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  • Global South’s Rising Economies Gain Investor Spotlight

    Global South’s Rising Economies Gain Investor Spotlight

    By David South, Development Challenges, South-South Solutions

    SOUTH-SOUTH CASE STUDY

    A new book is arguing that the world’s attention should switch away from BRICS countries – Brazil, Russia, India, China and South Africa – and take another look at nations and regions elsewhere across the global South. It argues many are lodestones of future growth and prosperity in the making and will see dramatic changes over the next decade.

    The story of the BRIC and BRICS countries is an impressive one. In just eight years from 2000 to 2008, the BRIC countries’ combined share of total world economic output rose from 16 to 22 per cent. This led to a 30 per cent increase in global output during the period, showing how key these countries were to global prosperity in the 2000s. BRIC countries make up nearly half the world’s population and are regional leaders. Taken together, their gross domestic products (GDPs) are not far behind the United States.

    Ruchir Sharma’s Breakout Nations: In Pursuit of the Next Economic Miracles (http://www.amazon.com/Breakout-Nations-Pursuit-Economic-Miracles/dp/0393080269) argues that the BRICS are now entering a more stable growth path and thus will not see the rapid-fire expansion and quick profits investors have become used to in the past decade.

    “The BRICs,” Sharma told Forbes magazine, “were last decade’s team.”

    The BRIC acronym (http://en.wikipedia.org/wiki/BRIC) was coined in 2001 by Goldman Sachs managing director Jim O’Neill, in a 2001 paper titled “Building Better Global Economic BRICs” (http://www.goldmansachs.com/ourthinking/brics/building-better.html). O’Neill predicted that this handful of countries would dominate the growth and economic development story for the years 2000 to 2010. This was because they all shared a similar stage of advanced economic development.

    The BRIC states first began meeting together in 2006. South Africa was added in 2010 to form the BRICS acronym.

    The buzz surrounding the BRICS countries over the past decade has been justified by their impressive growth rates, declining poverty levels,modernizing economies and societies and growing middle class populations.

    China alone had seen its gross domestic product grow by US $5 trillion between 2001 and 2011.

    Now, Sharma argues, it is someone else’s turn.

    Sharma is head of emerging markets with Morgan Stanley Investment Management in New York, and Breakout Nations looks at where the next economic surprise stories will take place.

    “A breakout nation is a nation that will grow above expectations, and will grow more than nations with similar per capita income,” Sharma told Forbes. “You can’t bunch all of the emerging markets together anymore. The last decade saw these countries behaving the same economically, but I think that is behind us now. Investors today will really have to pick their spots.”

    He points out that Indonesia was the best performing emerging market in 2011 and has an economy that will surpass a trillion dollars in the coming years.

    He also believes Sri Lanka and Nigeria are economies to watch.

    Sharma says funds flowing into emerging market stocks grew by 478 per cent from 2005 to 2010, a massive jump compared to 2000 to 2005, when they grew by 92 per cent.

    As he sees it, China has now reached middle-income status and its growth rates will not be as high as they have been for the past two decades. In his research, he found that countries like Japan, South Korea and Taiwan all slowed down once their per capita income went past US $5,000.

    Investors who watch the emerging markets predict the hot growth areas for the next decade will be around energy, technology, and agricultural resources.

    Sharma picks out Indonesia, Turkey, the Philippines, Poland and the Czech Republic for future investment interest, but urges caution with thinking all emerging economies are on course to boom.

    “You’ve got to pick your spots, rather than just assume that because you put a tag of emerging on a particular nation, it’s going to boom,” Sharma told The Globe and Mail newspaper.

    To make sense of the complexity of fast-emerging economies, a flurry of new investor acronyms has popped up. One of the country clusters is called the CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa (http://en.wikipedia.org/wiki/CIVETS).

    The MINTS (Mexico, Indonesia, Nigeria and Turkey) are also set for great growth in the next decade, many investors believe.

    Then there is the N-11 or Next 11. This is the MINTS plus Bangladesh, Egypt,Iran, Pakistan, the Philippines, South Korea and Vietnam.

    And after that there is VISTA (Vietnam, Indonesia, South Africa, Turkey and Argentina). While clearly the creative juices are flowing at investment houses as they come up with ever-catchier acronyms, a more serious point is being made: many countries in the global South, for the first time in history, are no longer solely dependent on the Western economic system for demand.

    These countries, investors note, now have an unprecedented range of options uncoupled from the political, financial and economic legacy of Western developed nations. They say that many nations in the global South are set for a runaway investment boom because they are making changes and modernizing their economies faster than many expect.

    As the BRICS economies mature and slow down and take on different priorities based around improving the quality of life of their citizens, those seeking faster profits will look elsewhere. This trend is even happening within the BRICS, as Chinese and Brazilian companies offshore work to Vietnam and Colombia.

    There are many new centres of economic activity and rising prosperity across the emerging markets that often fail to gain wider attention. Few would probably know that the Northeast Asian nation of Mongolia – mired in the 1990s in the worst peacetime economic collapse in half a century (http://www.scribd.com/doc/20864541/Mongolia-Update-1998-Book) – is now the world’s fastest-growing economy (http://www.worldbank.org/en/news/2012/02/28/what-behind-mongoliaeconomic-boom) and one of the top places for mobile phone usage and penetration (http://www.businessmongolia.com/mongolia/2012/03/19/mongolia-ringing-the-changes/).

    Then there is Myanmar (formerly Burma), where many are hoping recent moves toward democracy and improvements in diplomatic relations will lead to an economic boon for the region. Investors are also targeting Kazakhstan in Central Asia.

    Reflecting these changing realities, Standard Bank, Africa’s largest bank, has been documenting the rising role played by the Chinese currency in international trade. A recent report forecast US $100 billion (R768 billion) in Sino-African trade would be settled in the Chinese currency, the renminbi, by 2015. This would be double the trade between China and Africa in 2010. It also found 70,000 Chinese companies are using the renminbi in international trade transactions.

    Published: April 2012

    Resources 

    1) Beyondbrics blog: A blog by the Financial Times calling itself “The Ft’s emerging markets hub”. Website: http://blogs.ft.com/beyond-brics/

    2) BRICS Summit: The Fourth BRICS Summit was hosted in New Delhi on 29 March 2012 under the overarching theme of “BRICS Partnership for Global Stability, Security and Prosperity.” The Summit has imparted further momentum to the BRICS process. Website: bricsindia.in

    3) Market Oracle: A good source for updates on investor sentiment about the emerging market economies. Website: marketoracle.co.uk

    4) Monocle magazine: “A briefing on global affairs, business, culture and design” often featuring trends in the emerging market countries. Website: monocle.com

    5) BRICS Information Centre, University of Toronto. Website: brics.utoronto.ca

    https://davidsouthconsulting.org/2022/04/15/african-youth-want-to-do-business-in-fast-growing-economy/

    https://davidsouthconsulting.org/2022/03/20/global-south-eco-cities-show-how-the-future-can-be/

    https://davidsouthconsulting.org/2021/07/19/global-south-trade-boosted-with-increasing-china-africa-trade-in-2013/

    https://davidsouthconsulting.org/2022/10/20/global-souths-middle-class-is-increasing-prosperity/

    https://davidsouthconsulting.org/2022/10/20/global-souths-rising-economies-gain-investor-spotlight-2/

    https://davidsouthconsulting.org/2021/11/12/global-souths-rising-megacities-challenge-idea-of-urban-living/

    https://davidsouthconsulting.org/2022/11/15/indonesian-middle-class-recycle-wealth-back-into-domestic-economy/

    https://davidsouthconsulting.org/2022/10/20/trade-to-benefit-the-poor-up-in-2006-and-to-grow-in-2007/

    https://davidsouthconsulting.org/2022/11/20/venezuelas-currencies-promote-cooperation-not-competition/

    https://davidsouthconsulting.org/2022/10/10/wireless-internet-culture-helping-zimbabwe-economy-recover/

    Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator. 

    https://davidsouthconsulting.org/2021/03/05/southern-innovator-issue-2/

    Creative Commons License

    This work is licensed under a
    Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

    ORCID iD: https://orcid.org/0000-0001-5311-1052.

    © David South Consulting 2022

  • African Countries Re-branding for New Economic Role

    African Countries Re-branding for New Economic Role

    By David South, Development Challenges, South-South Solutions

    SOUTH-SOUTH CASE STUDY

    Africa’s diverse countries have been subject to years of negative stories in the media. The effect on global audiences has left many to cast the whole continent in a bad light and to know little about the individual countries and cultures.

    This has damaged business confidence over the years. Just like products and people, nations need to have a strong and positive brand to do well in the global economy. Nation branding, the process by which countries alter people’s perceptions, has taken hold in Africa as the continent seeks to reverse the bad vibes.

    South Africa is the continent’s leader in nation-branding, and countries including Nigeria, Kenya and Ghana are newly pursuing it. South Africa’s ‘Proudly South African’ (http://www.proudlysa.co.za/) campaign is known around the world.

    The past decade has seen economic growth and rising tourism in many African countries. But the reality that many people around the world can’t tell the difference between most African countries, or have mostly negative impressions formed from news reports, means they are unaware of the positive developments and opportunities.

    Author and researcher Simon Anholt, in his book Brand New Justice, claims Africa’s biggest obstacle to growth is the image of the continent itself. He argues that in a globalized world it is the responsibility of good governments to understand, measure, and exercise control over a country’s reputation if it is to prosper. However, he has criticized nation-branding if it is just a marketing strategy without substantial changes to how things are done in a country.

    And it is clear the winners in nation re-branding will be the countries that prove on the ground that they are changing and living up to the fine words and catchy phrases.

    In Nigeria’s Lagos State (www.lagosstate.gov.ng), Governor Babtunde Fashola – known as ‘Nigeria’s Obama’ – has launched a campaign to turn around the country’s long-standing reputation for corruption. Using the slogan Good People, Great Country, the city of Lagos has set itself ambitious goals that are dependent on significant increases in investment.

    Lagos wants the city to be transformed into a place anyone can do business and be attractive to tourists.

    The city has seen its population triple in the last 50 years and is on track to be the third largest city in the world by 2015. Thinking long term, plans are in place for the city to eventually be home to 40 million people.

    Critics are blunt about their hostility to the re-branding exercise: “How do you re-brand a product when the content stinks?” asked Akinola M.A. on news website Mynaija News. “I can’t understand the meaning of this project when basic facilities like good roads, water and electricity are virtually not available.”

    Supporters say the governor’s strategy is based on action, not words. Investment is going into a Rapid Bus Transit (BRT) system, traffic management, security, street lighting, beautification, and public-private partnerships to improve services.

    “Nigeria cannot wait until it solves all her problems before it can stand to give serious thought to re-branding its battered image,” Nigeria’s information minister Dora Akunyili told Online Nigeria. “This is because our development is tied to our image. This negative perception has had destructive effects on our people and stymied our growth and national progress.”

    Showing the power of trans-African approaches, the Wisdom Keys Group, a Nigerian company founded in South Africa (http://www.wkg.co.za/network.html) and working in 16 countries with partners, was contracted to do the campaign.

    As the pioneer of brand power in Africa, South Africa’s International Marketing Council (http://www.imc.org.za/) heads a relentless campaign to engage an international audience and expatriate South Africans. It is a sharp, multi-media outfit tackling every aspect of South Africa’s domestic and international reputation. Products include e-newsletters, campaigns to lure back expert South Africans, a vast network of web content, and a highly targeted advertising and marketing campaign that lures businesses and tourists to the airport (via ads on taxis and in subways) and on to flights to South Africa.

    For Kenya (http://www.brandkenya.go.ke/), the focus is on instilling pride within the country. As Kenyan media consultant Kwendo Opanga told the Nation Branding website, “it is not branding Kenya for foreigners that is difficult. It is branding Kenyans for Kenya and Kenya for Kenyans that is a tough call.”

    “We even work with the school system to ensure that this is in the curriculum so that children are told that they need to start living dignified lives.”

    Rwanda, despite experiencing a horrific genocide in 1994, is gaining attention for turning its image around. It has taken a different approach and has targeted building powerful networks of support around the world to make deals. As Rwandan government adviser Elaine Ubalijoro told FastComany, “How do you take a country that’s been through hell and bring it to security and prosperity? This is about healing, and this is about hope. We think it can be done.”

    The Rwandan strategy is hinged on exploiting a global network of high-profile and powerful contacts that includes former British Prime Minister Tony Blair, Starbucks CEO Howard Schultz and Google chief Eric Schmidt. The results include a training programme where British civil servants work in Rwanda. Starbucks, meanwhile, has become one of the top purchasers of Rwandan coffee.

    Ghana’s newly launched Brand Ghana office was set up to coordinate the development of an engaging national image for the country. Its head, Mathias Akotia, told Nation Branding: “We are in competition with other nations for attention, wealth, tourism and for the export of products. Country branding is about the management of our national identity and values in a way that will take us forward.”

    Still in the early stages of re-branding, Ghana plans to hold a national summit to draft a plan and identify the country’s values and identity.

    Branding is not merely slogans and catch phrases. Word-of-mouth can radically change a country’s image, and its prospects. The international magazine Monocle (www.monocle.com), a publication that prides itself on spotting the next big thing, has highlighted the East African nation of Burundi (http://en.wikipedia.org/wiki/Burundi) as the place to watch. The magazine thinks that by reinventing itself as a place of tourism, coffee and oil, with some of Africa’s best inland beaches and a wealth of art-deco architecture recalling Miami’s South Beach area, Burundi can distance itself from past conflict and become a must-see destination. At present, 80 percent of its earnings come from coffee and tea exports. It is hoping to become a tourist and transport hub with a new port, linking central and east Africa.

    As the magazine says, “Bujumbura has got all the substance – and architecture – required to turn Burundi’s backwater capital into an African success story, and the country’s upcoming elections are a chance to create lasting peace after 15 years of civil war. But corruption could still derail the dream.”

    The Nation Branding website (http://www.nation-branding.info/) (“everything about nation branding and country brands”) is the place to visit for all those interested in nation branding, country brands and how countries can improve their image abroad. Upcoming nation branding events can be found here: http://www.nationbrandingevents.com/nationbranding.

    Published: November 2009

    Resources

    1) Monocle Magazine: Launched in February 2007, Monocle is a global briefing covering international affairs, business, culture and design. Developed for an international audience hungry for information across a variety of sectors, the magazine is a consistent champion of Southern countries and their economic opportunities. Website: http://www.monocle.com/

    2) A BBC radio documentary on Nigeria’s experience of nation branding. Website: http://www.bbc.co.uk/worldservice/documentaries/2009/html

    3) Brandchannel: The world’s only online exchange about branding, packed with resources, debates and contacts to help businesses intelligently build their brand. Website: www.brandchannel.com

    4) Small businesses looking to develop their brand can find plenty of free advice and resources here. Website: www.brandingstrategyinsider.com

    5) Catwalk for Africa: A fashion show taking place from December 4-6, 2009 in Tunisia. Website: http://www.catwalkforafrica.com/accueil/accueil_en.php

    https://davidsouthconsulting.org/2022/11/11/african-breakthroughs-to-make-life-better/

    https://davidsouthconsulting.org/2022/11/20/african-bus-to-tackle-african-roads/

    https://davidsouthconsulting.org/2022/11/19/african-culture-as-big-business/

    https://davidsouthconsulting.org/2022/10/20/african-hotel-boom-bringing-in-new-investment-and-creating-jobs/

    https://davidsouthconsulting.org/2022/11/17/african-ingenuity-attracting-interest/

    https://davidsouthconsulting.org/2022/11/15/african-innovators-celebrated-in-prize/

    https://davidsouthconsulting.org/2022/10/21/african-media-changing-to-reach-growing-middle-class/

    https://davidsouthconsulting.org/2022/11/02/african-online-supermarket-set-to-boost-trade/

    https://davidsouthconsulting.org/2023/01/16/african-theatre-becomes-european-success/

    https://davidsouthconsulting.org/2022/10/20/african-tourism-leads-the-world-and-brings-new-opportunities/

    https://davidsouthconsulting.org/2022/11/22/happy-nigeria-west-african-nation-has-good-attitude/

    https://davidsouthconsulting.org/2022/10/20/online-education-could-boost-african-development/

    https://davidsouthconsulting.org/2022/10/18/woman-wants-african-farming-to-be-cool/

    Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator. 

    https://davidsouthconsulting.org/2021/03/05/southern-innovator-issue-2/

    Creative Commons License

    This work is licensed under a
    Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

    ORCID iD: https://orcid.org/0000-0001-5311-1052.

    © David South Consulting 2022

  • Ambitious Schemes Hope to Advance Economic Development

    Ambitious Schemes Hope to Advance Economic Development

    By David South, Development Challenges, South-South Solutions

    SOUTH-SOUTH CASE STUDY

    Sometimes it takes a bold, fresh start to speed up economic and human development goals. Taking a large-scale approach has been used around the world, either establishing new trade zones or even a new city.

    Two recent examples in Nigeria and Afghanistan are attempting to speed economic development in their respective countries, with both receiving help from experienced Asian practitioners of rapid economic development.

    The role models for this approach are the so-called “Asian Tigers”: they include Taiwan, Hong Kong, Singapore and South Korea. They are admired because each country rose from extreme poverty to become some of the Earth’s richest nations. Importantly, what they did stands as proof that extreme poverty can be escaped from; people can become much wealthier in just a decade or two.

    The pioneer of using trade zones to speed development is the Asian city state of Singapore (http://www.gov.sg/government/web/content/govsg/classic/home)..Fifty years ago it was one of Asia’s poorest countries. With its port (http://www.mpa.gov.sg/) it had a way to turn things around but it also realized in the early 1960s it could not just compete by having cheap labour, something that was plentiful across the developing world (http://www.mti.gov.sg/MTIInsights/Pages/Economic-History-and-Milestones.aspx). It needed unique technical skills that could not be found elsewhere.

    The country was unable to create products and services that it could export and compete in global markets because of a lack of skills, the Government determined. Authorities employed a mix of measures to make the country attractive to foreign companies to boost skills. These included fair enforcement of local laws, tax incentives and upgraded infrastructure, much of it paid for with an infrastructure tax, rather than borrowing. With the influx of new thinking and high-quality skills, new technologies and new ways of doing things, in time, a culture of innovation became hardwired into the way things were done in Singapore.

    Beginning in 1961 with the Jurong Industrial Estate (http://infopedia.nl.sg/articles/SIP_246_2004-12-16.html), the Singapore government set aside land to develop the economy by attracting international businesses and boosting its existing port facilities. It also established the Economic Development Board (EDB) in 1961 and the Singapore Tourism Promotion Board (STPB) in 1964.

    By creating favorable conditions for international businesses to come in and operate, Singapore quickly developed to become one of Asia’s wealthiest trading and manufacturing centres.

    This is a strategy China successfully implemented in the 1980s and 1990s and in turn generated the largest and quickest population shift out of poverty in human history, turning the country into an economic powerhouse.

    The secrets to making this strategy work include understanding what modern infrastructure requirements are necessary for international businesses. These days, this means speedy and generous bandwidth for the Internet, modern airports, roads, security, and quality housing and food.

    One of the biggest contemporary challenges is competition. Whereas Singapore was a pioneer in its day, now, many countries across the global South are pursuing this strategy to spur growth. An international company has many options to consider, and will more than likely gravitate towards the country that makes the best offer with the least risk.

    Trade zones are places ripe with opportunity for innovators. New places tend to be seeking the latest in information and communication technologies, the latest in transportation options, modern housing and office facilities. All of these changes require innovators with fresh thinking to make them work. It is also often easier to introduce new ways of doing things to places that are not coping with legacy infrastructure and old habits and ways.

    Billing itself as a “new model city,” the Lekki Free Zone Lagos, Nigeria (lekkizone.com) in West Africa is trying to bring a fresh start to the city and the region. It is a joint partnership between investors from China and Nigeria.

    Its goal is to better connect regional markets to the global economy. The free trade zone hopes to remove barriers to growth and to attract international investment, becoming the top destination for inward investment in Africa. The project is being run by the Lagos State Government but funded with private capital investment.

    Nigeria has been looking into Free Zones since 1982, as it sought additional ways to earn income apart from oil exports. The Export Processing Zone Act 63 was passed in 1992 and the Calabar Export Processing Zone was eventually set up in 1999 (http://www.nepza.gov.ng/index.php?option=com_content&task=view&id=18&Itemid=34). Since then, a slew of Free Zones have been set up, or are in the works.

    The Lekki Free Zone is envisioned as a high-tech zone that will eventually lead to the creation of 2 million jobs. The Zone’s investors are targeting businesses working in oil and gas, petrochemicals, electronics, light and heavy equipment, machinery and automobiles, pharmaceuticals, textiles, shopping and banking and financial services.

    Lagos State is home to 21 million people, and the current city of Lagos is on course to become the third-largest megacity in the world. Officials claim the area has an economic growth rate of 16.8 per cent per year.

    The 16,500 hectare Lekki Free Zone, to the southeast of the city, is divided into two parts: an industrial zone and a residential zone. The residential zone will include apartments and villas, shopping malls and plazas, hospitals and clinics, schools and research and development centres and a hotel, tour and recreational centres, golf courses, gyms and water sports facilities.

    Located on the southern coast of Nigeria with connections to the Atlantic Ocean and the Gulf of Guinea, the Lekki Free Zone says it will give companies access to the largest consumer market in Africa, with a potential reach of 500 million people.

    The companies will also be able to draw on Nigeria’s natural resources, including oil, natural gas, timber, rubber, cocoa, Arabic gum and sesame seeds as examples.

    Another new beginning is being sought in war-torn Afghanistan, which is working on building a new city close to the capital, Kabul.

    Kabul New City started construction in 2013 and is planned to be a city of canals, parks and villas. It will be home to 1.5 million people, cost US $33 billion and take 15 years to complete. It is being partly funded by Japan.

    It is a very ambitious scheme for a country that has been mired in conflict for decades. It is hoped the initial seed capital invested by Japan will attract other investors to fully fund the project. Japan got the project going with a commitment to contribute US $106 million between 2009 and 2015.

    The site of Kabul New City is 19 kilometres from the existing Kabul, near the Bagram airbase used by NATO forces in the country.

    Foreign military forces are looking to leave Afghanistan in 2014 and the new city offers a fresh start for the country after years of conflict.

    Located in an area surrounded by the Marko mountains, it is in “one of the safest areas of Afghanistan,” Abdul Habib Zadran, Chief Financial Officer of the Dehsabz-Barikab City Development Authority (http://www.dcda.gov.af/), the agency in charge of the project, told The Sunday Times.

    The project could be a significant leap ahead in modernization from the current conditions in Kabul, where the streets are in poor condition and buildings in disrepair. Kabul was originally built for 800,000 people, according to The Sunday Times, but now has over 4 million residents. Projections forecast the city growing to 6.5 million people by 2025. Kabul will experience extreme pressure to handle this growing population and find the resources to serve it.

    The homes would receive electricity from solar panels and renewable energy sources. Kabul New City will need to tackle the problem of access to enough water to service the growing new city’s population. Plans are afoot to provide water from rivers north of the city.

    The master plan for the new city has been designed by Zahra Breshna (breshna-consulting.com), an Afghan-German company which has also built the new Kabul Bank headquarters. The company calls the project “a new beginning for Kabul.”

    Published: May 2013

    Resources

    1) Tianjin Eco-city: The Sino-Singapore Tianjin Eco-city’s vision is to be a thriving city which is socially harmonious, environmentally-friendly and resource-efficient. Website: tianjinecocity.gov.sg/

    2) Songdo International Business District: Songdo International Business District (IBD) is home to the UN’s Green Climate Fund and is a smart city located in the Republic of Korea built to the highest green building standards. Website: songdo.com/

    3) Singapore: An island and islets in the heart of Southeast Asia, between Malaysia and Indonesia. Website: http://app.www.sg/

    4) Djibouti Free Zone: Djibouti Free Zone was created with one primary goal in mind – to bring about a sea-change in the way Africa thinks and does business. No red tape, ruthless efficiency and genuinely exhaustive services – in essence, we offer the ideal conditions for trade and commerce to flourish in. Website: djiboutifz.com/

    5) Cisco Smart + Connected Cities: Cisco Smart+Connected Communities solutions use intelligent networking capabilities to bring together people, services, community assets, and information to help community leaders address these world challenges. Website: http://www.cisco.com/web/strategy/smart_connected_communities.html

    6) IBM Smarter Cities: Smarter cities drive sustainable economic growth and prosperity for their citizens. Their leaders have the tools to analyze data for better decisions, anticipate problems to resolve them proactively and coordinate resources to operate effectively. Website:http://www.ibm.com/smarterplanet/us/en/smarter_cities/overview/

    7) Southern Innovator Magazine Issue 4: Cities and Urbanization. Website: http://www.scribd.com/doc/133622315/Southern-Innovator-Magazine-Issue-4-Cities-and-Urbanization

    Southern Innovator logo

    London Edit

    31 July 2013

    Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator. 

    Creative Commons License

    This work is licensed under a
    Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

    ORCID iD: https://orcid.org/0000-0001-5311-1052.

    © David South Consulting 2023

  • Cash Machines for the Poor

    Cash Machines for the Poor

    By David South, Development Challenges, South-South Solutions

    SOUTH-SOUTH CASE STUDY

    Access to basic banking services for the poor is weak at the best of times. Many are openly discriminated against as a ‘bad risk’ by banks, and denied the sort of banking services middle and higher income people take for granted. Yet it is a myth that the poor do not have money or do not wish to save and invest for their future or for business.

    The so-called Bottom of the Pyramid (BOP) – the four billion people around the world who live on less than US $2 a day – are being targeted by a wide range of businesses. Indian business consultant and professor CK Prahalad, the man who coined the term BOP, has gone so far as to claim this is a market potentially worth US $13 trillion, while the World Resources Institute puts it at US $5 trillion in its report, The Next 4 Billion.

    And contrary to popular perception, the poor do have buying power, as has been documented by Massachusetts Institute of Technology (MIT) professors Abhijit Banerjee and Esther Duflo in their paper “The Economic Lives of the Poor”. Surveying 13 countries, they found those living on less than a dollar a day, the very poor, actually spent 1/3 of their household income on things other than food, including tobacco, alcohol, weddings, funerals, religious festivals, radios and TVs. The researchers also found that the poor increasingly used their spending power to seek out private sector options when the public sector failed to provide adequate services.

    India, where 63 percent of the BoP market is rural and 304.11 million people are illiterate (Human Development Report), makes for a particularly tricky market to reach with bank machines: the average transaction is just 100 rupees (£1.25).

    But a Madras-based company has come up with the Gramateller – a low-cost, blue-and-white bank machine custom-designed for the poor and illiterate. Vortex received funding of 2 million rupees (US $48,000) from an investment company, Aavishkar, that specializes in micro-venture capital — small sums for new business ideas. The advantage of micro-venture capital funding is its longer payback time: a young company does not get driven out of business by having to pay back the cash before the idea has been realized. Normally, venture capital helps a business to grow quickly but the venture capitalist wants to see an immediate profit on the investment.

    Vortex’s chief executive officer, V.Vijay Babu, said: “The idea was conceived by Prof. Jhunjhunwala of IITM (Indian Institute of Technology Madras) in the course of an exploratory project focused on using ICT to deliver modern banking services to rural India.”

    “It was found that branch-based banking is too expensive to be extended to remote rural locations where the volume and size of transactions are small. Using conventional ATMs (automatic teller machines) as a channel posed many difficulties because these ATMs were not built to operate in [illiterate] environments. Hence the need for developing an ATM specific to this context.”

    Costing just a 10th as much to build as an ordinary cash machine, Gramateller has a fingerprint scanner for the illiterate, and is able to accept dirty and crumpled bank notes. Vortex came up with an ingenious solution to do this, said Babu: “Vortex developed a beltless dispenser design that in many ways mimics the way a human teller would pick and count notes.”

    Vortex hopes to massively expand access to cash machines: at present, India has just 30,000 machines, or one for every 43,000 people (the US has a machine for every 1,000 people). These machines are being piloted with India’s biggest private bank, ICICI, and they have garnered interest from Indonesian banks as well.

    “We are running pilots for two leading banks with about 10 ATMs,” said Babu. “Though it is still early, the initial response has been very encouraging – rural users find fingerprint authentication intuitive and simple and the ATM convenient and easy to use. A few users also gave feedback that our ATMs look less intimidating, maybe because it is placed in a non-air conditioned room with easy access and also is different in shape from a typical ATM.”

    Furthermore the cash machines have taken a beating to see if they are robust enough for rural India: “The ATMs were tested for extended operating cycles under the harshest of environments that would prevail in the rural context — using soiled currencies, operating in non-air conditioned and dusty environments, subjecting the machine to typical fluctuations in line voltages and power outages. User-acceptance was tested by enlisting the participation of rural and semi-urban people to carry out test transactions.”

    As for thieves getting their hands on the cash before the poor, Vortex maintains the machines will not become the victim of thieves: each machine will only carry a fifth of the money of city-dwelling bank machines.

    Elsewhere in the South, a South African research and analysis company BMI-TechKnowledge (http://www.bmi-t.co.za/) in its latest report identifies a boom in banking services across Africa. In particular, South Africa, Botswana, Namibia, Angola, Mauritius, Tanzania, Kenya, Ghana, Nigeria, Egypt and Morocco – all have seen surges in profit and services as a result of improving banking regulations and political conditions. Maybe future markets for the Gramateller to reach Africa’s poor lie ahead?

    Published: August 2008

    Resources

    • Unleashing India’s Innovation: Toward Sustainable and Inclusive Growth, a report by the World Bank.
      Website: web.worldbank.org
    • xigi.net (pronounced ‘ziggy’ as in zeitgeist) is a space for making connections and gathering intelligence within the capital market that invests in good. It’s a social network, tool provider, and online platform for tracking the nature and amount of investment activity in this emerging market also referred to as blended value investing. xigi’s goal is to help this international emerging market to grow through market formation activities that guide and educate a growing wave of new money, while connecting it to the emergent entrepreneurs and deals on the internet.
      Website: http://www.xigi.net/
    • The new report Global Savings, Assets and Financial Inclusion by the Citi Foundation is packed with innovative approaches that are allowing the BoP (bottom of the pyramid) to use their income to build assets and more sustainable livelihoods.
      Website: http://www.newamerica.net
    • NextBillion.net: Hosted by the World Resources Institute, it identifies sustainable business models that address the needs of the world’s poorest citizens.
      Websites: http://www.nextbillion.net/ and World Resources Insitute

    Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator. 

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