The Economist - USA (2019-10-05)

The EconomistOctober 5th 2019 Business 57

1

I

n 1999 aUgandan teacher decided to start

her own school. Barbara Ofwono

Buyondo had $350 of savings. Bankers

would not give a loan without collateral,

especially to a young woman. With no

money for tables, children wrote on their

chairs, kneeling. Today her company, Vic-

torious Education Services, is one of the

leading schools in Uganda. Over 4,000 fee-

paying pupils attend its five campuses,

swept up by a fleet of branded buses and

welcomed by primly uniformed teachers.

Decent jobs are so scarce in Africa that,

like Ms Buyondo, many people create their

own. Surveys by the Global Entrepreneur-

ship Monitor find that one in three work-

ing-age adults in sub-Saharan Africa either

runs a new business or is trying to start

one, compared with one in six Americans

and one in 20 Germans. In Tanzania infor-

mal firms created four-fifths of new non-

farm jobs between 2002 and 2012. Most

such enterprises are also tiny. Schemes to

help them emulate Ms Buyondo’s success

have a mixed record.

Take attempts to give promising entre-

preneurs access to capital. A study in 2017

by David McKenzie of the World Bank

looked at Youwin!, a government-run con-

test in Nigeria which awards $50,000 on

average to applicants with the best busi-

ness plans. He found winners used the

money well, becoming larger and more

profitable than otherwise similar firms

that did not win. But such initiatives,

which resemble a lottery, are inherently

hard to scale. Other studies have found that

extending microloans to entrepreneurs

does not generally raise their incomes.

An alternative approach is to foster

good business practices. Enterprise pro-

grammes range from small non-profit ini-

tiatives to the $100m foundation estab-

lished by Tony Elumelu, a Nigerian tycoon.

At a recent training session run by Enter-

prise Uganda, a government-backed initia-

tive, some 70 businesspeople discussed

how to manage employees. The trainer

warns against hiring indolent relatives.

“You can’t have a minister without portfo-

lio in your business,” he says (half-joking-

ly). One woman recounts how her husband

kept antagonising customers, until she

moved him to accounts.

These, too, are a mixed bag. Good re-

cord-keeping and marketing have been

linked to subsequent business success. All

too often, though, classroom-style courses

meant to inculcate such skills do not suc-

ceed in getting trainees to practise what

they have learned. In Togo, for instance, Mr

McKenzie and colleagues found that teach-

ing practical skills was less effective than

showing students how to set goals and

identify markets.

Entrepreneurs often need specific in-

formation, for example, where to sell their

products or source supplies. A randomised

trial by researchers from the University of

Notre Dame in America linked young busi-

nesswomen in a Kenyan slum with local

mentors dealing in similar trades. Their

profits were 20% higher over the following

year, relative to a control group, mainly be-

cause they had switched to cheaper suppli-

ers. A study in Egypt showed that artisanal

rugmakers learned to make higher-quality

carpets after being connected with more

demanding rich-world buyers.

Budding business folk need other sorts

of assistance. Down a narrow alley in Kam-

pala, Uganda’s capital, Ivan Zziwa has built

KAMPALA

Schemes to make entrepreneurs more

successful are hit and miss

African enterprise

Uberising luck

Trimming the odds of success

C

arpooling appsto connect pas-

sengers with drivers going the same

way are old hat. Now “crowdshipping”

services are doing the same with par-

cels, allowing senders to “plug into”

road traffic as if it were a utility, says

Marc Gorlin, boss of Roadie, a startup

based in Atlanta. Drivers get a tip; the

middlemen take a cut. Firms like Mr

Gorlin’s are proliferating. Rappi oper-

ates in 57 cities in Latin America. A

Filipino firm, Jojo, does so in Manila,

the capital, and a nearby province.

Many of the senders are companies.

Amazon’s quick and cheap deliveries

are forcing others to up their game, says

Ravi Shanker of Morgan Stanley, a bank.

Corporate fleets and logistics giants

like FedEx will dominate long-haul

routes. But by tapping into people’s

movements, firms can withstand

spikes in demand—floral bouquets on

Mother’s Day, say—and save money on

the “last mile”, often the costliest leg of

a parcel’s journey.

Four-fifths of Roadie’s revenue

comes from retailers such as Macy’s,

Walmart or Home Depot (which has

invested in Mr Gorlin’s firm). Airlines

are another big client. Nearly half of

Delta’s mishandled bags are delivered

by travellers who use Roadie’s app to

see if suitcases need dropping off along

their drive home. The carrier’s head of

cargo, Gareth Joyce, says this has cut

costs, speeded up deliveries and boost-

ed customer satisfaction. Alaska Air-

lines, Southwest and United also use

Roadie to return lost luggage.

Other crowdshipping startups are

eyeing free space inside travellers’

suitcases. PiggyBee, based near Brus-

sels, and Grabr, with offices in Moscow,

New York and San Francisco, operate

worldwide, linking consumers desir-

ous of products only available—or

cheaper—overseas with international

passengers headed their way.

The buyer pays the product price,

and any relevant taxes and duties, into

an escrow account managed by the app,

plus a tip to make it worth the transpor-

ter’s while. The transporter buys the

item and receives the reimbursement

and tip on delivery. The apps discour-

age transporters from pretending a

purchase is for personal use to avoid

customs duties. But as David Vuylsteke,

boss of PiggyBee, acknowledges, “since

we’re under the radar, no one cares.”

Headed your way

Crowdshipping

SAN FRANCISCO

The next stop for the sharing economy