Global transfers: M-Pesa and intellectual property rights

In July 2020, in the midst of the COVID-19 crisis, Kenyan mobile operator Safaricom announced a significant event – the intellectual property rights (IPR) for the mobile money service M-Pesa was finally “moving back into African control”. For this, it paid a sum of £7m to its UK-based parent company Vodafone.

The announcement didn’t receive much commentary at the time, but it raises a number of critical questions – Who controls the IPR of M-Pesa? Wasn’t M-Pesa created in Kenya, so why did Safaricom need to buy the IPR?

IPR is a key source of economic power, and global rules have been argued to support the dominance of firms from the global north [1]. Further understanding, however, is required with the expansion of digital economy in the global south. How does IPR relate to the expansion of digital firms when it is fundamental to competitive advantage [2]?

The case of M-Pesa can provide a useful perspective on these issues. M-Pesa should be seen as a global innovation associated with a large multinational (Vodafone Group) with control of a set of mobile operators around the globe. M-Pesa has been part of services in locations such as Egypt, Ghana, South Africa and India (with varying success).

M-Pesa while created in Kenya should be considered a global innovation. This includes multiple implementations linked to Vodafone Group, and with a range of IPR assets

Innovation in M-Pesa and IPR

A first step to understanding M-Pesa IPR is to examine who was involved in creating the service. The core of M-Pesa emerged in 2007 as a small development project through DFID, the UK development agency, in a fund that supported private sector involvement. Financing was shared between DFID and the Vodafone Group.

Safaricom also played an important role through technical and operational support as M-Pesa emerged during a pilot study in Kenya as part of the project. We should also not underplay a broad range of actors involved in shaping innovative aspects of M-Pesa. This includes informal innovation in Kenya around the use of mobiles that pre-dates M-Pesa and the role of users and agents during early stages.

M-Pesa IPR includes software, patents and branding. Examining the documentation associated with the IPR, we see the shadows of these diverse contributions to innovation. But when it comes to assigning rights, diverse actors reduce. For example, of 10 patents filed, principal authors are largely made up of UK-based researchers in Vodafone. A more detailed analysis of such patents, however, shows that some relate to local creative practices occurring in Kenya, where patents formalise previous informal activities through describing software systems.

A crucial moment around IPR in M-Pesa was how the initial development project treated IPR issues. Evaluation documents indicate that with low expectation of innovation, “intellectual property rights were..not adequately considered in the design process. As many proposals involve customised ICT development, this poses a serious problem” [3]. There is little indication that DFID sought to gain any rights, to ensure development goals were considered going forward, or how Vodafone Group dealt with IPR linked to its subsidiaries.

So what?

Ownership of IPR in M-Pesa has been central to control of the service. Firstly, it can be linked with significant transfers. As well as the fee paid to take back the IPR in 2020, Safaricom have paid an annual “service fee” to the parent Vodafone for use of the M-Pesa service (and IPR). This has resulted in the estimated transfer of €170m between 2010-2019.

Secondly, in Kenya, IPR control has led to significant tensions around innovation. After its initial successes, those involved with M-Pesa in Kenya often express frustration – with slow upgrades, with limited interaction with financial ecosystems, and with restricted innovation in new products. One key reason for this voiced by managers is that Safaricom faces challenges around control, citing the way that the software and IPR is controlled by Vodafone from the UK, who may have different priorities to Safaricom.

Challenges of IPR in the digital economy

Even though M-Pesa is a unique case, it provides insights on IPR and global digital innovations:

  • Diverse actors involved in innovation become narrowed when it comes to IPR. In M-Pesa, it was mainly actors in the UK who filed patents or wrote the code.
  • Socially-orientated funders are often a part of innovation but may pay scant attention to IPR issues (due to time, focus, skills, corporate pressure) with long-term outcomes.
  • When digital technologies are embedded in the global south, there are underplayed ethical challenges in how local knowledge and practices become embedded within IPR.

IPR is rarely explored as part of research around digital development. But as this case shows, engagement is vital.

The creation, use and adoption of digital technologies offer important new resources in driving development, but without due attention to IPR issues, longer term challenges and injustices can arise.

This article summarises a recent short paper “Global Transfers: M-Pesa, Intellectual Property Rights and Digital innovation” presented at IFIP 9.4 online conference 2021. Full paper available on arXiv

Notes

[1] For critical discussion, see Chang, H.-J. (2001) Intellectual Property Rights and Economic Development: Historical Lessons and Emerging Issues. Journal of Human Development, 2(2), pp. 287–309; Stiglitz, J.E. (2014) Intellectual Property Rights, the Pool of Knowledge, and Innovation, Working Paper, 20014, National Bureau of Economic Research, Cambridge, MA.

[2] Haskel, J. & Westlake, S. (2017) Capitalism without Capital: The Rise of the Intangible Economy. Princeton University Press, Princeton, New Jersey.

[3] Ebony Consulting. (2003). Financial Deepening Challenge Fund: Mid Term Review. Ebony Consulting International Ltd.

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Digital trade and global governance of the digital economy

It is easy to forget that a decade ago, the digital economy was tiny in most countries. This is changing, and in many regions accelerated by the COVID crisis. The global growth of the digital economy has, however, not been matched by the growth of domestic digital firms. Rather, we have seen a growth in digital firms located in technologically-leading economies, operating across multiple markets and often with limited local investments.

This state of affairs has important implications globally, especially for countries who are looking to ‘catch up’ with technologically leading nations. In these contexts, digital development is as much about how policies (at all levels) shape foreign digital firms as it is about nurturing domestic digital economies.

We explore these issues in a recent paper which discusses the way that policies around digital technologies and data flows are becoming entwined with international trade [1]. We specifically look to examine such debates through a political economy perspective. Perhaps when we first started researching this topic a few years ago, connecting digital development outcomes to global political economy was an obscure topic. But in an era of app bans and global trade wars driven by a desire to control advanced technologies, political economy approaches are becoming ever more important.

Global governance and digital trade

Emerging from the birth of the Internet, so-called “Internet Governance” (IG) organisations were designed to govern technical issues as the Internet expanded globally (e.g. IP address allocations and standards). While there have been attempts to bring broader economic and social issues under the IG umbrella, the lack of formal rule making power limited the political power of these organisations.

As cross-border flows of data have expanded globally, actors have sought to integrate the governance of digital technologies and data within rule making on trade, typically referred to as “digital trade”. The goal of trade agreements is to encourage free-trade across borders. Following this, digital trade chapters in trade agreements look to enforce “open” digital trade, for example in binding commitments to “free flows of data” across borders and rules to prevent signatories undertaking certain domestic policies around digital and data [2]. The CPTPP (11 nations bordering the Pacific) and the USMCA (US, Mexico, Canada) are examples of recent trade agreements that include chapters with binding “digital trade” rules.

Clearly digital technologies and data have overlaps with trade, particularly in areas like e-commerce. But it is not clear if trade agreements are the most appropriate place to globally regulate digital and data [3]. From a political economy perspective, one can associate the growth of digital trade with the power of technologically advanced nations such as the US and Japan who seek to more strictly govern global norms around digital, and push open data flows. These nations are strongly backed by lobbying of ‘big tech’ firms who see such open digital trade as central to their global expansion.

Trade agreements are powerful because they offer binding rules unlike other spaces of global governance. In addition, dispute settlement mechanisms in trade agreements mean that signatories who break rules can face serious consequences. Even for a nation with a small digital economy, trade agreements can mean that breaking digital trade rules will lead to retaliatory tariffs in other sectors.

Ultimately the inclusion of digital trade in trade agreements (regional and bilateral) is a first step to powerful nations establishing digital trade rules at a global level. This would be through digital trade agreements in the World Trade Organisation (WTO). Digital trade rules at the WTO are controversial, not only because they look to enforce open digital trade globally, but because they potentially override existing trade agreements where developing countries have negotiated exceptions (such as the General Agreement on Trade in Services – GATS). These exceptions are thrown into question if goods and services that are transmitted digitally are subject to new rules [4].

This is best illustrated in the case of financial services, where some developing countries are permitted in WTO agreements to impose regulations on foreign operators to support development. But when a financial service becomes an application which is delivered digitally, how this is regulated can become a grey area. Would developing countries be able to continue to legitimately impose barriers, or would they be prevented if digital trade rules were present?

Global conflicts around digital trade

The path to binding digital trade rules within trade agreements has not so far been a smooth path. There is significant divergence in positions across powerful countries, including in Europe and China who see more strategic approaches and policy around digital as being an important part of their future development.

Vocal opponents to digital trade have also come from developing countries, especially India, South Africa and the “WTO Africa Group” [5]. They have opposed such rules arguing that they would override previous trade agreements, and potentially limit them undertaking new types of “industrial policy” to catch up in the digital area [6].

So far these alliances, alongside the recent anti-international approach of the Trump administration, has meant that digital trade has moved slowly and mainly in regional and bilateral agreements. But this story is still unfolding, and the political economy of digital trade is liable to change rapidly in the future.

These tensions are not just of policy concern. From licencing apps in the gig economy, to supporting local data pools for community development, to taxing the digital economy. Digital trade touches on crucial future directions of digital development [2].


References

[1] Azmeh, S., Foster, C.G. & Echavarri, J. (2020) The International Trade Regime and the Quest for Free Digital Trade. International Studies Review, 22(3), pp. 671–692.

[2] For details on specific policies on digital trade, we have launched an accompanying website – The digital trade tracker tracks digital trade policy and its relevance to development

[3] Aaronson, S.A. (2016) The Digital Trade Imbalance and Its Implications for Internet Governance, Paper 25, Centre for International Governance Innovation, Waterloo, Canada.

[4] Kelsey, J. (2018) How a TPP-Style E-Commerce Outcome in the WTO Would Endanger the Development Dimension of the GATS Acquis (and Potentially the WTO). Journal of International Economic Law, 21(2), pp. 273–295.

[5] Foster, C. & Azmeh, S. (2018) The Digital Trade Agenda and Africa. Bridges Africa, 7(2). Available at https://infomediation.net/publication-the-digital-trade-agenda-and-africa/

[6] Foster, C.G. & Azmeh, S. (2020) Latecomer Economies and National Digital Policy: An Industrial Policy Perspective. Journal of Development Studies, 56(7), pp. 1247–1262.


Image Credit: Kofi Annan, Monhla Hlahla and Gao Xiqing – World Economic Forum on Africa 2012 – Wikimedia Commons – CC Attribution Sharealike

Big data and development in India. The hype and the reality

Many around the world celebrated the agreement of the Sustainable Development Goals (SDGs) and a new agenda for transformative development by 2030. But, practitioners and policy makers were left scratching their heads as to how they were going to monitor the detailed 169 targets and ever more numerous indicators, never mind understanding and achieving these goals.

It is in this context that we’re seeing a growth of interest in using data to help solve development problems. Indeed, we can say that the infrastructures now being built to support data are likely to become central to how we make development decisions in the future.

How will such data infrastructures shape our thinking about development over the next decade? What types of limitations and biases might they embed? How should they best be designed and implemented? It is these questions that we looked to explore in a recent paper [1] analysing big data use for development in India.

In this paper we dug into two cases where big data was being used to support wider development over commercial goals – the Bengaluru Metropolitan Transport Corporation (BMTC) and big data transport upgrades in Bengaluru, India; and Stelcorp (name changed), a state initiative using big data for improving electricity systems.

Digging into big data

Digging into these cases, we found that both of these initiatives were connected into longer, often decades-old histories of data collection and decision making. This meant that new data innovations were being introduced in an attempt to understand long running development problems. Thus, the main focus of BMTC was on using vehicle tracking and big data innovations to improve the notoriously unreliable city bus services.

We found that big data innovation allowed improved integration of rich information flows, and led to centralisation of decision making. In StelCorp, previously manually-collected meter data was now digitally-collected and aggregated (see images below). The supporting infrastructure allowed a near real-time analysis of the status of the electricity network, and was more effective at monitoring around failures and blackouts. A new central data centre played a growing role in processing and analysing this data. In BTMC, new bus transportation data was aggregated and fed in real-time to large screens in a “control centre” where activity was monitored by administrators.

Digitalisation in Stelcorp: Meters such as those on the left supply real time data about network usage. Even manual meter reading data is now often transferred through automated reading devices (right) to later be input into the system.

Beyond day-to-day monitoring, we also saw signs that the new data was feeding into more strategic decisions. In the electricity sector, for example, upgrades have been plagued by poor and politicised decision making, but the state-wide data from Stelcorp is now being used in upgrading decisions.

More conceptually, there is evidence that these initiatives are playing a role in supporting new forms of state commitments, or citizen interaction. BTMC has been associated with a ‘Smart City’ initiative and citizens interacting with a set of efficient urban services. Indeed, BTMC introduced a citizen mobile app for tracking bus routes which has had over 50,000 downloads. In the Stelcorp initiative, state political visions about “24/7 electricity” have in part emerged from the better data that allows improved management of the electricity system.

Limitations

Whilst big data has led to these operational, strategic and visionary advances, there were a number of concerns in these projects. One key concern raised was the quality of data being used in these projects, which was often incomplete, short-term, or skewed.

Most problematic was that data from marginal groups was difficult to obtain, so in Stelcorp, automated electricity data was mainly coming from cities, where rural data was still manually collected, and in both cases there was often the need for “data wrangling” before the data had value.

These data limitations pose questions of how representative the data being used is of the population. If certain measures are skewed towards those more affluent, data coming from those more marginal might then be seen as “nonconforming” or even deviant. Moreover, the way that the data is selected, measured and transformed in such systems will be important in determining what processes are made visible by data and what might remain in the shadows.

The Smart Cities Challenge: Such visions can be seen to be made viable by the growth of big data. However in reality big data projects often tend to have a narrower focus. Source: http://www.smartcitieschallenge.in/

There were also more general questions about the focus of big data projects. These projects were marketed and discussed under lofty development goals, but in implementation they were often quite narrow projects. BTMC, for all its discussion of smart cities and citizens, was far more focussed on stamping out corruption among bus employees than making the city’s public transport smart.

Further, in all these projects there is scant sharing of the new data produced. These projects have not been about the public shining a light on opaque mechanisms of decision making. In fact, with a growing number of public and private actors involved, mechanisms of decision making are becoming even less transparent.

Big data for development

Big data projects are in their infancy in countries like India, but as these cases show they are becoming important to support decision making on key development issues, not only at an operational level, but in strategic decision making and in supporting new visions of developmental partnerships between citizens, private sector and the state.

However, these initiatives rarely follow the vision of big data driving transformative changes. They so-far tend to use problematic data to enhance decision making. They also tend to focus on quite narrow aspects of problems in implementation over the bigger development problems that might be more impactful.

We also need to make sure that big data does not solely lead to technocratic solutions, or underplay the importance of integrating with a wider set of social and political activities for development – data showing electricity pilferage will have limited impact without solving the complexities of local politics of electricity in rural and slum areas, and data on public vehicle movements cannot replace the underfunding of urban transport.

[1] Heeks, R., Rakesh, V., Sengupta, R., Chattapadhyay, S. & Foster, C. (In press) Datafication, Value and Power in Developing Countries: Big Data in Two Indian Public Service Organisations. Development Policy Review.


This is an adapted version of a blog originally posted on the Sheffield Institute of International Development (SIID) blog.

With thanks to Vanya Rakesh & Ritam Sengupta for their research in India and SIID and the University of Manchester for the small grant support for this work.

What can we learn about e-commerce in Africa from Jumia’s IPO filing?

 

There has been growing discussion about the potential of e-commerce in developing countries. This discussion intensified recently when pan-African e-commerce firm Jumia went public in the US, becoming the “first African unicorn”.

The IPO prospectus, a 270-page outline of the firm released as part of this filing, has sparked much debate. Elsewhere, TechCrunch has dug into the financial intricacies of Jumia, and online debates have raged linked to the question “Is Jumia really an African firm?” (see here and here).

I won’t detail those two issues here. Instead, below I will discuss the insights that the prospectus provides us about e-commerce platforms operating in Africa. This is especially useful as we have been struggling with a lack of detail on e-commerce, with firms reluctant to share commercially sensitive information.

 

stock_exchange_trading_floor_new_york_manhattan_business_finance_market_investments-882989.jpg!d_2

 

1) The market for e-commerce in Africa is already large, and growing rapidly
Jumia announces that it had 4 million active customers in the year 2018, growing rapidly from 2.7 million in 2017. This translates into “Gross Merchandise Volumes”  (GMV) of €828.3m in 2018, from €507m in 2017. As these figures suggest, e-commerce is bringing in a significant number of customers on the continent and is growing at a rate of over 50% in the last year.

Regionally, the largest countries for Jumia’s business are Nigeria (29% of GMV) and Egypt (20.5%). Interestingly, in the largest 5 markets, only 50% of goods are delivered in primary cities with the rest evenly split between secondary cities and rural areas. Most customers are mobile users, which comprise 81% of all traffic in 2018.

 

2) …but making profits is a challenge. Jumia is a loss-making firm
The growing size of e-commerce has not yet translated into profits. Jumia made a €170m loss in 2018.

This is attributed to a number of factors. As a platform, sales are mainly made by third-party sellers (90%). So the €828m GMV translates to just €130.6m revenue for Jumia.  Jumia then faces high costs for operating including warehousing, delivery, sales and advertising and the platform. Once these are considered, the €130.6m turns into a €170m loss.

How does Jumia plan to become profitable in the future? By becoming a market leader in Africa, Jumia will rely on expanding markets to increase sales volumes over the coming years. Alongside this, they describe the potential of reduced costs in fulfilment (storing and delivering goods) and growing use of mobile payments that should make each transaction more efficient over time.

 

3) The role and prospects for Jumia platform sellers
Jumia has 81,000 sellers and the prospectus hints that quite a number of these are African, although there is no data provided. Interestingly, commissions from sellers for sales only contributed moderately to revenues. Jumia makes similar amounts of revenue from services such as fulfilment (delivery costs to buyers) and “value-added services” (premium services for sellers).

As Jumia grows, its aim is to attract ever more sellers to the platform. “Competition between sellers is…essential to our monetization, as it increases the appetite for sellers to use our services”. This statement suggests that the platform will move low margins and high competition, with sellers relying on value-added services as a source of expansion. For local sellers, these future directions suggest concerns about this platform supporting widespread upgrading of local SMEs in Africa.

 

4) Data is an important component of the relationship with sellers
We know that data is vital to many platforms, and Jumia is no different. A seller score “..a data-driven scoring of a seller’s performance” is a key aspect of Jumia’s relationship with sellers. The score is important to the success of sellers, where platform algorithms use this score to determine the order of products in searches. Jumia also gamifies the “seller score”, associating it with a range of other advantages for sellers.

In order to support sellers, Jumia supports third-party financial services for its sellers, using this score as a way to demonstrate creditworthiness. This mirrors alternative credit-scoring schemes we have seen elsewhere in Africa.

 

5) African e-commerce platforms face significant and often unexpected risks
Many of the challenges for Jumia are similar to those challenges of e-commerce elsewhere [1]. One key challenge repeatedly mentioned is the “…failed deliveries, excessive returns, late collections, unrecoverable receivables and voucher abuse”, with 14% of all sales (by revenue) being failed deliveries or returns. These risks particularly emerge from the use of cash payments on delivery (COD), a common approach to payments for online goods in developing countries.

Beyond this challenge, an eye-opening aspect of the prospectus is the unexpected challenges encountered by Jumia:

  • In Kenya, a Jumia warehouse was robbed and €500K of merchandise was stolen
  • In Egypt, a €5000 fine was imposed by authorities due to the platform offering “unlisted drugs”
  • In Kenya, a scam involving electronic payments suppliers led to €550K losses
  • Jumia has undertaken investigations around allegations of internal fraud and bribes in countries such as Nigeria and Morocco connected to relationships with platform sellers

 

6) Policy challenges for e-commerce in Africa are significant
In line with other platforms, Jumia operates a relatively “asset light” way across multiple countries in Africa. Even with close to a billion euro in GMV, and with offices in 18 countries, it is a tiny direct employer with around 4,800 staff in Africa.

This “asset light” approach, however, comes into collision with African governments’ desire to regulate e-commerce. Jumia discusses the challenges faced in a number of countries including taxes, particularly VAT on imports; uneven data protection rules, and restriction of cross-border personal data transfer; and regulation on financial and mobile payments.

There has been pressure for harmonising such rules globally in order to support cross-border business models of digital firms such as Jumia. However, African governments are keen to ensure that they are able to operate their economies appropriately, including collecting taxes and nurturing local firms, in the face of e-commerce imports [2]. It is therefore understandable that policy might vary according to the political goals of different nations in Africa. These challenges are likely to intensify coming years given current disagreements on harmonising e-commerce at the WTO, and African CFTA discussions on e-commerce rules still at an early stage [3].

Platform firms, therefore, require careful mapping of national rules and regulations, and in Africa the “asset light” model may only be viable to well-funded platforms. For smaller platforms, it may be better to focus on a smaller subset of countries.

 

In summary, the Jumia prospectus indicates that digital economies are expanding and we can expect to see a growing set of firms operating across the continent. However, given the challenges encountered by Jumia, easy profit and growth are not a given. For platform sellers, e-commerce provides new potential market opportunities, but careful consideration of how platforms best support them, will be vital to success.

 

References
[1] UNCTAD (2015) Information Economy Report 2015 – Unlocking the Potential of E-Commerce for Developing Countries, UNCTAD, Geneva, Switzerland.
[2] Azmeh, S. & Foster, C. (2018) Bridging the Digital Divide and Supporting Increased Digital Trade: Scoping Study, Discussion Paper, GEG Africa, Pretoria, South Africa. http://www.gegafrica.org/item/782-bridging-the-digital-divide-and-supporting-increased-digital-trade-scoping-study
[3] Foster, C. & Azmeh, S. (2018) E-Commerce and the African Continental Free Trade Agreement (AfCFTA), Discussion Paper, GEG Africa, Pretoria, South Africa. http://infomediation.net/publication-e-commerce-and-the-african-continental-free-trade-agreement-afcfta/

 

Digitally Removing the Middleman for Development: Trouble Brewing in East African Tea?

How do new digital technologies enable firms to develop? One process often highlighted is disintermediation, where digital technologies allow firms to “cut out the middleman”. Exploring the Kenyan tea auction we suggest that these ideas need to be rethought. Digital technologies bring change, but may lead to more challenging conditions for smaller firms.

 

Kenya_mombasa_tea_auction_480_feb2012_2
The Mombasa auction. Source: Wikimedia Commons

 

One of the benefits often associated with digital technologies is the potential for disintermediation – or put more simply “cutting out the middleman”. This concept forms the basis for many hopes for development around digital technologies [1].

In the early days of digital technologies, it was found that they often failed to cut out the middleman due to the “digital divide” where digital skills, infrastructure quality and cost limited the use of technologies in smaller firms. But as firms have adopted technologies and with appropriate applications these foundational claims for digital development are important to revisit.

 

Digitalising the tea sector

Tea is an important export in East Africa and twice a week sellers come together in the Mombasa tea auction to trade tea with international buyers. The tea auction emerged during the colonial era, and with its antiquated traditions, slow speed, and accusations of corruption, there have been demands to move online.

An online auction would speed up the processes of trading by cutting out the middlemen in tea value chains (see below) and allowing tea producers to sell more directly to international buyers.

 

combined
Roles of middlemen in the tea value chain: The tea trade centre in Mombasa, home to the tea auction (left); tea tasting (middle); auction warehousing of tea lots (right).
Source: Photos courtesy of Laura Mann.

 

The auction seems a good fit for digital disintermediation in terms of economic models of transactions [2]. Trade is predictable with a limited number of traders and a strong sectoral governing body. With falling costs of online access in the region, a digital auction seemed viable, particularly as competitor regions such as Sri Lanka and India are already in the process of digitalising their auctions.

 

Challenges faced in the tea sector

While on paper the case seems promising, change has not taken place as expected. An “e-auction” trial was abandoned and over the past decade, digitalisation has been slow and frequently resisted.

In discussion with key stakeholders involved in the auction, we identified three challenges:

  • The nature of transactions: Tea transactions are often seen as generic and simple to trade, and so well suited to online exchange. But tea trading is becoming more complex.  Tasting the quality of tea, for example, is important to buyers who are mixing different teas together to produce retail products, and there is also a growth in value-added teas where buyers need extra information about ethical standards they want met. These factors make moving trading online more complex, where more complex factors need to be included in a digital system.
  • The types of institution: Well-established rules and governance in the tea sector limit the ability to reform the tea auction. The balance of power in sectoral bodies is often skewed towards middlemen, exactly those who might be cut out by digital technologies. This meant that any kind of reform was strongly resisted by sectoral bodies.
  • Middlemen adaptation: Eventually after much resistance, aspects of the tea auction were partially digitalised such as e-payments and digital auction catalogues. This did have an effect of reducing certain roles connected to the auction. But the intermediaries did not disappear. They adapted and took up new roles. For example, tea brokers who were previously important in facilitating payments repositioned themselves as providers of auction intelligence and price data for small tea producers.

A key finding related to these challenges was that international firms, dissatisfied with the slow pace of change, began to sidestep the auction by becoming involved in “direct sales” with selected producers, supported by digital technologies.

 

Making sense of digital disintermediation

The future for tea trade in East Africa is fragmentation which may be detrimental to smaller tea producers. Smaller tea producers were not connected enough to become part of “direct sales” with international firms. With the auction only slowly digitalising, it is falling behind as the centre of trading.

For the analysis of digital disintermediation, the case highlights the need for careful consideration of transactions: the nature of transactions, the role of institutions and potential externalities (such of adaptation of middlemen) [3]. These are factors that implementers might consider to better support small producers’ development outcomes from digitalisation – what are the institutional bodies that need to buy in? Which stakeholders should be considered? etc.

More than this though, a greater awareness of the way actors use their power as change occurs is crucial. Such an approach is very different from the abstract, economic approach normally used to explore digital disintermediation [4]. From this perspective a very different view of development emerges. In the Mombasa auction case, it has not been transformed. Through the challenges and strategic activities of more powerful actors, digital transactions are solidifying the relationships of those who are already well linked, and able to capture resources.

 

This post summarises a recent book chapter: ‘Making Sense of Digital Disintermediation and Development: The Case of the Mombasa Tea Auction’ by Chris Foster, Mark Graham and Timothy Mwolo Waema.

The chapter is part of the new MIT Press book ‘Digital Economies at Global Margins’. The book is available as an open-access PDF from the IDRC website

 

 

Notes:

[1] A good example is the World Development Report (2016) on ‘Digital Dividends’, but many other projects often uncritically assume similar concepts.

[2] In economics, disintermediation is often associated with transaction costs, and an analysis of how digital technologies change aspects of transactions costs: information costs (gathering information about transactions) and coordination cost (co-ordinating the exchange of goods) (e.g. Wigand 1997).

[3] The study of transaction costs can be split into two differing perspectives. The “neoclassical approach” focussing on the mechanics of transactions such as coordination and information costs, and “property rights approaches” which explore wider aspects of transactions such as rules, regulations and externalities (Allen 1999). We suggest that digital disintermediation has been too focussed on narrow “neoclassical” perspectives to date.

[4] Contemporary institutional analysis often explores political power and settlements in shaping institutions. We also stress this aspect here, highlighting the importance of power in shaping institutions, and in turn the outcomes of digital disintermediation.

 

 

References:

Allen, D.W. (1999) Transaction Costs, in Encyclopedia of Law and Economics, B. Bouckaert & G. De Geest (eds), Edward Elgar, Cheltenham, UK, pp. 893–926.

Wigand, R.T. (1997) Electronic Commerce: Definition, Theory, and Context. The Information Society, 13(1), pp. 1–16.

World Bank (2016) World Development Report 2016: Digital Dividends, World Bank, Washington, D.C.

Digital Culture, Brazil and the Virtual Pistolâo

[Partial] Review of The Throes of Democracy: Brazil since 1989 – Brian McCann

Studies of internet use in the South rarely come from outside a small circle, so it is worth examining The Throes of Democracy. Written by Latin American historian Brian McCann, it analyses Brazil’s emerging digital culture as one strand within processes of democratisation in Brazil. In line with the book’s wider argument, McCann presents two views of digital culture, celebrating it as a force for democracy, whilst examining the “corroding forces” which limit the potential of this new media channel.

McCann argues that ICTs and digital culture can be seen to have “reconfigured Brazil’s market” and this has led to a new vibrant network of active citizens. Nor is this happening only within the middle classes, thanks to the government’s support for telecentros which link the peripheries and favelas. Emerging from this digital culture, McCann sees promising examples of citizenship and democratic practice such as the popular interactive crime blogging of Jorge Antonio Barros, and the regional cultural sharing on the site Overmundo. In a wider context, online spaces like Orkut and LAN games, break real-life social barriers for the poorest through participating in online networks.

However, McCann also sees trends that connect this new media into less positive histories. For example, Overmundo is rightly lauded as an “innovative cultural endeavour that draws participation”. But when digging deeper things are not so black and white. The site founder Hermano Vianna is a consultant for the Brazilian TV programme Central da Periferia shown on the much maligned Globo chain, and McCann sees Overmundo as essentially part of the conveyor to produce talent for this show. Additionally Overmundo cannot be seen in the purely entrepreneurial model of new media: it received a $1m grant from Brazillian oil giant Petrobas, as part of the Rouanet Law, a way for corporations to reduce taxes through cultural sponsorship.

McCann uses the Brazilian figure, the pistolâo to explain his critique. In the job market the pistolâo is a powerful figure, who through recommendation can open up paths for those unemployed. The virtual pistolâo operates the same way, for those less connected in the new media world. Often from a family within the upper echelons of society or celebrity, the virtual pistolâo is an eminently conservative figure, with an eye on reputation and retaining cultural sponsorship. The control and nepotism that plague other sectors of Brazilian society can be seen to be seeping into digital culture through the virtual pistolâo. For a hip-hop group like Cidinho e Doca this means moving away from proibidão, the controversial (but one could argue genuine) voice born in the favelas, in order to maintain the support of the virtual pistolâo, placate the sponsors and remain within the system.

In the rest of his book McCann highlights the importance to democracy of outsiders who break through such hierarchical structures; whether that be the left-wing leaders who eventually came to power, the rise of the landless movements and even the drug gangs. So it is surprising that he seems to underplay the importance of such groups within digital culture, in particular the less hierarchical and vibrant activist networks. These groups have been voicing similar critiques for a number of years and their work seems to offer a basis to move beyond McCann’s virtual pistolâo.

In sum, McCann’s work is very useful in that it tries to understand technology use within a local historical domain, something not often considered within ICT4D. From such a vantage point it is easier to analyse the effects of ICTs, and in particular to see if the introduction of ICTs simply reinforces societal norms or brings genuine change.

Katine, one year on

The Guardian’s Katine project is a unique attempt to track a development project by reporting it over a long period and by using the full range of media. It is coming up to a year since the project was launched, so this is a good time to see how effective the media components have been so far.

Katine might also provide lessons to a whole family of similar projects, such as Kiva, The Millenium Village and Nabuur, where ICTs, whilst not the principal intervention, are involved predominantly to allow a Northern audience to connect more closely with these interventions.

The Goal

Based in Northern Uganda, the Katine project seeks to provide improvements in the region through a number of interventions in health, education, governance and livelihoods. The Guardian, along with Barclays bank occupies the position of development donor, supplying the funds for NGOs AMREF and Farm-Africa to carry out the interventions.

But, the Guardian “unlike many more traditional donors..is not a ‘hands off’ donor”*. With regular reporting and coverage on its dedicated Katine website, it is closely involved in following and scrutinising what is happening on the ground. For the Guardian editor Alan Rusbridger, this hands-on approach is a way to allow the Guardian to report development complexities, moving “beyond the sloganising and occasional yah-boo politics of the development debate” whilst allowing space for readers to contribute, “we would like a technical know-how bank of people who are prepared to offer time and advice”.

Reporting

We can see two styles of reporting that have emerged, one comes from the writers from ‘outside’, the other from those who have a longer association with the project. Unsurprisingly, the more embedded views tend to be the most interesting; the work by Guardian reporters and visitors often seems indistinguishable from online material produced by other NGOs.

The embedded Ugandan journalist, Richard M Kavuma, has provided a number of interesting pieces, particularly more recently. For example, he takes up the case of the non-payment of the builders within the project, and recently has used website comments to question AMREF’s contracting practices.

Equally enlightening is the writing of the independent evaluator Rick Davies. It is disappointing that his blog is separated from the Guardian, as it provides the most interesting discussions. He has used the extended form of his blog to debate a number of interesting development issues, such as project aims and goals, openness of implementers and the jargon of development.

The surprise is that the voices of the locals of Katine are muted. Where local voices do appear, such as in the small documentaries or the village voices section, they are often mediated through a video narrative or a communications officer. The Katine website could have been an opportunity for locals to interact with the online community through articles, photography, video and audio, particularly given the presence of the Guardian as a resource. Without this, the Ugandan villagers often seem secondary to the opinion of the writer or narrative; not exactly in line with the empowering rhetoric of the overall project.

Benefits of media?

Increased amounts of funding can be seen to come through this higher profile method of fundraising. Not all of this goes directly to the project, as there are significant costs that come from the extra requirements as outlined in the budget; internet access, IT specialists, supporting UK journalist visits, UK based “liaison with the Guardian and Barclays”*. However, it would be unfair to say that the donators are simply funding the Guardian’s media operations. This type of media-aware action provides potential for increased contributions to a development project.

And what about editor Rusbridger’s comment abou the media coverage influencing the project itself? In his most recent evaluation, Rick Davies comments that “Most AMREF staff…could recall particularly postings that had prompted a reaction of one kind or another”, although he doubts any changes, “in Katine my impression was that in some cases nothing more was heard”. Perhaps Davies is underplaying their power. Even if not explicit, the media awareness and learning must have some effect on the way the project partners act, even if it is not possible to measure.

What about more advanced hopes of the Guardian ‘crowd-sourcing’ help for development? Despite a few isolated successes, Davies provides a more convincing critique as to why this is not occurring. Rusbridger is making an incorrect assumption “that the main problems are technical when in fact it could be argued that they are really more social and institutional”.

Outlook

In sum, Katine has provided a more expansive view of development, mainly through the ability to build stories over time, particularly from those like Kavuma and Davies who are closely connected with the work. But there seems a missed opportunity for local production which still leaves a suspicion of the Guardian project being a one-way conversation.

Increased funding can also be attributed to the Guardian, and although this has been somewhat diminished by the extra resources needed, the extra funds generated point to the financial potential of such close media link ups in development.

As this is a three year project. I’m look forward to seeing how this develops, both in terms of the project itself (and the inevitable issues that arise) and how the media components evolve as technology changes.

Why so many competitions?

Finding solutions to support development has always been a fraught experience, and it seems that organisations are calling on your help.

Just in the last few weeks, Google has launched 10^100 in which is offering $10m to five ideas that “help as many people as possible”. Meanwhile, Nokia is ‘Calling all innovators‘, asking developers to submit mobile solutions which will “Make a difference” to the environment or “pioneer and monetize services impacting the daily lives of millions in developing nations” and offering up to $25K for the winners. How do we interpret this constant need to call on the Northern public when it comes to solutions (and particularly technical ones) in the South?

For the organisations involved there is no doubt that this drums up extra publicity, both within the blogosphere and the mainstream press. For Google, the competition coincides with its 10th birthday and conveniently reminds us that Google is still “not doing evil”. Nokia nudges mobile developers to take a break from java development for a while and chance their arm using Nokia’s Symbian platform instead.

Both competitions imply that change and impact in the South is simply a matter of the big idea or piece of software that will solve a problem. But look at Nokia’s list of potential ideas and one becomes a bit more skeptical, whilst it talks breathlessly of ‘holy grail’ solutions, it reads like a list of existing ICT4D developments

Nokia: “Imagine if an application could help relief workers reallocate resources in real time for disaster-torn areas”
– Stop imagining! You could partner with Vodaphone on the EpiSurveyor or use Frontline SMS
Nokia: “What if a mobile device could test the potability of water”
– It can! Perhaps you should talk to there guys

Nokia’s talk of “social responsibility” seems uneasy. They pinpoint to
solutions where partnerships to add impetus to existing solutions would surely
be the best way forward, rather than more technical solutions doing virtually the same things.

For Google the small print is interesting, “once we’ve selected up to five ideas for funding, we will use an RFP process to identify the organisation(s) that are in the best position to implement the selected ideas. We will be providing funding to these, organisations to implement the ideas”. So to offer a solution is not to be able to provide any input into its implementation, leave that to the experts. This suggests a curious future relationship, the competition winner is taken out of the loop, whilst their solution is presumably morphed into something more useable by the implementors. Which makes you wonder, why bother with the whole gathering process in the first place?

There’s no doubt that from time to time, one of these competitions unearths an idea that has legs, and might progress onto better things. But the question if whether the public competition is the best approach to unearthing and implementing ideas and solutions in the South. Competitions begin to look like publicity campaigns which are having the added effect of giving a skewed view of what solutions for development entail.

[Disclaimer: I never win competitions!]

Technology innovation vs real interventions

First to say that its good to be blogging here, and lets hope this blog comes together as an interesting group of diverse opinions on ICT, development and anything related.

As Richard mentioned in the inaugural post, ICT4D is no longer a new, novelty area, it has a history of success and failures which influence what will happen in the future. On one hand, there continues to be the constant push of new technologies and approaches into the development space, with the almost daily appearance of a new development solution or philanthropic efforts relying on innovative ICT’s. However, on the other hand many of the largest ICT4D actions are still building on models that were refined many years ago. Look at the Indian and Brazilian flagship mass telecentre programs, or the range of similar e-government schemes still being rolled out as examples.

Does this indicate a dual problem? Firstly a resistance to building adaptive ICT4D solutions that fit in with existing technologies or schemes. Whilst its simple to criticise setups like the telecentre, given that these are often already present, innovation might look to move towards a more intergrationist approaches. Equally it is rare to see ICT4D solutions which exploit older technologies like TV or (until recently) solutions using voice through telephones.

I’ve also heard the other side of the story. NGO’s or organisations do not know how to bring new technology into their working projects. A model solution has been built, and new technology or uses are seen as a risk that might jeopodise accepted solutions or be more costly.

So this post is really an ongoing thought, to flag this duality as a ongoing problem. How can we break away from the purely innovation focus of many new ICT4D ideas, and how do we build more adaptive and open understanding within adopted solutions in the South?