Entrepreneurship in Africa

6 August 2011 at 10:01 am 7 comments

| Dick Langlois |

Inspired by Peter Lewin’s recent post on the beauty of Africa, I decided to hop on a plane to Peter’s native South Africa. I haven’t been to a wildlife park, though I have found myself twice down in caves, one containing fossils and one a disused gold mine. I also took in the Apartheid Museum, which seemed to me (as an outsider) to be extremely well done. It didn’t pull any punches but always appeared neutral, even analytical. For me, the museum’s story underscored the point that Walter Williams and others always used to argue while apartheid was going on: that the system required, and was implemented through, central planning and massive government intervention in markets. (Apparently they even had a wacky scheme to move people from their distant segregated homes to and from urban work using high-speed bullet trains.) I was struck by how similar the revolution here was to the contemporaneous one in Eastern Europe. It was a revolt by a middle class that was denied human and political rights — and also economic opportunity — by an increasingly inefficient and distortive state apparatus.

A couple of exhibits at the Apartheid Museum asserted that in the heyday of gold mining the British had “fixed the price of gold.” This price fixing forced the mine owners constantly to lower production costs, which they did by deskilling mining operations – using technology to break the process into simpler tasks (Ames and Rosenberg 1965) — in order to hire cheaper labor. By contrast, the mining museum suggested that there was plenty of skill-enhancing innovation as well, like pneumatic drills replacing the hammer and chisel, which reduced from eight hours to five minutes the time it took a worker to carve out a blasting hole.

Oddly, neither museum mentioned that gold was the monetary standard. (You know this already: it’s not that the “price of gold” was fixed; it’s that the value of the currency was defined in terms of units of gold.) This might sound like an economist’s carping. But I mention it because on this trip I also encountered the strange combination of task design and monetary economics in a strikingly different African context. I’m actually in south Africa not primarily for the tourism (at least in principle) but to visit Giampaolo Garzarelli and his Institutions and Political Economy Group at the University of the Witwatersrand and, as Peter Klein mentioned in an earlier post, to attend a conference on “Open Source, Innovation, and New Organizational Forms,” which took place on Monday. Joel West, another of the participants, has already blogged elsewhere about the conference. One paper, by an MA student from Kenya – Joel has already blogged about this as well – discussed an amazing phenomenon I had never heard about before: crowdsourcing in developing countries using mobile phones. A company called txteagle allows customers to outsource cognitive work by breaking tasks into small pieces, which pieces are then sent to participants via text message. (As phones have become cheaper they have become ubiquitous in the developing world.) For example, the participant could be asked to translate a phrase into his or her local language or to transcribe a voice snippet. The txteagle computers then aggregate the output and use redundancy and artificial intelligence to validate the results. The participant is paid for the task, via the same mobile phone, using M-Pesa, a system I first heard about only a couple of weeks ago. Interestingly, M-Pesa is itself a formalization of a spontaneous monetary system – think cigarettes at a prison camp – in which people without access to banks would save and transact in airtime minutes. The amount a participant can earn in this system is quite meaningful in the context of poor countries with high unemployment.

Entry filed under: - Langlois -, Business/Economic History, Conferences, Entrepreneurship, Innovation, Institutions, Public Policy / Political Economy. Tags: .

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7 Comments Add your own

  • 1. Peter Lewin  |  6 August 2011 at 12:17 pm

    Wonderful Dick. Glad to be such an inspiration :-).

    Cell phones in Africa have been a significant constraint buster. Definitely deserves more attention.

    I agree the Apartheid museum is very well done. Never been down a mine – that’s for tourists.

    Those interested in a quick history and analysis of Apartheid might find the this interesting:

    http://www.utdallas.edu/~plewin/Hutt.pdf

  • [...] Entrepreneurship in Africa [...]

  • 3. Dick Langlois  |  7 August 2011 at 3:02 am

    Thanks, Peter. Great article, I wasn’t familiar with Hutt’s work — or yours — on this topic.

  • [...] Full article [...]

  • 5. Jessica Elaine Smith  |  9 August 2011 at 8:49 am

    Interesting article, I hadn’t heard of txteagle. There are so many uses for the cellphone, i.e. distributing price info to rural remote farmers. Safaricom has even collected relief funding from Kenyans for the current famine situation. When this technology is coupled with improvements in infrastructure the results will be amazing.

  • 6. Michael Marotta  |  13 August 2011 at 8:06 am

    M-Pesa … in airtime minutes.

    As Hayek said, there are more forms of money than the Chicago Monetists know about. At numismatic conventions I have placed educational exhibits about phone cards, pre-pay gift cards, community currency, and coal mine tokens.

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