part I am as surprised by the intensity of the battle as the politicians clearly are: The military got a pay rise, 24 hourcurfews are in place, salaries are being withdrawn for striking workers, some might even face the sack - the People in Power are worried: This no longer looks like a controlled "saving face" union action we had thought it to be.

The People in Power might well be worried. The subsidy removal is just the tip of a very big iceberg that has been growing for the last 50 years, and has only grown more rapidly since military rule ended. I hesitate to speak about the advent of democracy, because you can't really call it that if those elected into power fail to represent the people that did so. The social contract that ties government to tax paying citizens has long since vanished, washed away by oil money. It has left the life of the 99% a daily, basic, violent struggle for survival. 

Others can and have more eloquently described the ongoing battle for a better Nigeria. But in the face of the sacrifices some people have made for this cause I cannot be silent. While I seek more effective ways to support the protest, I have to at least try to make my voice heard and highlight others. Meanwhile I weep for every soul lost to the defense of their basic rights. The blatant murder of civilians, and the collective shrug which seems to have followed, is the real tragedy of this saga. 

What now? If all we come away with from this is a reduction in fuel prices, then the protesters will have lost. The real target is the leadership rot that got the country into this mess in the first place: 'We are not broke', say the protesters, paraphrasing the finance ministers's justification of the subsidy removal, 'we are mismanaged'. They demand a slashing of exorbitant government wages (MP's reportedly earn 12 TIMES what their highest paid European counterparts, the Italians, earn), an analysis of where the money's gone and punishments for those driving and those benefiting from the emptying of state coffers, and, more than anything, a clear and decisive plan to getting basic services up and running pronto.

But how is this to happen? Right now it's not clear: Unions are said to be paid off by governments, the Twitter elite can't carry the masses, and the intellectuals get caught up in "grammar". There doesn’t even seem to be a collective manifesto of demands, though some try. There is currently no uniting force, and so I fear the governments hold strategy will work in the end: Things will peter out for lack of leadership, in the face of adversity, attention diverted by another disaster, and driven by the sheer necessity to get back to work, to earn a few cents, to get some food. But maybe not, maybe the countries rightly enraged citizens can transform some of that anger into real change. Inspired by the Arab Spring, goaded by the ostentatious wealth that surrounds them, provoked by the violence and fear they encounter every day, maybe Nigerian’s can craft a better future for themselves. I certainly hope so. 

Fuel Subsidies

The removal of fuel subsidies seems to be the topic of choice here in Nigeria at the moment:

On one hand you have a huge drain on scarce national resources, a large portion of which goes directly into the pockets of a bunch of sleazy players through anything from round-tripping (docking the ship and the subsidy, only to take it out again and re-register it for import and another subsidy!) to black market retailing (pocketing the subsidy and withholding the delivery until scarcity drives black market prices up which are then cashed in on).

On the other hand cheap fuel is pretty much the only tangible benefit the man on the street gets from his government. Many of my friends fear a social revolution if its removed. Mark my words, they say; remarks which are echoed by nearly every civil society organization out there - from Unions to the Nigerian Bar Association. Everybody is against it, apparently.

Its a sad state of affairs that the government really provides so little. Maybe it could provide more if it didn't 'chop' all the money itself in the form or reoccurring expense. That is to say - if we do cancel the subsidy, would the government know what to do with the extra cash?

But lets look at it rationally: In reality nobody but the oil lobby actually seeks the continuation of fuel subsidies. They:

1. Waste an awful lot of money. The IEA and others estimate that USD 409bn were spent directly on consumption subsidies in 2010, not to mention the indirect subsidies such as tax cuts. The American example, and the corresponding support for renewable is beautifully embodied in the graph published by ELI.
2. Make fuel artificially cheap, which in turns makes the renewable alternatives seem artificially expensive. Thus, they also distract investments into renewables, which would increase if the business opportunity were even more apparent.
3. Drain a scarce resource. The OECD estimates that if the subsidy were removed by 2020 globally, then the global energy demand would drop 5% and oil demand would drop 4.7mb/d, or around 1/4 of the current US consumption. The IEA estimates even higher drops.
4. Increase environmental pollution. The OECD estimates that the proposed removal of global subsidies by 2020 would reduce carbon-oxide emissions by 2 gigatons, about 1/15 of total emissions in 2011.
5. Hardly ever reach the people they are meant to. The IMF estimates that only 1 in every 6 dollars of subsidy reaches the poor, the rest gets lost in sleaze. 

So, lets cut the subsidy and see what happens. Maybe less support from government will actually make it more accountable to the people. Who knows? My guess though is that Nigerians will maintain their resilient nature and battle on through. The original stiff upper lip.  XHK69U9FVEPU

Where does Music come from?

I've always had a strong interest in how music originated, or rather the limited geographic sense thereof. In pre-literate society, which include most of Africa's early tribes and clans, music and stories carry added significance. This might explain why they seem to be more fundamental to societies here (although - classical cause and effect theory here - why would they need the literate traditions if their oral ones are so strong?).

The debate on origins of music are a never ending of course, and many clever heads that have much more to say on oral traditions than my rudimentary thoughts. In academia the area has been battling a bit for relevance however, especially in Europe I was told by Linda Braun (a Falling Walls Lab colleague), and suffers from chronic funding shortage. This seems surprising, given its importance and the unanswered cause and effect questions.

One way to up the relevancy levels is to bring the history of music that's more popular (though not more profitable) than ever back into popular conciousness. The best way to do that of course is graphics (who likes to read?). I have a huge map of the origins of jazz back in Germany, but I wanted to share the one below as a particularly good example...

Interesting that it comes from a travel agency. Maybe it will inspire more people to venture down the Chicago - New Orleans blues trail that Harry and I attempted way back. After all, that's where it all started ;)

Where's all the money going?

Lots of time to think in Sri Lanka's tea plantations. Mostly... Has the "where's all the money going" story been fully told?

Basically, there's a lot of money coming into SSA private equity (and public ones too, I imagine, but there's some fact checking to be done there). It's coming from established forces that are raising larger commitments (Helios, EMP), big funds new to the market (Carlyle amongst others), local funders (PIC) and increasingly also private sources (Allen Gray is rumored to be starting something). This means a) that there's a lot more cash and b) it's coming from new sources.

But I'm beginning to doubt if they can spend it. Yes, some democratization is driving business climate improvement and yes, some valuations may be on the low side. But continued structural issues (strife, infrastructure and corruption) remain largely unchanged. Even if there are young hopefuls such as FHN or IHS they are still a) facing the same barriers as before (I'm sure Will can name one or two examples to add to the ones that spring to mind) and are b) still few and far between. Just look at Anders, who went from looking for pipeline to making it.

Can this change? Yes, of course. But it's likely to take far longer than a PE fund and its investors have the stomach for. Don't get me wrong - these investments can still do an immense amount of good. However, they're likely to have far more VC characteristics than investors seem to think, with all the risk, timeline, work, cost, and other challenges that go with them. Hopefully more money will bring a) (short term) valuation inflation that will benefit a few golden nuggets b) enforcement of higher management and corp gov standards c) give rise to a new entrepreneurial gold rush that can really help foster a deeper pipeline. But all that might not necessarily translate into profits now.

I hate to tell a bearish tale, especially in a bullish time for Africa during which international investors have little else to be bullish about. However, I've seen first hand how too much enthusiasm can backfire (haven't wee all in some way or another). Microfinance for instance was for a long time (over)-heralded as a saving force only to fall flat on it's face when empirical studies showed that it's output didnt match those lofty expectations. That's not to say that it does not do any good at all though that's another discussion. Fortunately the sector is still largely backed by public institutionals who move slowly and have longer term/non-financial objectives. The sector therefore has time to build a new brand or prove it's critics wrong. Given the 'new' funding base of African PE it's questionable whether the sector will have that luxury.

Big Ticket Items

The new World Development Report touches on something I've been thinking about for some time: The need to build environments where people and business can flourish, before adding the proverbial cherries on top - infrastructure, education, finance etc.

The report's data shows that fundamental settings matter to progress. No amount of microcredit, health spending or agricultural value chain development matters if there is no peace, as the graph makes clear.

With all our fancy new initiatives that drive business thinking into every livelihood angle we can think of, we seem to have forgotten the basics. Maybe forgotten is unfair - de-emphasised maybe. For me, there are three learnings here: 

1. There are limits to human resilience: This is clearly the cause of violence in the first place; the point the pain of violence comes second to the pain of injustice (although, as the report indicates, people may underestimate the cause of violence). But it also the underlying principle of underachievement in violent states; resilience and ingenuity of people matters not if there is no stability and environment where citizens can "make do".

2. There seems to be a Elementary Hierarchy of Development Needs, which we would do well to remember before designing other well-meaning interventions. I know this is nothing new, but the plethora of conflicts and the increasing issues they generate seem to stem from them seems to indicate that we haven't learned the lesson.

This hierarchy is a key learning I gained from my transition from India (a stable and 'fairly' well functioning environment where the most blatant structural issues have been overcome), to Nigeria (a 'fairly' unstable environment where hardly any structural issues have been dealt with). In India, my work with SMEs, microfinance and other 'social' enterprises, made me feel as though I was adding something to the country. In Nigeria similar, more innovative work (in relation to other stuff that's going on), makes me feel as though I'm running my head into a brick wall.

3. Simple is best: Our apparent preference for micro interventions in recent decades (following years of focus on structural issues), has led to the relative neglect of big issue topics such as corruption and infrastructure development. The WDR reflects this when it mentions the number of laws (244) that the government has had to pass and repeal.

Clearly, where livelihood solutions reduce poverty and injustice they foster peace and thus create a virtuous cycle. Indeed, the report shows clearly that poverty and injustice are the main causes of violence. But people can create livelihood solutions themselves, and too often intervening in/subsidizing those initiatives creates dependencies that then create at least the appearance of injustice. With limited resources at the disposal of development organizations we must concentrate on the big ticket items that can get people to a place where they can determine their own future. This is the same premise the microfinance industry built its reputation on - give people what they need to make their own lives better. Fortunately they can (already do, through loan sharks even where 'modern microfinance' doesn't exist) supply these services themselves. Unfortunately, the cannot do so for structural issues or peace.

NOTE: Neeraj Swaroop, regional chief executive India and South Asia, Standard Chartered Bank maintains that livelihood solutions might have no effect if the underlying requirements aren't there to start with:

"A lot of the accounts are dormant and not activated because there's no credit as those people are really poor," he added. "You can't have financial inclusion go ahead without economic inclusion and if those people don't have access to roads, electricity, [a steady stream of income]."

HT: NextBillion

Critical infrastructure

What happens when services provided by private companies become critical to the nation? First off, governments start paying more attention to you. They may monitor and protect your facilities and supply lines, as Wikileaks showed. But companies also stands in the duty to ensure the provision of these services is widely available if required.

Mobile phones are a great example of this. State run telecoms monopolies have been undermined by mobile networks, although some have been reigned back in as the case of pro-Mubarak messages in Egypt showed. Largely they now stand a as a bulwark that allows people to communicate, even if everything else falls apart.

That's if you can get hold of phone credit. Most people who first come to Lagos are astounded by the plethora of recharge retailers that sell their ware for a 3% margin. They are everywhere. However, if there is violence or even war these guys would disappear pretty promptly I'd imagine, or people might not be able to go on the street to buy any for fear of being shot, or they might not be able to afford any because they haven't earned their day wages due to the unrest or there's simply no currency available. These factors certainly seem to be the case in Ivory Coast, even though credit is more desperately needed than before to get in touch with loved ones or update everybody on events (maybe using Twitter). Now, after a campaign started here and promoted here, Orange is the first provider to commit to free credit. According to Ethan Zuckerman, they are:

giving credit of 2000 CFA (a little under $5) to all customers, a week of free calls to a landline number of their choice or an Orange number and a week of free Internet access. Most touchingly, they closed their announcement (posted to their Facebook wall) with this statement:

Par ces gestes de solidarité, Orange Côte d’Ivoire et Côte d’ivoire Telecom apportent leur soutien à tous leurs clients pour leur permettre de garder le lien avec leurs proches en ces moments difficiles.

(Rough translation: With these acts of solidarity, Orange Côte d’Ivoire is providing support to all their customers to help them stay connected with loved ones during this difficult time.)

HT: Ethan Zuckerman

Information Highways

In countries like Nigeria I'm always reminded how important information is and how hard it is to come bye. It affects everything from concert timings, flight schedules, to market prices and food delivery. Google and Time Out have spoiled us in the West. In Nigeria, I have to be in 20 different mailing lists and get a whole lot of spam, just to find out what's going on next weekend. In a city of 20mn! Crazy!!

There's clearly room for innovation here. Companies that can capitalize on the information arbitrage that exists more clearly here than nearly anywhere else stand to win big. Cool new products won't help anyone if they don't know they exist! Technology can help spread 'the message'; low technology (SMS) probably more so than high tech (internet), but whatever we use we need to have a solid understanding of how it spreads. Shamefully, this is an area most companies have completely underperformed in. Though they now know better how their products get to people, they have little clue how news of them is getting there. There's no data that could help, and often information highways bear little resemblance to what we know or can conceive. A story told by a colleague recently brought the message home.

Her sisters dogs went missing on the mainland and couldn't be found; a cause of great upset not only to my colleague's sister, who I heard whaling on the other side of the line, but of the security guard who left the gate open, who now feared for his position and more. The dogs couldn't be traced anywhere. At the same time the sheer size of the dogs had scared a motorbike-taxi (Okada) driver to drop his passenger at the sight of them  on the other side of town. A resident on the street noticed the commotion on the way back from work and found the dogs. Eventually he noticed that they were well bread and decided to take them in, telling his staff to keep an eye out for the owners. The news was told to a newspaper boy who served the house and who happend to drop papers at my colleague's sister's house too. When he heard from her guard that he had upset the family by leaving the gate open and letting the dog escape, he immedateyl remembered the story and dog and owners were eventually reunited.

This unlikely tale is more than an anecdote on the power of the word of mouth but emphasises the crucial role that information intermediaries play in societies with poor formal information highways. I know little of these opportunities to bring news to low-income households, and from experience I know that marketing departments know even less. Clearly there's an opportunity here that we must develop on if we're to build inclusive products/markets. Any companies/people out there that do this kind of research/consultancy?

Insular Cabal

On quoting an article in the Chronicle of Higher Education, which said a recent drop in figures meant that "only 45 percent of the articles published in the 4,500 top scientific journals were cited within the first five years after publication", Chris Blattman goes one to criticize an increasingly fractionalized information market:

I share the loathing for terrible work, and increasingly obscure and specialized journals, which publish the work of an insular cabal. The great tragedy is not the production of the work, but the initiation of so many new students into mediocrity.

Not really my view at all: The Long Tail allows me to focus on what I need to focus on and help make Adam Smith' vision a reality. What's wrong is not that there's increasing specialization, but that we may not yet have built the tools to process all the information. Blattman says himself that

There are benefits to an intellectual market with low barriers to entry. A few hours a month isn’t a terrible price to pay to consume the results.

What if we could condense those few hours into a few minutes? Google and its tools, such as Google Reader are built precisely on this premise but may not go far enough. Inventions that help us sift through increasing amounts of data are going to be as important to our way of life as bicycles and cars have been.

That's not to say that we should ignore all the rest of the world. There's so much beauty in the little things that surround us, as I hope this blog shows, that simply focusing on our iota of planet is a complete waste. While we've said goodbye to the Age of Polymaths, surely we could all do with a little Thomas Young in us. The popularity of events such as TED tells me that quite a few people think this way; a counterculture to the increasing specialization is developing in parallel with it - cross-dissemination and fertilization of ideas seems to  be blossoming.

Lagos still Dark

There's growing controversy about a BBC2 show portraying life in Lagos (Welcome to Lagos, ends today), that invites you to a glimpse of the "most extreme urban environment". I haven't seen the thing myself, not having TV and being barred from BBC's Iplayer, but from the episode titles it doesnt look promising:

1. A look at life in the Olusosun rubbish dump, where about 1000 people live in scrap houses. 
2. A look at the lives of those who choose to live and work on the waters of Lagos Lagoon.
3. Following Esther, who lives in a scrap house on the beach in central Lagos.

Hold on, this feels like a we're back in "Heart of Darkness" age. I mean, I met the crew that was here at the time. They were staying in a cool guesthouse in the heart of posh Ikoyi, surrounded by art and music. They saw fun and laughter next to poverty and despair. Even if they chose to highlight the "resourcefulness, determination and creativity of those adapting to life" in Lagos, it feels like they missed their brief. Anybody who knows Lagos and Nigeria knows that there's more than pitiful locations of Makodi, Bar Beach, and Olusosun. Knows that there's a hunger and thirst for life the expresses itself in explicit acts of creativity that warrant a setting that reflects the attitude in a bolder way.

People look at the surface and even if the show reveals, as I hope to find when I get back home, a lighter side of life in the most pressing of circumstances, the choice to portray the least appealing of places in Lagos means that the producers have stuck to the old prejudices rather than sticking their head out and showing a new side of Africa that might actually change peoples stereotypes. I can only imagine that the final decision makers thought that would be too much for the home audiences to swallow. Opportunity missed.

I, and most of my Nigerian friends and colleagues, agree with Wole on this one. I thought that Said had managed to re-evaluate our conception of others, and helped others to overcome their own notion of self. Clearly the battle still rages strongly, maybe more strongly than ever as we near the World Cup in South Africa.

Volcano bonus

Loving the inspired response from guys stuck in London due to the volcano that nobody can pronounce. TED and a VC are doing/have done unscheduled events. I'm sure there are many more. Increases my belief that, contrary to the startling figures bandied around, the Volcano-induced grinding halt seems to have a net zero effect. No tourists in, but other tourists and others who had wanted to go on holiday are stranded.

This of course doesn't account for the plight of individual industries, such as Kenyan flower growers or airlines, but works, roughly, on an economy wide scale. Now that I've started looking, NYT insists that, unless it lasts for a while and companies start finding it difficult to cover supply needs, it wont really damage GDP.

Of course, we could see more dramatic social outcomes, as in 1783, when the "eruption of Laki in Iceland, which lasted for about eight months, [was] linked to crop failure in France. As such, it may have been one of a number of factors that led to the French Revolution." [Guardian]

In the meantime, those of us that remain unaffected in Nigeria can just entertain ourselves by listening to the stories of stranded passengers and their responses, such as Angela Merkel, the Norwegian Prime Minister and John Cleese.

UPDATE: Just found this picture of thunder lightening the eruption through facebook friends, truly amazing. Hat tip, BB.

Cost of doing business

We all know about the additional burdens weak infrastructure, bad regulation, corruption, and high cost of imported goods, can place on entrepreneurs and MNCs operating in developing countries. But at times practical examples make a striking point of just how deep the problem runs: Jumoke, one of the MDs of Alitheia, recently complained about her broken laptop screen - why, i wondered, would she (a) not replace it, or at least (b) get an external screen in the meantime.

Answer:
  (a) There is no Sony repair centre repairing laptops in Nigeria. I was suprised by this and did the research, and true, in a country of 150mn people the only Sony service centre will only start accepting laptops from May. Even if she were to get hold of the spare part from elsehwere, there would be no guarantee that there's anybody in the country that can help install it.
  (b) The computer guy seems incapable of attaching a temporary external screen, which feeds into the other bit about nobody having the skill to help out.

Result:
The only alternative to sending it out of the country, which would cause whole other set of problems, is to buy a new computer. Imagine - instead of a relatively cheap, routine maintenance she has to go out and splash out $$$s on a new computer even though hers works fine. Crazy

Voyeurism in the news

Voyeurism and exhibitionism hit the news in different ways recently. One way struck me when I was scanning the BBC website today (see pic). I don't know if this widget was intentional or not but it sure came out funny/strange. How twisted to you have to be to (a) want to watch somebody get electrocuted (b) electrocute somebody (c) be electrocuted on live TV. The latter made me think of a piece on psychopathy and reward, which I guess we all knew about. But even so - aren't all those seeking recognition on Big Brother & Co. just psychopaths in their own little way?

early questions

so... I have some catching up to do. Two interesting concepts hit me when I first got here.

One is Distance. Well, actually it was Vonnegut, who's God Bless You, Mr. Rosewater I was reading in my first days here. Reminded me of some other New York rich kid book (can somebody pleae remind me of the name. very famous?) the second time in Kenya, and reading Pakenham's Scramble for Africa just before at Enkosini. So on one hand you have contrast, on the other the opportunity to create a more intensive experience by reading how locals lived, the musical history, or whatever else tickles your fancy. Makes me think why we bother with the former at all? Truth is, I think (remind me to do a rant on the post-modern thing), if you take it beyond the old holiday book (which I am not really capable of anyway), that distance puts a subjective element into the moral evaluation, which you are not really bound to get at home. Of course you are still going to identify with characters etc. but you always do judge in relation to something, and here the contrast is so big that that something becomes like a disney film... totally fictional.

The second thought was, naturally as I dont have one, on Home. My dreamy stroll through Shoreditch (thanks Ems) in search for just the right place to have my things made me realise that I really dont need one. Travelling around as one is at the moment, we can make ourselves at home anywhere, maybe with the help of strangers such as Baas in Senegal momentarily. This raises a few interesting questions. Why do we think we need a home? Where does that urge come from? The comfort we get from security of home/lover/friends&family is a natural answer. But can't you get that another way? I am coming to believe that Home is just an old-age mothers wisdom that doesn't hold in the modern, global world any longer. Lets see how long I stay happy with that...