Anyone who’s worked in Africa has had that moment of realizing that capitalism doesn’t quite work the way they sold it to us in the textbooks there. Tons of markets are monopolistic or oligopolistic, but more are just plain disorganized, with a crazy jumble of providers each operating at an unsustainable scale, failing to compete effectively with each other.
Oddly, what’s true for African SMEs is true for international NGOs in Africa too.
Which is one good reason to get excited by Living Goods – a social enterprise now operating a network of Avon-like distributors for NGO-goods in Kenya and Uganda. As their website explains,
In Africa today, outside of a few major cities, there are no chains or franchise networks. That means thousands of small sellers are utterly lacking in buying power. Moreover, existing distribution is built on layers of re-sellers. A little drug shop 20 kilometers from a trading center typically buys from a small local distributor, who contracts with a regional distributor, who in turn buys from a national wholesaler who purchases from a manufacturer or importer. Each layer in this Byzantine network tacks on profit margins and transaction costs that are ultimately born by the poor clients. As such, market retail prices can reach up to 350% of the manufacturing cost. Living Goods harnesses the buying power of its agent network, removing supply chain inefficiencies to deliver cheaper prices to consumers and bigger margins for our micro-franchisees.
It’s the kind of initiative that gives me hope that the failure of aid in Africa need not spell the failure of development, or even the failure of western involvement in Africa’s development. Because the last few years have seen incredible ferment in these kinds of initiatives: business-oriented, aimed at boring-as-hell-problems, focused on livelihoods and rigorously tested.
Whether LivingGoods and the Avon model is the right solution or not, I can’t tell. (Though probably the RCT they’re using can tell.) But what’s clear is that if the right solution exists, you’ll only ever find it via experimentation. And experimentation is what these guys are all about.