Foreign Aid & Civil Society

Malindi Day 2: The Bottom of the Pyramid

By Dweep Chanana ⋅ December 17, 2005 ⋅  Email this post ⋅ Post a comment

Our 9am meeting with leaders of organized small-holder farmer groups started on time at 9.30am. Our conference room, under the shade of a large tree, was comfortable and breezy. Nearby, a goat had been freshly slaughtered. I saw it kicking its last futile kicks, staring at me at impossible angle with its throat grotesquely slit. By the time we started our meeting, it had already been skinned.

Everything is in Swahili, so I only understand what is translated to me. The farmers understand what the buyer wants. In short order, they then bring up the relevant issues. Can they vary prices depending on the season? Will they be paid on credit? Who will pay for the initial investments in quality? How do they know the buyer will not cut-and-run, after they have invested in the improved quality he wants?

The last, in particular, is a sticking point and emerges frequently during the 90 minute meeting. I see reflections of the much reviled Prisoner’s Dilemna of game theory here. Both the buyer and seller have an incentive to cooperate, but afraid the other will cheat. The responses are also predictable. The farmers want a long-term commitment, and a way to establish trust. Game theorists would call this repeated games and ’signalling’ commitment to cooperate. These are issues I may have to help resolve at the appropriate time.

Later in the day I visit somefarms. On the banks of the Sabaki River, this is the fruit basket of Kenya. Mango, papaya, banana, passion fruit, cashew, coconut – everything grows here. But the people I am visiting are small-holders (the largest farm has about 150 trees), squeezed by everyone. The Malindi fruit cooperative is controlled by Arabs that own plantations and force small-holders to sell produce at throw-away prices. Transporters charge a tooth and a nail to move small consignments to Nairobi. The price of their mangoes, leaving the farm is Ksh. 3 per piece (about 500g). By the time it reaches Nairobi, it is Ksh. 7.

The desire to help these people is overpowering. I find I am reminding myself of my IOMBA courses on microeconomics, and my work at the International Trade Centre UNCTAD/WTO on coffee farmers. It is a familiar story in agriculture – economies of scale are not in production but distribution and processing.

The day has been a commentary on so much. But I realize how exciting doing business here is. In Kisumu I had seen ‘boda bodas’ – bicycles with padded seats at the back. These are popular and cheap, but the bicycles are heavy. Why can someone not make them lighter, and faster, I asked in Malindi? In response, the city kid was politely told that these bicycles will hold not just one person, but an entire family, plus bananas, mangoes, and whatever else must be transported from village to town.

Emerging Markets is the trendy word for these countries. But it is not the markets that are ‘emerging’. Rather, it is the awareness that these markets exist. The only challenge is that you must know everything to succeed. Know what you sell. Then know the people you sell to.

There are signs of globalization, even in these corners. Up around Sabaki river, they are replacing traditional mango varieties with those more exportable. These people may not know what goes on in Iraq and are far removed from MTV. But, what happens when someone in Europe decides s/he prefers another type of mango? Globalization, evidently, is not about culture per se, but about the commoditization of the artifacts of culture.

The meeting ended well, though it was inconclusive. With bowed heads, we prayed. Gathered near me are farmers and their extension providers. Most have no cell phone, and walked for several miles this morning. I am so out of my league here.

This is the bottom of the pyramid. It is not in the books of C.K.Prahalad, nor in the research papers and case studies that I wrote. It is here and it is incredibly astute. These people do not have an MBA degree, but they can do a cost-benefit and risk analysis as good as any. They may not know game theory or economics, but are familiar with transaction costs of market economies, and are aware of the importance of social capital to overcome those costs. They are humble. They welcome you into their home with a smile and a few words of English. They ask very little in return. Even that I am unsure anyone can provide. It is unfair, yes.