Sunday, September 26, 2010

Western vs Eastern Perspectives on Africa's Development

During the 19th century until the first World War in 1914, Africa has been the object of invasions and colonisation by most Western European countries. The entire continent was annexed as colonies by Belgium France, Germany, Great Britain, Italy, Portugal and Spain. Those countries found in Africa the resources needed for the European development and the raw materials unavailable in Europe, especially copper, cotton, rubber, palm oil, cocoa, diamonds, tea, and tin. The geographic design of many colonies was inspired by the need to easily export those goods via the ocean. It is visible on this partial map of West Africa where all countries have an ocean access.
This geographic design was contrary to the local population's interest as it forced different tribes to live together against their natural affinity. Along the cost you would find fishermen tribes, further inland you would find farmers cultivating the land and higher in the plains you would find cow breeders tribes. The colonies' borders were cutting across these tribes, separating them by country and forcing fisherman, farmers and breeders to live together.

The only colony created by the United States was Liberia created to accept emigration of free black slaves. This colonisation attempt was against the will of the native people.
While the French colonies represented a more significant surface area occupied, it was the British colonies that hosted the largest populations.

In general, the trade balance between the colonies and the colonial power was in favor of the latest as they were selling more goods to the colony than they would buy from it.

It then took more than 20 years to see the African colonies access to freedom starting in 1951 with Libya. While "free", the same pattern of exploitation by the colonial power would basically continue. This was sometimes called the "neocolonialism". The USA had a growing influence during the post-colonial era as Africa became the target for the communist bloc and the cold war propagated in Africa. The USA were supporting often rogue government to stop the increasing influence of the USSR in the region. As an example, Angola has been the subject of a civil war after the end of the war for independence from Portugal in 1975. The war featured conflict between two primary Angolan factions, the communist MPLA and the anti-communist UNITA. lasting 27 years during which an estimated 500,000 people were killed.

So basically, the development of Africa for the last two centuries until the end of the 20th century was heavily influenced if not controlled by the Western countries (Western Europe and the USA).

Then as China and India fast growing economies required more access to natural resources, they became more involved in Africa. Over the past decade, the Asian powers have consolidated their presence on the African continent through trade, investment, aid and migration.

It is interesting to compare the Easter perception of Africa's development with the Western perception that prevailed until recently. This has been very well described by Fiona Dwinger in a report published by Consultancy Africa Intelligence: Opportunity versus Risk: Differing Perspectives on Africa’s Development 
I will summarize it here. 

The basic difference between the Western and the Eastern perception of Africa is that Western countries see Africa as a high risk business while Eastern countries see it as a business opportunity. 

Western Perception: High Risk

- Western industrialized states have traditionally shared the view of “helping” Africa.
Western strategy is aid-based development assistance, focusing on issues such as health, education, poverty reduction and, more recently, good governance
- Over the past forty years Western aid has not been correlated with a significant improvement in the African people’s standard of living.
- The Western system of development assistance has led to a high dependency on external help and has thus stifled innovation, entrepreneurship as well as hindered Africans from taking their fate into their own hands.
- Developmental projects funded by aid – such as the building of schools and health care centers – are often not sustainable and fall into decay once their control is handed over to local Governments.

Eastern Perception: Opportunity

- Asia’s involvement in Africa is much more diverse than that of the West.
Asian interest in Africa is not limited to resource-extraction but has rather brought with it opportunities for growth.
- The building of roads, railways, harbors and the expansion of telecommunications is of mutual benefit to both Asia and Africa.
- Asia reduces the costs associated with logistical inefficiency and of transporting raw materials from their source to harbors for export
- Africans gain from externalities whereby the cost and time of transporting goods - and thus of doing business in general - is reduced.

In her report, Fiona Dwinger also addresses the Western concerns (in particular from the USA about China's investments in Africa) of the Chinese non-interference policy. "The United Sates, for example, argues that by investing in or giving aid to (Western labelled) pariahs such as Zimbabwe or Sudan, the Chinese Government is directly influencing the ability of these despotic regimes to hold onto power...  The United States’ argument is rather contradictory considering that by investing in China, American businesses are also supporting a state with a questionable human rights record."

"In addition, treating African recipient countries as equal partners and not dictating the conditions of development assistance and thus controlling the domestic policy space". This is another major difference with the West which seems to subject their support to conditions of African countries adopting certain Western values. I spoke about those in preceding postings:

See you later alligator....

Tuesday, September 21, 2010

The fallacy of family planning in developing countries

Yesterday, with thousand of other people in 82 locations around the world, I attended a TED x Change meeting. This was a special event organized by the Bill and Melinda Gates Foundation and TED, marking the anniversary of the Millennium Development Goals (MDGs). 
I attended the event in Chapel Hill where it was hosted by IntraHealth International, an NGO based in town.

Melinda Gates was the first speaker. She impressed me by the clarity and innovative thinking of her ideas. She made the point that if Coca-Cola was able to distribute their drinks anywhere in the world, we should be able to learn from that to address health problems.

The next speaker was Hans Rosling, a brilliant researcher from Sweden. He is using a great visualization technology that he developed that transforms development statistics into moving bubbles and flowing curves that make global trends clear, intuitive and even playful. This software is open source and available here.

I probably misunderstood some "strange" ideas that he shared, so my next description has to be taken with caution, as he is much smarter than I'm. What I don't agree with is an idea that he presented and that I have seen presented by many others in the Western or "developed" world (see my view on the reality of "developed" in my posting of  September 13, 2010).

So here is what I understood from some part of his presentation. He showed a chart where on the horizontal axis you could see the measure of the average number of children per family going from zero to eight. On the vertical axis you could see the children mortality going from zero to hundreds per thousand births. Then on the chart you would see circles representing the different countries where the size of the circle was proportional to the population size and its position was based on the child mortality and average family size in that country. He then showed that there were two major groupings on the chart. The African countries were mostly on the top right of the chart meaning that they had large (more than 4) number of children per family on average and that the infant mortality was high, in the hundreds per thousand birth. Then he showed that most of the other countries (the developed world) would be in the bottom left of the chart, meaning they would have less (less than 3) children per family and a much lower infant mortality.

So this would mean that less children per family would lead to lower mortality!!! I don't think that there is a direct link here. We know that in developed countries life expectancy goes up with the average income (GDP/capita). But so does the cost of children, and therefore naturally families tend to have less children. In the developing world, because of the domination of unskilled labor in the production function, the child represents an early economic value, while in developed countries he acquires value only at the end of a long and expensive training.  In modern societies, the child never contributes more than he costs. Better, he is expensive and brings nothing.  To allow him to integrate into a technical economy, parents need to provide him with a lengthy and costly training.  And once this training is acquired, no sociological imperative compels him to surrender the fruits of his work. At the contrary in traditional societies in the developing world the social structure is characterized by the predominance of the extended family, which includes all members of the same lineage, compelled to a series of several obligations, under the rule of an undisputed chieftain.  The requirements governing the operation of the clan provide parents with the personal enjoyment of the work of youngsters, which are in a way their pension scheme. This reason accounts more for a difference in procreative behavior between developed and developing countries.

Another idea shared by Hans Rosling is that the link of lower child mortality to lower average family size should justify the importance of family planning, the "most important way" to address the problem of child mortality. He also added that family planning would also solve many of the other MDGs. Since it would lower the mortality, children would actually survive to go to school addressing MDG #2 (achieve universal primary education). Having less children would reduce world population, saving the planet from exploitation of limited resources and solving MDG # 7 (ensure environment sustainability). And the audience applauded frenetically!!!

What I'm uncomfortable with here is that it is somewhat implying that a large African family is more dangerous for the environment sustainability than a small family in developed countries. This was shocking to me, even if he did not put it exactly that way. We know how developed countries are contributing to the world pollution compared to developing countries. It seems to me that the push for family planning by developed countries is more about their concern to have to share the limited resources of planet earth with the growing population of developing countries and to protect their existing way of life.

Finally what is the moral basis for developed countries to tell families in developing countries how many children they should have? The fallacy of these policies is very well described by Fernand Bezy in "Démographie et sous-développement : propos antimalthusiens" You can find this document in the Fernand Bezy Web Site (there is a link to it in this blog). You will find it in the bibliography section (document REF8) both in French and English version.

 See you later aligator.....

Monday, September 13, 2010

Are the so called "developed" countries really more developed?

Today people speak about "developed" countries to designate the industrialized world, mainly North America, Western Europe and Japan. Opposed to developed countries are the "under-developed" countries now called the "developing" countries.
The notion of "under-developed" countries is mainly based on a Western concept of development. Under-development is considered as an objective status based on a series of criteria, the main one being the "Per Capita Income". Examples of other criteria are the alphabetization rate, life expectancy, infant death rate, distribution of population between agriculture, industrial and services sectors.
This approach based on under-development indicators is rejecting any value judgment in favor of facts observation only . These indicators are used for a "precise" measurement of the intensity of under-development. Like a thermometer that is used for the body temperature measuring fever to determine if the person is sick or not, but fever is not the sickness, it could be due to cold, malaria, tuberculosis,...with very different possible outcome.

The most used indicator because it is summarizing all other indicators is the per capita income, the ratio between the gross domestic product (GDP) and the total population, which represents the mean value of the output produced per person.
Indicated in US dollar, here are some GDP per capita from 2009 provided by the World Bank: Monaco = US$ 209,667; USA = US$ 46,436;  Germany = US$40,873; Japan = US$ 39,729; Brazil = US$ 8,114; Angola = US$ 3,734; China = US$ 3,687; India = US$ 1,122; Kenya = US$ 759; Congo (RDC) = US$ 163 (that is 1,280 times less than Monaco).

Today, there is another category of countries between the developed and under-developed countries: we call these the emerging countries like Russia, China, India, Brazil and others. While these countries may have high GDP per capita, they still present indicators of under-development, especially on the social and poverty aspects.

In the Western concept, under-development is perceived as a lag towards technical development, increase of production and standard of living. Under-development is thought of as a development gap that needs to catch up. This vision assumes that the developed country model is ideal, that developing countries need to modernize like Europe or the US by adopting their technology, their management models and at the same by relinquishing their traditional religions, their  "archaic" social structures etc, all of which prevent them from closing the gap. The expectation is that overtime the developing countries will close the gap and become "developed".

So lets look at this more closely. In the ratio between the gross domestic product (GDP) and the total population, the numerator and the denominator do not represent the same number of individuals. The national revenue is created only by those who are working while the denominator also include the children, the old retired people, the jobless. This ratio between active and inactive people is very different between developed and developing countries. And this average is hiding very different situations. Someone once told me that statistics is the science that concludes that a man who has his head in an oven and hist feet in a refrigerator, feels good on average. To understand, 10 could be the average between 9 and 11, but also between 1 and 19. In the first case, the average is close to the reality because it is not too far away from the numbers it represents. Unfortunately, in developing countries the situation looks more like the the second case. While some Brazilians live like Americans, half the population lives in poverty.

In the case of developing countries, some elements are not included in the national revenue. An example are personal services like housework. This would not be a problem if the ratios where the same in developed and under-developed countries. But in the Western society, many women are employed generating revue and in addition personal services are commercialized: hair dresser, dry cleaning, restaurants, entertainment, etc. Therefore the national revenue of developing countries is systematically under evaluated.

In the case of developed countries some revenue are not subtracted from the national revenue. Development has its costs (liabilities) which should be subtracted from revenue (assets) as is required in accounting. In the so called "developed" countries, enormous amounts are disbursed to repair the damage from development: car accidents, too rich and unbalanced  food (excess of sugar, fat, alcohol, tobacco) generating teeth caries, cancers, cardio-vascular problems, diabetes. Technology like television showing violence  impacting criminality, scholar results, social relations and finally the huge cost on the environment.

Using the revenue per capita to measure development implies that happiness is linked to wealth and accumulation of material goods pushed by large corporations for their own interest, persuading customers about their needs with massive advertising.

Using these indicators to define development, industrial countries appear superior to developing countries civilizations. But in many respects they look less advanced. How not to appreciate the under-developed countries values like their social values against the neurosis generating Western hyper-individualism. I will describe some of these values in a future posting.

The Western development often addresses fabricated needs where goods are estimated at their exchange value, not their usage value, but do they address the real needs of the majority? Should developing countries be inspired by that type of development? In developed countries, the system goal is to reduce cost of expansive workforce, while developing countries have an enormous mass of cheap workers. In industrialized countries, the norm is to satisfy luxury needs of rich customers, while in developing countries, most don't even have access to the basics. 

For developing countries, the Western development model is more like a cons-model. In a future posting I will present the developing countries' view of development.

PS: Many concept described here are inspired by Fernand Bezy and have been published in his "Analyse Economique des Pays en Developpement" course in 1990.

Saturday, September 4, 2010

Will software piracy threaten the growth of ICT in Africa?

In an article recently published by "Jeune Afrique" (here is the link for those of you reading French), they describe how in Tunisia you can buy pirated software in public stores.  The article then mentions about 30 other similar shops in Tunis full of people buying pirated software. In those stores, a software that is priced at thousands of dollars is sold for five to ten dollars. Across the region, up to 80% of software is counterfeit. Actually the biggest piracy is that of music/movies CDs and DVDs sold in more than 35,000 locations across the country.

In this post, I'd like to focus on the software piracy. And this post is not particularly targeted at Tunisia as this happens in all the countries in the region and in other emerging markets like China.

So the good news is that those stores are full of people, confirming that the ICT (and digital media) market is growing in the region. The bad news is that those people buy pirated content and don't pay the full price, or at least that is the thinking in the developed countries.

The reaction of developed countries to this situation is to require that those countries put in place the laws to protect Intellectual Property (IP) and threatening the users buying pirated versions. In fact Tunisia recently adopted such a law but that did not change the situation. These stores are publicly accessible and the law does not seem to be applied.
So most Independent Software Vendors (ISVs), i.e. the companies that develop those software and sell it for hundreds or thousands of dollars don't see that revenue to which they are legally entitled.
For those ISVs that want to take the opportunity to increase their revenue by penetrating the growing ICT market in Africa, there is no question that piracy get them thinking twice before making that investment.

Everything I said so far is the superficial analysis of the situation. It typically results from developed countries trying to apply in Africa what they do at home without understanding the local situation. Actually, part of the answer is provided by a customer of one of those stores interviewed in the article: "I know that they are pirated, but I can not afford programs such as AutoCAD or InDesign, they are too expensive. I would have to invest about EUR 4000 for software to be able to work. It is not within my means, but here I have it for 5 euros. Somehow, I find it normal to choose the pirated versions, because the publishers are filling their pockets on the backs of consumers and, with such prices, they create a selection by money".

Most ISVs in developed countries do not understand how to do business "at the bottom of the pyramid". In his book "The Fortune at the Bottom of the Pyramid", C.K. Prahalad makes a great case on how to serve the world's poorest people AND make a profit. "The rich use cash to inventory convenience. They can afford, for example, to buy large bottle of shampoo to avoid multiple trips to the store. The poor have unpredictable income streams. Many subsist on daily wages and have to use cash conservatively. They tend to make purchases only when they have cash and buy only what they need for that day."

The first thing to do to address the piracy problem is to adapt the pricing to the region. Clearly selling software at $4,000 is not affordable for most people in the region. "This requires to start with a radically new understanding of the price-performance relationship compared to that currently employed in developed markets. This is not about lowering prices. It is about altering the price-performance". An example is Microsoft's Windows XP Starter Edition offered in developing countries. It is a low-cost version of Windows, but users can run only three programs or have three windows opened at once. Performance and price are adapted to local need. ISVs then may fear that those low cost products be sold in developing countries competing with the "same" product sold there at a higher price. That risk is reduced by different performance, the Windows XP starter edition running only three programs at once would probably not satisfy the more sophisticated needs of users in developed countries.

Another way to address the pricing problem are free open source software (OSS). Linux is a free open source operating system, and actually, the best Linux version in the market is Ubuntu developed by an ISV originating from South Africa. The challenge for OSS is that they have very little visibility in emerging markets. Consumers in those markets are very influenced by recognizable brands. The reason is that they have no access to other information about products than brand advertisement. It is very unlikely that free OSS can spend the money to establish their brand and compete against the mega marketing power of Microsoft. This will change over time when access to Internet will increase (see my posting of August 31, 2010)

The second thing that can, and in my opinion SHOULD be done by ISVs to counter piracy is to adapt their software to local needs: local languages, local currency, local culture, desired local "look-and-feel.",etc. This is called "localization" of the software. Again  Microsoft announced the Local Language Program, a global initiative to partner with governments to localize Windows in regional languages. Localized software in local languages and sold at a lower cost in emerging market are even more unlikely to be sold in Europe or US. But more importantly, localized software will deliver more value and be more attractive to local buyers.

But probably the best protection against piracy is still to come and will be provided by cloud computing. Cloud computing is a new consumption and delivery model for IT. SMEs can buy access to IT resources from cloud providers on a pay-by-usage basis. End-users no longer need expertise in, or control of the technology infrastructure "in the cloud."   

For SMEs, the traditional paradigm for procuring IT was to buy their own software and hardware. Now the SME only needs a good Internet connection to remotely access the IT infrastructure that is located in the cloud provider’s data center.  The cloud provider can offer access to IT services for a lower cost than an on-premise IT infrastructure. This low cost is achieved by the cloud provider’s ability to share IT infrastructure among a large number of consumers, by utilizing efficient IT service management. 

ISVs use clouds to deliver software applications through Internet. This is known as Software as a Service (SaaS). User then use PCs (even a cheap Netbook with an Internet browser will do it) and mobile phones to access the SaaS of their choice. A familiar example of SaaS is Gmail. Gmail is an email application running in the Google cloud data center and can be accessed through the Internet, using a simple web browser. Other examples of SaaS used by SMEs are,, and 

When delivered as a SaaS, software cannot be copied and pirated anymore as it resides in a remote secured data center and it is not available on CDs or DVDs. In addition ISVs are guaranteed to collect the revenue for the usage of their software by offering access to their SaaS through monthly subscription, typically less than $10/ month/ user. This price would surely better please the customer interviewed in the article. 

ISVs may ask themselves how will I get my investment back with such a low price? First the low price will attract significantly more buyers than the high price. In the telco industry in India, handsets prices used to be in the $300-$1,000 range and not surprisingly, the market was limited. Until one telco offered 100 free minutes for a mobile, multimedia phone with an up-front payment of $10 and monthly payments of $9.25. The company received 1 million applications in 10 days!
Actually ISVs don't see a penny from the 5 dollars currently paid to the pirate shops. A monthly subscription per user of 10 dollars/month over the lifetime of the usage of the software will ultimately exceed the onetime charge of thousands of dollars in the traditional model. If the user does not pay her subscription fees, the ISV can interrupt access to the SaaS by removing the user name from the authorization database.

So in conclusion, I don't think that software piracy will impact the growth of ICT in Africa. It is the responsibility of the ISVs themselves to address the problem, not through threatening the users pirating their software, but rather by offering them software adapted to their needs both in terms of functions and price.
Finally the new SaaS delivery model should protect ISVs from piracy and guarantee their revenue.