Eradicating poverty in Africa requires a collective and concerted approach. Collective approach implies involving all stakeholders. The stakeholders in a nutshell include the governments, the citizens (society) and the markets, (controlled mainly by the West). Concerted approach implies setting up strong economic policies that would help strengthen the economic institutions.
Now let’s begin with the markets. Believe it or not the poor in Africa pay a premium for every quality product or service. This is simply because the products’ portfolios have been priced and developed for Western markets, (a target market with much higher income), making the products to be literally out of reach for potential customers in poor African markets. So even if they end up reaching these markets, the margin to the end customer in Africa will be much higher, because of transportation costs, and other risk premiums charged. Or worse, the feature-function set of the product will often be inappropriate.
Let me give few examples of how the African markets suffer from this. Take the lay African in the Diaspora. If you live in the Netherlands, for instance, and you want to buy a second hand car, you can get one ranging from 500 to 1,000 Euros. This car could, on average, be with you and solve most of your business at least satisfactorily for a year or two. Now say that the car is destined for Africa, you have to pay transportation (shipping) cost, and customs, which means that your 500 Euros car now cost (depending on the country) about 1,500 Euros at least; artificially, making the car nearly unaffordable. How to solve this problem?
Reaching the poor is going to require more than just offering them "an existing portfolio of products and services," writes Prahalad. Multi-national corporations (mostly owned by the West) must thoroughly re-engineer products to reflect both the very different needs of poor consumers and economics of the market - small unit packages, low margins, and high volume. Innovation in product development will be key and may reverse the flow of concepts, ideas, and methods to improve existing products offered in developed markets. The use of existing western products and methods will simply not cut it.
The African Governments in their part should show what they have. Amongst others, Africa has a huge labour force which is a potential resource that should not be left to waste; the governments should therefore develop it so that it would be at an attractive level to tap. Multi-nationals are attracted by a huge and cheap labour force. On top of this, if the governments further strengthen property laws, through democracy and rule of law, companies would establish or localize their production factories, bringing those products near the African markets.
Check out for part three in the next issue!
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