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Posts Tagged ‘Digital Economy’

Latest Digital Development Outputs (Data, Economy, Health, Platforms, Water) from CDD, Manchester

Using SmartphoneRecent outputs – on Data-for-Development; Digital Economy; Digital Health; Digital Platforms; Digital Water – from Centre for Digital Development researchers, University of Manchester:

DATA-FOR-DEVELOPMENT

Strengthening the Skills Pipeline for Statistical Capacity Development to Meet the Demands of Sustainable Development: Implementing a Data Fellowship Model in Colombia” (open access) by Pete Jones, Jackie Carter, Jaco Renken & Magdalena Arbeláez Tobón, considers the importance of quantitative data skills development implied by the UN Sustainable Development Goals. The success of a partnership programme in the UK is used to explore how ‘data fellowships’ can fulfil some of the unmet capacity needs of the SDGs in a developing country context, Colombia.

Building Information Modelling Diffusion Research in Developing Countries” (open access) by Samuel Adeniyi Adekunle, Obuks Ejohwomu & Clinton Ohis Aigbavboa undertakes a literature review – including current and future research trends – on the adoption of building information modelling in developing countries.

DIGITAL ECONOMY / PLATFORMS

Conceptualising Digital Platforms in Developing Countries as Socio-Technical Transitions” (open read access) by Juan Erasmo Gomez-Morantes, Richard Heeks & Richard Duncombe demonstrates how the multi-level perspective approach can be used to analyse the lifecycle of digital platforms: the process of innovation, rapidity of scaling, and development impacts relating to resource endowments, institutional formalisation, and shifts in power.

Digital Platforms and Institutional Voids in Developing Countries” (open access) by Richard Heeks, Juan Erasmo Gomez-Morantes, Brian Nicholson and colleagues from the Fairwork project, analyses how digital platforms change markets through their institutional actions.  Using the example of ride-hailing, it finds platforms have formed a market that is more efficient, effective, complete and formalised.  At the same time, though, they have institutionalised problematic behaviours and significant inequalities.

Navigating a New Digital Era Means Changing the World Economic Order” (open access) by Shamel Azmeh, discusses the implications of digital shifts for global economic governance.

DIGITAL HEALTH

Cost-Effectiveness of a Mobile Technology-Enabled Primary Care Intervention for Cardiovascular Disease Risk Management in Rural Indonesia” by Gindo Tampubolon and colleagues demonstrates how to determine the economic impact of m-health.  It calculates the cost-effectiveness of a mobile-based health intervention at c.US$4,300 per disability-adjusted life year averted and US$3,700 per cardiovascular disease event avoided.

Delivering Eye Health Education to Deprived Communities in India through a Social Media-Based Innovation” by Chandrani Maitra & Jenny Rowley aims to develop understanding of the benefits of, and the challenges associated with the use of social media to disseminate eye health information in deprived communities in India.

Using a Social Media Based Intervention to Enhance Eye Health Awareness of Members of a Deprived Community in India” (open access) by Chandrani Maitra & Jennifer Rowley reports on a WhatsApp-based intervention to promote eye health communication in deprived settings. This research highlights the potential benefits of WhatsApp in increasing awareness on eye problems, amongst deprived communities where the disease burden remains very high.

DIGITAL WATER

Digital Innovations and Water Services in Cities of the Global South: A Systematic Literature Review” (open access) by Godfred Amankwaa, Richard Heeks & Alison Browne reviews the literature on digital and water in Southern cities.  It summarises findings to date on implementation and impact and sets out the future research agenda.

How Platforms Change Markets: The Lens of “Institutional Voids”

Void

Do digital platforms change markets for better or worse?

To help understand this, we used the lens of institutional voids in the World Development paper, “Digital Platforms and Institutional Voids in Developing Countries”.  This argues that markets don’t work properly because they have institutional shortcomings or voids: inadequate provision of information, limited matching of buyers and sellers, poor management of transactions, ineffective market regulation, etc.

A promise of digital platforms is that they will fill these voids and change markets for the good.  We investigated this using evidence from Colombia and from the South Africa Fairwork project on taxi markets before and after the advent of three e-hailing platforms: Bolt, EasyTaxi and Uber.

The “before” picture was far from perfect.  Institutional voids led to markets with problems including high costs, crime, insecurity, opportunism, informality and discrimination.  As predicted, the gig economy platforms filled some of the institutional voids that led to this profile.  This reduced costs and risks for both drivers and passengers, improved vehicle and service quality, and enabled employment for those excluded from the traditional market.

Yet, in contrast to past research on business and institutional voids in the global South, we found that void-filling is not all that platforms companies do.  They also maintain some voids, such as lack of information and lack of formal employment status for drivers.  They expand some voids, such as lack of information available to government.  And they create some voids by circumventing the regulatory roles performed by government agencies and driver collective bodies.

The core impact of these additional strategies is to increase the relative power of the platform company vis-à-vis other market stakeholders and to make the market much more unequal.  Going far beyond the typical role of business, platform companies have internalised the institutions for the entire gamut of market functions; collapsing an entire organisational field into themselves.  The previously-distributed and -dissipated institutional power that the platform companies have concentrated into themselves is thus unprecedented, particularly given the duopolistic nature of the markets that are often created.

Filling institutional voids is not wholly beneficial – our research also identified problems caused by the digitalisations and formalisations that platforms bring.  But our key recommendation is a need to identify and address the voids that these companies retain or make.  Actions needed include information provision to address customer–driver asymmetries; revitalised state control over market supply–demand imbalance; new legislation to address lack of employment rights for workers; and more effective worker collectivisation.

Our research represents a novel insight into the relation between platforms, institutions and markets, and we look forward to further work applying these ideas to other sectors and contexts.

Revisiting “Leapfrogging” in a Platformised World

11 January 2021 Leave a comment

What difference do digital platforms make to the long-standing argument about “leapfrogging” of development by developing countries?[1]

The idea that latecomer nations could accelerate their passage through development stages via use of new technology has been around for decades[2].  It was no surprise, then, that leapfrogging played at least some part in turn-of-the-century cheerleading for the role that ICTs could play in development[3].  And statistics bore out the concrete example of global South countries jumping fairly quickly to mobile phone-based telecommunications infrastructure during the 2000s and 2010s, having invested much less in relative terms in the previous generation of landline infrastructure than countries in the global North[4].

The flaw in much of the simplistic thinking about technology and leapfrogging is that technology never acts alone in development; it always forms part of a socio-technical system[5].  Lower-income countries might be able to move more quickly than higher-income countries to a more-recent generation of technology.  But they could not repeat the same trick with the social part of their systems.

One way of understanding why the “social part of their systems” constrained development was to identify institutional shortcomings – often called “institutional voids” – that particularly meant developing country markets could be inefficient, ineffective, incomplete and/or inequitable.  While ICTs always had institutional effects, these were limited, with lack of institutional change acting as the brake that prevented economic leapfrogging.

In the past few years, though, this picture has changed with the arrival of digital platforms as an important force in development.  Digital platforms much more readily fill institutional voids than prior ICT-based systems.  They not only provide cheaper and better information, they form the entire institutional infrastructure for new markets; not just the transactional infrastructure but the regulatory infrastructure as well[6].

So digital platforms, being much more complete socio-technical systems than earlier ICTs, can offer developing countries a route for leapfrogging.  Yes, local context matters and platform implementation can be a bumpy road so a platform is not quite “market in a box”.  But, for example, e-hailing platforms have helped dozens of Southern cities quickly improve taxi markets that were beset by insecurity, high costs, long wait times, etc – problems that had existed for years without resolution.

But if leapfrogging, at least in terms of some markets, is now more feasible; exactly what are developing countries leapfrogging to?  The new platform-based markets are more efficient, safer, with less opportunistic behaviour.  But they are also more unequal and less democratic as the platform becomes marketplace, manager, adjudicator, enforcer and regulator all rolled into one; eliminating roles for government, unions, and other stakeholders[7].

Platforms may be offering an opportunity for leapfrogging but they come with a caveat: be careful where you leap.


[1] With acknowledgements to Anne Njathi for asking the questions about leapfrogging that led to this post.

[2] See e.g. Goldschmidt, A. (1962) Technology in emerging countries. Technology and Culture, 3(4), 581-600.

[3] See e.g. World Bank (1998) World Development Report, World Bank, Washington, DC; InfoDev (2000) The Networking Revolution: Opportunities and Challenges for Developing Countries, World Bank, Washington, DC; Steinmueller, W. E. (2001) ICTs and the possibilities for leapfrogging by developing countries. International Labour Review, 140, 193.

[4] UNCTAD (2018) Leapfrogging: Look Before You Leap, UNCTAD, Geneva.

[5] See e.g. Wade, R.H. (2002) ‘Bridging the digital divide: new route to development or new form of dependency?’, Global Governance, 8, 443-466; Alzouma, G. (2005) Myths of digital technology in Africa: Leapfrogging development?. Global Media and Communication, 1(3), 339-356; Kenny, C. (2006) Overselling the Web?: Development and the Internet, Lynne Reiner Publishers, Boulder, CO

[6] Heeks, R., Eskelund, K., Gomez-Morantes, J.E., Malik, F. & Nicholson, B. (2020) Digital Labour Platforms in the Global South: Filling or Creating Institutional Voids?, GDI Digital Development Working Paper no.86, University of Manchester, UK

[7] Heeks, R., Eskelund, K., Gomez-Morantes, J.E., Malik, F. & Nicholson, B. (2020) Digital Labour Platforms in the Global South: Filling or Creating Institutional Voids?, GDI Digital Development Working Paper no.86, University of Manchester, UK

Digital trade and global governance of the digital economy

30 October 2020 Leave a comment

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

Context and Digital Start-Ups in the Global South

How does context affect new digital start-ups in the global South?

The open-access paper, “Embeddedness of Digital Start-Ups in Development Contexts” provides some answers, using the Triple Embeddedness Framework:

Based on a study of 19 digital start-ups and 20 other start-up ecosystem organisations, this research makes three main conclusions.

1. Hybrid Embeddedness. These young enterprises are hybrids that straddle multiple contexts:

– They are embedded in both their vertical product sector but also the cross-cutting digital economy.  Some successful start-ups borrow ideas or staff from other digital firms; helping them to innovate in their product sector.

– They are also embedded in both local and global contexts.  Some successful start-ups mimic business models from the US and draw financing and training from the US; and then use this to innovate within their country or region.

2. Optimal Embeddedness. The most-successful digital start-ups find a “Goldilocks”-style sweet spot in their relation to context. They are not so deeply embedded that they are trapped within existing institutions and unable to innovate.  But they are sufficiently embedded that they can draw knowledge, money, skills, etc from their context.

3. Global Peripherality. Some global South digital economies have a “semi-permeable membrane” between themselves and the global North. Ideas and other resources can flow in to assist digital start-ups, but they have some relative protection from external competition.

Practical implications include:

– The need for global South governments to keep building local digital sector institutions; particularly network intermediaries that link local and global digital economies

– The need for digital start-ups to self-analyse their embeddedness: understanding the extent of constraint and freedom imposed by embeddedness in both digital and product sectors

– The need for business methodologies from the global North, such as Lean Start-up, to be re-scoped to better incorporate the realities of global South contexts

We look forward to further work on context and the digital economy in the global South.

Trust Issues and Ride-Hailing Platforms in Lagos, Nigeria.

The idea of building trust is often central to the adoption and use of technology platforms in general such that the processes and governance of these platforms ought to align with the realities of user-groups which are essential for a seamless service. Since 2013, the entry of ride-hailing platforms in Nigeria has increased because of an overall technology awareness in Lagos and continuous successes of existing ride-hailing companies such as Uber and Taxify (see Table 1). Ease of access, trip predictability and ease of fare calculations and payment, amongst other things have improved.

Despite its growing impact on urban transport in Nigeria, the industry has suffered several challenges such as insecurity and lack of safety for user-groups. Prior to ride-hailing platforms, the notion of trust has been integral for taxi businesses or technologies to thrive. For instance, a passenger who builds a bond with a local taxi driver such that the driver runs personal errands such as dropping off school kids.

Trust in simple terms is the belief in the ability of someone or something. There has been increasing interest in the concept of trust in online transactions since the development of the internet and e-commerce in the early 1990s (1). The concept of ‘trust’ encapsulates both offline environments and online environments such that the difference lies in the varying characteristics of these environments as well as the context in which trust is formed and maintained. In technology, “it is a belief that a specific technology has the attributes necessary to perform as expected in a given situation in which negative consequences are possible” (2).Risks and uncertainties are exacerbated because users lack total control of the processes governing ride-hailing apps.

Table 1: Ride-hailing companies in Lagos
Source: Author’s fieldwork

In the ride-hailing industry in Lagos, both drivers and passengers are aware of the risk in engaging with a complete stranger via an app which is monitored by platform companies through data analytics and algorithms. Unlike the conventional taxi industry, user-groups often build trust in platform companies based on the efficiency and reliability of their apps over time. For example, Mr Ayo, the Taxify driver has just accepted his first trip for the day, but later declines because the rider would only pay via an ‘online bank transfer’ and from experience, the driver does not trust this process because it is often a fraudulent tactic used by riders without money. Using a third-party banking app to make a transfer to the driver’s account gives the rider more power in this situation because the payment could be reversed in 24 hours if reported by the rider. If it were a card-paid trip, the driver would feel safer because the ride-hailing app acts as an intermediary between both parties such that if a conflict occurs, it can be resolved amicably.

One of the many instances where the rider loses trust is through trip manipulations by drivers.  Since Uber slashed the base fare of trips by 40% in Lagos, drivers have reacted with strategies for increasing the fare of trips through manipulative techniques (3). In 2017, Lockito, designed for testing geofencing-based apps, was being used in inflating fares by manipulating the distance of a trip.  For example, a trip that should be about 5.9km would be double the distance when the Lockito app is being used (see Figure 1).

Although drivers are responsible for altering the GPS function in the Uber app, riders become aware that the app is also vulnerable to fraudulent activities. Riders frequently monitor the Uber app, drivers’ behaviour and prefer cash payments to card payments to avoid being defrauded during trips. Although there are other factors involved such as low smartphone and card penetration overall (4), the psychological construct of trust remains central to the reliability and predictability of drivers, riders, and the algorithms behind ride-hailing apps.

Figure 1: Incorrect GPS reading vs correct GPS reading
Source: BrandSpurNG (2017)

Regardless of ride-hailing platforms’ success in Nigeria, trust issues surrounding usability and culture remain a stumbling block especially for indigenous start-ups like Oga-Taxi. More research would be needed to understand the implications on user behaviour and what coping strategies are needed to thrive in an increasingly ‘networked’ environment as well as how these strategies may create new realities in the global South.

References.

  1. Li, F., Pieńkowski, D., van Moorsel, A. & Smith, C. (2012). A Holistic Framework for Trust in Online Transactions. International Journal of Management Reviews, 14(1), pp. 85-103
  2. McKnight, D. G., Carter, M., Thatcher, J.B., & Clay, P.F. (2011). Trust in a specific technology: An investigation of its components and measures. ACM Transactions on Management Information Systems, 2(2), pp. 12 – 32.
  3. Adegoke, Y. (2017). Uber drivers in Lagos are using a fake GPS app to inflate rider fares, Quartz Africa, 13 Nov
  4. appsafrica (2015). Can Uber really work in Lagos, Nigeria? appsafrica, 2 Jun
  5. BrandSpurNG (2017). Uber Drivers In Lagos Using Fake GPS App To Inflate Fares – Report, Nairaland Forum, 14 Nov

Analysing the Perceptions of Digital Gig Workers: Mining Emotions from Job Reviews

In a previous post, we provided a discussion of how the analysis of user-generated content (e.g. comments/posts on social media and/or job review sites) can help in understanding perceptions of digital gig workers. The prevailing assumption is that generally, digital gig workers contend with non-standard working conditions, e.g. the lack of social security coverage, long working hours, lower salaries, and the lack of benefits. Nevertheless, it is believed that digital gig workers in the Global South in particular perceive their jobs as being better than local benchmarks (i.e. office-based work).

To test the above assumptions, we developed and employed automatic text analysis methods to answer the following research questions:

  • How do digital gig workers feel about their jobs?
  • Which topics pertaining to decent work standards do they frequently talk about?
  • Are there any differences—in terms of sentiments and topics—across different geographic locations, or across genders?

We hereby present the results of analytics in the way of answering the questions above.

Firstly, we collected online posts published by digital gig workers from Glassdoor, a web-based platform for sharing reviews of companies and their management. Focussing on reviews of the digital gig companies Upwork, Fiverr and Freelancer, we retrieved a total of 567 reviews, 297 of which include geographic metadata (i.e. the geographic location associated with the account/profile of the user posting a review). For our text analysis, we made use of the Pro and Con fields that each review came with.

Based on the NRC Emotion Lexicon, a dictionary-based emotion detection method (implemented in the R statistical package) was applied on the reviews, classifying them according to Robert Plutchik’s eight basic emotions: Joy, Trust, Fear, Surprise, Sadness, Anticipation, Anger, and Disgust. We then grouped the reviews as either coming from the Global North or the Global South based on the geographic metadata attached to them. Shown in the figure below are the 15 most frequent emotion-bearing words found within reviews, represented according to the emotions they express. Bars in amber correspond to words prevalent in reviews from the Global North (GN) while those in blue pertain to those in reviews from the Global South (GS). 

Riza GNGSemotion

It can be observed that there are more words within GS reviews containing emotions that are clearly positive. All of the 15 words associated with Trust were found more often in GS reviews. Furthermore, 10 and 8 words associated with Joy and Anticipation, respectively, were more frequent in GS reviews. These results support the belief that digital gig workers in the Global South (GS) do express positive feelings towards their jobs.

Meanwhile, our results show that digital gig workers from both GN and GS express negative emotions. On the one hand, GS reviews were the source of 11 and 10 words associated with Anger and Fear, respectively. On the other hand, 15 and 11 words associated with Sadness and Disgust, respectively, were contained in GN reviews. This suggests that generally speaking, digital gig workers do have to contend with less than ideal working conditions, which in turn trigger such negative emotions.

Finally, 10 words associated with Surprise came from GN, 5 from GS. It is worth noting though that this particular emotion can either be negative or positive depending on context.

These results are but “teasers” to the full results of our automated analysis. Further details including the topics/themes towards which such emotions are targeted, as well as answers to the second and third research questions stated above, will be presented by Dr Victoria Ikoro in the upcoming 3rd Annual ICT4D North Workshop to be held in the Management School of the University of Liverpool on the 6th June 2019.

 

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

30 April 2019 1 comment

 

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.

 

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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?

11 February 2019 1 comment

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.

How Many Platform Workers Are There in the Global South?

29 January 2019 3 comments

In developing countries, there has been a rapid increase in the gig economy and in the presence of digital labour platforms: defined as “a set of digital resources – including services and content – that enable value-creating interactions between consumers and individual service-providing workers”[1].

But how many workers actually work for such platforms?

I am not going to provide a reliable answer to that question but I will give some kind of ballpark figure.

We start by dividing out two types of platform work: digital gig work that involves digitisable tasks like data entry, writing copy, web design, accounting, etc; and physical gig work that involves a physical task like taxi driving, food delivery, domestic work, etc.  A previous estimate[2], updated to account for growth, would be that there were something like 10 million active digital gig workers in the global South at the start of 2019 (and around ten times that number registered on digital labour platforms but with 90% of them inactive).

So how many physical gig workers are there?  I’m going to break this down by continent since the extent of physical gig work seems to vary significantly between the three main continents of the global South.

Africa

Calculations here are based on extrapolations from just two economies, and seek to take account of wealth and population[3].  Current research for the Fairwork project estimates around 30,000 physical gig workers in South Africa; about half in taxi-driving and the rest mainly in delivery and domestic work.  Estimates for Nigeria[4] plus re-use of some of the same ratios found in South Africa, suggest 20,000 such workers.  Accounting for GDP per capita and population suggests around 60 workers per US$1,000 GDP/capita and per 1 million population; i.e. per US$1bn GDP.  Multiplying up to the overall GDP of Africa produces an estimate of c.130,000 physical gig workers in Africa.  However, given there are at least 100,000 in Egypt alone, we can at least double that to 250,000.

Asia

Similar calculations can be undertaken in Asia, based on numbers associated with platforms in India and Indonesia.  Extrapolating from estimates for taxi-driving and food delivery platforms in India[5], I estimate around 2 million physical gig workers in India.  For Indonesia[6], the figure is closer to 1 million.  Accounting for GDP suggests around 800 workers per US$1bn of GDP.  Multiplying up to the overall GDP of Asia (excluding Japan) produces an estimate of roughly 18 million physical gig workers in developing Asia.

However, there is an alternative approach, which is to exclude China in this calculation, which produces a figure of 9 million, and then take at face value claims that Didi Chuxing employs 21 million physical gig workers in China[7].  This would lead to an estimate of 30 million physical gig workers in developing Asia.

Latin America

Here, I’ve taken a simpler approach based on some national and continent-wide estimates of taxi driving[8] and then re-using ratios from the South Africa work.  This produces an estimate of something like 2 million physical gig workers in Latin America.

Summary

The basis for these estimates is flimsy, and the extrapolations are worse, so please attach a strong health warning to this material.  Better still, come up with some improved statistics.  But my ballpark figure is that there are at least 30 million platform-based gig workers in the global South; 10 million digital and just over 20 million physical.  And that the figure could be more than 40 million, which would be around 1.5% of the global South workforce.

A proportion of these workers are not relying on this as their primary source of income.  For digital gig workers, this number is anything from two-thirds to a half[9].  It may be somewhat less for the physical gig economy, so another ballpark would be that around 15-20 million workers in developing countries are relying on digital platforms for their primary source of income.

(Annual turnover is an issue for another day but, globally and summing figures for the digital gig economy[10] and main physical gig platforms Uber[11] and Didi Chuxing[12], it must be at least US$50bn.)

 

[1] Adapted from Constantinides, P., Henfridsson, O., & Parker, G. G. (2018). Introduction—Platforms and Infrastructures in the Digital Age, Information Systems Research, 29(2), 381-400

[2] Heeks, R. (2017) Decent Work and the Digital Gig Economy, GDI Development Informatics Working Paper no.71, University of Manchester, UK

[3] An alternative approach would seek to extrapolate in terms of numbers of Internet users but that is correlated with GDP, and the figures still point to a strong under-representation of Africa in platform labour and strong over-representation of China.  Put another way, factors other than wealth and Internet access are needed to explain national differences in the proportions working in the platform economy.

[4] E.g. https://www.vanguardngr.com/2018/08/uber-monthly-passenger-base-in-nigeria-hits-267000/ and https://technext.ng/2018/08/17/max-ng-3-5-things-should-know-about-ride-hailing-platform/

[5] E.g. https://qz.com/india/1385653/uber-ola-drivers-pay-the-price-for-indias-fuel-price-rise/ and https://www.livemint.com/Companies/cYbdfsYk93HFhMuC0XgaNN/Swiggy-Zomato-hike-delivery-boy-salaries-as-competition-gro.html and https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/zomato-swiggy-and-ubereats-paying-higher-cash-on-delivery/articleshow/65142563.cms

[6] e.g. http://buscompress.com/uploads/3/4/9/8/34980536/riber_7-s1_sp_h17-051_59-67.pdf and https://www.thejakartapost.com/academia/2018/11/21/the-gig-economy-and-skills-traps-in-indonesia.html

[7] E.g. https://technode.com/2018/03/19/didi-1-5-billion-abs/ and https://www.sustainabletransport.org/archives/6317

[8] E.g. https://www.reuters.com/article/us-uber-brazil/uber-rival-apps-join-forces-in-brazil-to-stem-tide-of-regulation-idUSKBN1D71KE and https://www.ft.com/content/7bf04e08-1d63-11e8-aaca-4574d7dabfb6 and https://www.globalfleet.com/en/smart-mobility/latin-america/news/chile-imposes-regulations-ride-hailing-companies and https://www.forbes.com/sites/jonathanmoed/2018/12/20/is-uber-operating-illegally-in-its-fastest-growing-region/#74c69e161925

[9] Heeks, R. (2017) Decent Work and the Digital Gig Economy, GDI Development Informatics Working Paper no.71, University of Manchester, UK

[10] Heeks, R. (2017) Decent Work and the Digital Gig Economy, GDI Development Informatics Working Paper no.71, University of Manchester, UK

[11] E.g. https://www.cnbc.com/2018/08/15/uber-q2-2018-revenue-bookings-slow-slightly.html

[12] E.g. https://kr-asia.com/losing-300m-in-2017-didi-chuxing-wants-to-turn-a-profit-in-2018-amid-fierce-competition

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