Saturday, 31 October 2015

A guide to business economics in the Great Lakes region

Here is a guide to business economics in the Great Lakes region, in the form of an index for my blog in 2015.  It is arranged by topic and divided into blog entries ordered by the date they were posted.  If you would like to see it in a different language, please visit Google Translate and type http://greatlakeseconomics.blogspot.co.uk in the translation box.

A guide to business economics in the Great Lakes region
Agriculture  
  1. Rwanda to be a non-agricultural society within six years? Hmmm.
Banking
  1. Retailers, consumers, and bankers talk about Burundi's unrest
  2. Are banks financing Burundi's innovative companies?
  3. What type of companies do banks fund in Burundi?
Bureaucracy  
  1. Is it profitable for businesses to avoid DRC bureaucracy?
Burundi  
  1. A market burns and information does too
  2. Restoring some of the benefits of Bujumbura's market
  3. The Burundian ruling party's position on the economy is...
  4. Economy discussions on the websites of the Rwandan and DRC ruling parties
  5. 750 days since the fire at Central Market of Bujumbura...
  6. The prominence of women in Burundian and Rwandan business
  7. Burundi is speaking a different language to the East African Community
  8. Government moves closer to business in Burundi, at least geographically
  9. Small companies in Burundi are not small large companies
  10. Shortages of publicly available goods affect smaller companies worse in Burundi
  11. Burundian government disapproval of telephony suppliers 
  12. Competition and changes in prices and sales in Burundi 
  13. How the Burundian economy is being damaged by the clashes 
  14. Retailers, consumers, and bankers talk about Burundi's unrest 
  15. Does gender equality offer any advantages to Burundi's companies? 
  16. Education and innovation in Burundi 
  17. An account of the economic consequences of the Burundian disturbances
  18. Major fire in a central Burundian market 
  19. Business policy in Burundi after the unrest
  20. Helping the Burundian hotel and restaurant sectors to recover 
  21. Helping the Burundian hotel and restaurant sectors to recover - a clarification 
  22. Are banks financing Burundi's innovative companies?
  23. What type of companies do banks fund in Burundi? 
  24. Capacity utilisation shows little relation to growth in Burundian companies 
  25. Supermarket fire in Burundi, insurance, and opportunities for suppliers of fire prevention equipment 
  26. Business policy in the third term of the Burundian government
  27. Exciting technological projects in Burundi and Rwanda
  28. Burundian manufacturing undercuts international prices
Communications  
  1. Great Lakes companies with high speed broadband employ it intensively
  2. E-mail: connecting DRC businesses nationally or internationally?
Conflict  
  1. I'm back, and the DRC's quieter in the East
  2. How much is peace worth?
    How the Burundian economy is being damaged by the clashes
    An account of the economic consequences of the Burundian disturbances
Corruption  
  1. Reported corruption experienced by Great Lakes companies
Counterfeits  
  1. Counterfeiting, a sword with many edges
Crime  
  1. Do foreign owners have a more difficult time in Rwanda than local owners?
Data on business  
  1. New survey of companies in Burundi
  2. A full, publicly available Rwandan business census

Development  
  1. Economic values and the value of lives
DRC  
  1. I'm back, and the DRC's quieter in the East
  2. Made in Congo, if that's best
  3. Leaving the DRC tidy when you go 
  4. Economy discussions on the websites of the Rwandan and DRC ruling parties 
  5. Splitting revenue to keep the DRC stable
  6. Ways and outcomes of splitting the DRC's revenue
  7. Entrepreneurial opportunities in the DRC depend heavily on the subregion 
  8. East versus West: which port gets Congolese exports? 
  9. Difficulties at the DRC port of Matadi
  10. Rwando-Congolese border enforcement may alter trade patterns 
  11. Central power, and DRC revenue collection and allocation 
  12. Productivity per worker in the DRC varies hugely by company 
  13. Lobbying and independence of Congolese industry
  14. Motivations for the new international market being constructed in Kinshasa
  15. The Congolese state backs out of company ownership
  16. Product innovation rates across the DRC 
  17. Why do managers in the DRC choose their industry?
  18. North Kivu promotes its investment opportunities
  19. Strategic innovation is frequent in DRC companies 
  20. High rates of R&D in Congolese companies 
  21. Innovation advantages for subsidiaries compared with stand alone companies in DRC 
  22. Does being part of a group help start-up companies in DRC? 
  23. Tourism development in the Virunga National Park
  24. Sales growth in DRC companies
  25. Obstacles for DRC companies, split by the firm growth rate
  26. Does innovation increase sales growth in DRC companies?
  27. E-mail: connecting DRC businesses nationally or internationally?
  28. What is the typical highly innovative company in the DRC?
  29. Restrictions on working wives damage DRC businesses
  30. Is it profitable for businesses to avoid DRC bureaucracy?
  31. Legal constraints on women's economic involvement in the DRC
  32. Interruptions in water supply hinder chemical innovation in the DRC
  33. DRC growth rates by industry
  34. A train is delayed somewhere in the DRC. Should an industrial economist be annoyed?
  35. Inflationary ripples in the DRC
East African Community (EAC)  
  1. Burundi is speaking a different language to the East African Community
  2. Budget reduction at the East African Community
Education
  1. Education and innovation in Burundi
  2. Workforce education in Rwandan companies

Employment  
  1. Rwanda NGO jobs have high pay, but the private sector offers long term prospects
Exports
  1. East versus West: which port gets Congolese exports?
  2. Do foreign owners help Rwanda export?

Finance  
  1. Are banks financing Burundi's innovative companies?
  2. What type of companies do banks fund in Burundi?

Foreign investment
  1. The Rwandan government works hard for further investment
  2. Do foreign owners help Rwanda export?
  3. Do foreign owners have a more difficult time in Rwanda than local owners?

Government policy
  1. Leaving the DRC tidy when you go
  2. The Burundian ruling party's position on the economy is...
  3. Economy discussions on the websites of the Rwandan and DRC ruling parties
  4. Splitting revenue to keep the DRC stable
  5. Ways and outcomes of splitting the DRC's revenue
  6. Government moves closer to business in Burundi, at least geographically
  7. The Rwandan government works hard for further investment
  8. Lobbying and independence of Congolese industry
  9. The Congolese state backs out of company ownership 
  10. Budget reduction at the East African Community 
  11. Rwandan competitiveness recognised in global business indices; Burundi and DRC lag behind 
  12. Business policy in Burundi after the unrest 
  13. Business policy in the third term of the Burundian government 
  14. Political economy in the Great Lakes region
Growth
  1. Competition and changes in prices and sales in Burundi
  2. Sales growth in DRC companies
  3. Obstacles for DRC companies, split by the firm growth rate
  4. Does innovation increase sales growth in DRC companies?
  5. The growth rate of Rwandan manufacturing companies - a puzzle
  6. Capacity utilisation shows little relation to growth in Burundian companies
  7. DRC growth rates by industry

Health  
  1. Illness and its impact on Rwandan companies
  2. Do Rwandan companies led by women have stronger health promotion among their employees?

Industry  
  1. Rwanda to be a non-agricultural society within six years? Hmmm.
  2. Burundian government disapproval of telephony suppliers
  3. Lobbying and independence of Congolese industry
  4. Why do managers in the DRC choose their industry?
  5. Tourism development in the Virunga National Park
  6. Helping the Burundian hotel and restaurant sectors to recover
  7. Helping the Burundian hotel and restaurant sectors to recover - a clarification
  8. Computer assembly in Rwanda
  9. Interruptions in water supply hinder chemical innovation in the DRC
  10. DRC growth rates by industry

Inflation
  1. A train is delayed somewhere in the DRC. Should an industrial economist be annoyed?
  2. Inflationary ripples in the DRC

Infrastructure  
  1. Shortages of publicly available goods affect smaller companies worse in Burundi
  2. Burundian government disapproval of telephony suppliers
  3. Interruptions in water supply hinder chemical innovation in the DRC

Innovation
  1. Product innovation rates across the DRC
  2. Strategic innovation is frequent in DRC companies 
  3. High rates of R&D in Congolese companies
  4. Education and innovation in Burundi 
  5. Does innovation increase sales growth in DRC companies? 
  6. What is the typical highly innovative company in the DRC? 
  7. Interruptions in water supply hinder chemical innovation in the DRC 
  8. What reforms of business practices accompany innovations in Rwandan companies? 
  9. Does radical innovation require extra reforms of business practices in Rwanda?
Insurance  
  1. Supermarket fire in Burundi, insurance, and opportunities for suppliers of fire prevention equipment
Manufacturing  
  1. The growth rate of Rwandan manufacturing companies - a puzzle
  2. Burundian manufacturing undercuts international prices

Markets  
  1. A market burns and information does too
  2. Restoring some of the benefits of Bujumbura's market
  3. 750 days since the fire at Central Market of Bujumbura...
  4. Competition and changes in prices and sales in Burundi
  5. Motivations for the new international market being constructed in Kinshasa
  6. Retailers, consumers, and bankers talk about Burundi's unrest
  7. Major fire in a central Burundian market

Obstacles
  1. A problem, a money making opportunity
  2. What doesn't worry Rwandan companies
  3. Entrepreneurial opportunities in the DRC depend heavily on the subregion
  4. Obstacles for DRC companies, split by the firm growth rate
  5. Legal constraints on women's economic involvement in the DRC

Productivity
  1. Productivity per worker in the DRC varies hugely by company
Profits
  1. Is it profitable for businesses to avoid DRC bureaucracy?
Regions
  1. Splitting revenue to keep the DRC stable
  2. Ways and outcomes of splitting the DRC's revenue
  3. Entrepreneurial opportunities in the DRC depend heavily on the subregion
  4. Government moves closer to business in Burundi, at least geographically
  5. Central power, and DRC revenue collection and allocation
  6. Product innovation rates across the DRC
  7. North Kivu promotes its investment opportunities
  8. Tourism development in the Virunga National Park

Rwanda
  1. Counterfeiting, a sword with many edges
  2. What doesn't worry Rwandan companies
  3. Economy discussions on the websites of the Rwandan and DRC ruling parties
  4. Rwanda to be a non-agricultural society within six years? Hmmm.
  5. The prominence of women in Burundian and Rwandan business
  6. Rwando-Congolese border enforcement may alter trade patterns
  7. The potential and limitations of "Made in Rwanda"
  8. The Rwandan government works hard for further investment
  9. Rwanda's new draft law on 100% salary during maternity leave
  10. Rwanda NGO jobs have high pay, but the private sector offers long term prospects
  11. A full, publicly available Rwandan business census
  12. Do foreign owners help Rwanda export?
  13. Illness and its impact on Rwandan companies
  14. Do foreign owners have a more difficult time in Rwanda than local owners?
  15. UK arrest of a Rwandan official
  16. Rwandan competitiveness recognised in global business indices; Burundi and DRC lag behind
  17. The growth rate of Rwandan manufacturing companies - a puzzle
  18. Do Rwandan companies led by women have stronger health promotion among their employees?
  19. Workforce education in Rwandan companies
  20. Computer assembly in Rwanda
  21. What reforms of business practices accompany innovations in Rwandan companies?
  22. Does radical innovation require extra reforms of business practices in Rwanda?
  23. Exciting technological projects in Burundi and Rwanda
Size of companies
  1. Small companies in Burundi are not small large companies
  2. Shortages of publicly available goods affect smaller companies worse in Burundi
  3. The characteristics of medium sized companies in the Great Lakes region
  4. More on the differences between small, medium, and large companies in the Great Lakes

Start-up companies
  1. Does being part of a group help start-up companies in DRC?
Subsidiaries  
  1. Innovation advantages for subsidiaries compared with stand alone companies in DRC
  2. Does being part of a group help start-up companies in DRC?
Tax
  1. Splitting revenue to keep the DRC stable
  2. Ways and outcomes of splitting the DRC's revenue
  3. Helping the Burundian hotel and restaurant sectors to recover
  4. Helping the Burundian hotel and restaurant sectors to recover - a clarification
  5. Political economy in the Great Lakes region
Technology
  1. Great Lakes companies with high speed broadband employ it intensively
  2. The UN's Technology Facilitation Mechanism 
  3. Exciting technological projects in Burundi and Rwanda
Trade
  1. Made in Congo, if that's best
  2. Difficulties at the DRC port of Matadi
  3. Rwando-Congolese border enforcement may alter trade patterns
  4. The potential and limitations of "Made in Rwanda"

Women
  1. The prominence of women in Burundian and Rwandan business
  2. Rwanda's new draft law on 100% salary during maternity leave
  3. Does gender equality offer any advantages to Burundi's companies?
  4. Do Rwandan companies led by women have stronger health promotion among their employees?
  5. Restrictions on working wives damage DRC businesses
  6. Legal constraints on women's economic involvement in the DRC

I'm taking a break from blogging, and will probably be writing about the Great Lakes region and its dynamic economy in academic papers.

Tuesday, 27 October 2015

Burundian manufacturing undercuts international prices

There's an detailed report of a small manufacturer in Burundi here and in English here.  The report talks to the company's founder, a buyer, and an investment adviser.

The company says that sells its products (sticks of chalk for schools) more cheaply than Chinese or Kenyan imports.  It buys the raw material from these countries, and adds value in the preparation of the end product.  As other developing countries become richer and specialise in production of higher value goods, their manufacturing of lower value goods is likely to become less competitive in the Great Lakes region (as their wage bill rises, for example), opening the door for local producers to move into production.

Thursday, 22 October 2015

Political economy in the Great Lakes region

Burundi, the DRC, and Rwanda all have long-serving presidents, and much political debate in the countries relates to their hold on power and their struggles to retain their positions.  Conventional economic debates on taxation and spending attract relatively less attention than in Western countries.  The pressure put on the free media limits critical comparison of economic policies across different political parties.

One frequent argument in conventional political economy is over the level of taxation in the economy.  The maximum rates of personal income taxation in each Great Lakes country are reported here (I haven't independently verified them).  They are 35 percent in Burundi, 30 percent in the DRC, and 30 in Rwanda.  The maximum rates of corporation tax are 35 percent in Burundi, 40 percent in the DRC, and 30 percent in Rwanda.

The taxation rates are not so different across the region.  Rwanda has the lowest maximum taxation, with Burundi and the DRC having higher maximum rates.  None are extreme by international standards.  There's a debate to be had about the optimal rates of taxation, in a discussion of conventional political economy.

Monday, 19 October 2015

Inflationary ripples in the DRC

There's been another burst of inflation in the DRC, in the north western village of Zongo, opposite the Central African Republic's capital of Bangui.  I wrote about inflationary hikes in the country in my last blog post.

Inflation is a rise in prices, often persistent.  In Western countries, two frequent causes of major inflation are government operations to change the money supply, and changes in the price of natural commodities. Both of those also happen in the DRC, but the causes of the recent bursts in the country relate to the arrival of refugees from conflict in the CAR (who want to buy the same goods as the Congolese), and interruptions in transport (reducing the amount of goods to buy).  A feature of these DRC-specific causes is not present in the causes in most Western countries (at least not totally present - government buying and selling of their own bonds is a bit similar).  The feature is that they tend to end fully by themselves.  Transport starts working again, refugees go home.  So an inflationary "ripple" occurs, with a rise above trend, then a fall below trend, then restoration to the trend.

I don't know whether anyone has analysed inflationary ripples, but there is probably a lot of work that could be done there.

Friday, 16 October 2015

A train is delayed somewhere in the DRC. Should an industrial economist be annoyed?

There was a decline in the price of cement from US$35 to US$26 last weekend in Kamina in the south of the DRC.  According to the Fédération des Enterprises du Congo, the cause was the arrival of a train carrying goods.  Transport arrivals, delays, and breakdowns can cause major shifts in prices in the country.

There are a number of ways to think about the issue from a business perspective.  The sudden, large changes in prices make it more difficult for companies to plan, and increase risk.  There are also implications for an efficient allocation of goods.  When the central supplier first puts goods on a train, they don't know for sure what the prices will be when the goods are sold.  There probably won't be a stable price over time.  The distribution of goods across the DRC's territory is unlikely to be the best possible, from the point of view of maximising profits.

Industrial economists - who study markets that don't work perfectly - should be annoyed if the loss of profits for all companies combined is more than the cost of putting on more frequent trains (or mending roads).  This might be the case if there is a problem with financing railways and roads, for example, or lack of information on company preferences.

Tuesday, 13 October 2015

Exciting technological projects in Burundi and Rwanda

A couple of major technological projects in Burundi and Rwanda caught my attention earlier this week.

In Burundi, a solar energy plant is to be constructed in Mubuga.  Lack of electricity supply is a leading hindrance to business in the country, so the project could help companies nationally, as well as creating jobs around the plant itself.  It looks like an enjoyable project to work for.

In Rwanda, there are plans to set up (reportedly) "the world's first drone airport".  The airport is to be used for transporting medicines and electronic parts around the wider region.  Again, it looks like a pleasant job, with plenty of mental challenges relating to construction and logistics.

Friday, 9 October 2015

Wednesday, 7 October 2015

DRC growth rates by industry

Africa is growing rapidly and presents opportunities for profitable investments, if risky ones.  The opportunities vary by industrial sector.  Here are DRC industries ranked by the average growth of the companies in them over the period 2009-2012.  Non-metallic mineral products was the fastest growing industry, and fabricated metallic mineral products was the slowest growing.

Data: http://www.enterprisesurveys.org/

I am not entirely confident that the reported returns accurately reflect economic performance (since there is some disagreement with macroeconomic growth figures), so the ranks are given rather than the actual values.

Saturday, 3 October 2015

The UN's Technology Facilitation Mechanism

The United Nations has just launched a project to promote technological development in developing countries.  The full name is the Technology Facilitation Mechanism for Achieving Sustainable Development Goals.  The details haven't been given yet, but I guess that the mechanism will try to set up conditions that help the adoption of existing technology, and innovation of new technology.

Wednesday, 30 September 2015

Does radical innovation require extra reforms of business practices in Rwanda?

Rwandan companies often produce innovations that are new to the company (but which are already present in the market), and less often but still frequently produce innovations that are also new to the market.  Business practices can adjust at the same time (for example, to make production processes more compatible), and the changes may differ between two types of innovation.

The table below shows the rates of business practice reform in Rwandan businesses that introduced innovations new to the company over years 2009-2011.  The rate of practice reform is high, averaging over 80 percent.
Data: http://www.enterprisesurveys.org/

The next table shows the rate of practice reform in companies introducing innovations new to the market.  The rate is even higher than in companies with less radical innovations, approaching 90 percent.  The practice reform requirements seem to be more extensive with more radical innovations.

Monday, 28 September 2015

What reforms of business practices accompany innovations in Rwandan companies?

New product innovations can also require reforms of business practices in order for them to work well.  It may give larger companies advantages over small companies, because the larger companies may have the resources to implement the reforms in a way consistent with recommendations for best managerial practice - for example, big companies can hire expensively trained executives.  A similar argument applies for companies in developed countries having an advantage over those in developing countries.

In Rwanda, business practice reform usually accompanies innovations in products and services.  The table shows that in more than three quarters of cases of companies undertaking innovation in the last three years, there is simultaneous introduction of new manufacturing methods, logistical processes, organisational structures, and marketing methods.

Data: http://www.enterprisesurveys.org/

However, these statistics don't tell the whole story.  It may be that companies are introducing business practice reforms independently of whether they are innovating in products and services.  The next table shows that companies often introduce business practice reforms even if they are not innovating, but the rate of reform is lower.


The biggest gap in the rates for innovating and non-innovating companies are for manufacturing methods, followed by new logistical processes.  In other words, Rwandan companies are more likely to change their manufacturing methods and logistical processes if they are innovating, but there is less of a change in their organisation and marketing.  I don't know whether new organisation and marketing methods are not needed for the innovations, or whether the skills to implement the new methods are not there.

Wednesday, 23 September 2015

Supermarket fire in Burundi, insurance, and opportunities for suppliers of fire prevention equipment

On Monday, fire destroyed a supermarket in Bujumbura.  While not on the same scale as the fire last month in Gitega or the catastrophic fire at Burundi's central market a couple of years ago, it does point to a tendency for fires to destroy centres of trade in Burundi.  The fire service does not seem to be able to respond, so surely there are opportunities for suppliers of fire prevention equipment.

My rough calculations of the available profits would be something like this:

Suppose there is a market valued at US$1 million, and it has a 10% chance of being destroyed by fire in any one year.  An insurer sells an annual policy, and would charge for the expected cost of damage (equal to US$1m*10%=US$0.1m) plus a risk cost.  The risk is pretty big and uncertain (10% chance of $1m), so the insurer has to provide a lot of capital to protect against the chance of loss.  They have to put up the full $1m for a year, and would want to earn a good return on it - say 30%.  So the risk cost will be US$1m*30%=US$0.3m.  The total premium would be $US0.1m+$US0.3m=$US0.4m.

Suppose instead that the risk of destruction was much smaller and the amount of damage much more certain (it is expected to be 3%, and never more than 20% of the market's value).  The expected cost would be lower (US$1m*3%=$0.03m).  The insurer would have to put up US$1m*20%=$0.2m to cover the risk, and would charge US$0.2m*30%=US$0.06m.  The cost of insurance would be US$0.03m+US$0.06m=US$0.09m.

The gap between the two insurance prices is $US0.4m-US$0.09m=US$0.31m.  That's a third of a million dollars for sharing between the market owners and the suppliers of the fire prevention equipment.  Although insurance may not be widely used, the risk borne by traders is self-insurance with an equivalent value, so they would be likely to be willing to pay well for prevention equipment.

Monday, 21 September 2015

Interruptions in water supply hinder chemical innovation in the DRC

Chemical production uses water; it would be impossible for a chemical industry to develop in its absence.  However, in the DRC many chemical companies face intermittent water supply.  Of DRC chemical manufacturers who use water in production (almost all of them) and surveyed in 2013, four out of ten had experienced insufficient water supply for production. The average frequency of shortages was 4.6 times each month.

Data: http://www.enterprisesurveys.org/

How severe is the problem for output from the industry?  If a company had no water shortages, then two thirds of the time they had introduced a new product in the previous three years.  If a company had experienced water shortages, then they introduced a new product less than a third of the time. 

It may be that innovative companies try harder to get reliable water supply.  But there is also a strong argument that if water supply is not reliable, the experimentation process required for innovation will be severely hindered.  Where experimentation does occur, companies with reliable supply are more likely to get to market first with the new product.

Friday, 18 September 2015

Capacity utilisation shows little relation to growth in Burundian companies

Here's a graph showing how much of their total capacity was utilised by Burundi's companies in the year 2013-2014.  Capacity utilization is the company's output as a percentage of the maximum possible output with their available staff, machinery, and factories.

Data: http://www.enterprisesurveys.org/

A quarter of companies were working at full capacity.  However, most weren't, and the average utilisation is 70 percent.

So what makes some Burundian companies use more of their capacity?  It could be sales growth - if a company is doing well, then the owners and managers could push the company hard to benefit from the strong performance.  But the data says otherwise.  The next graph shows the annual growth rates plotted against capacity utilisation for a selection of Burundian companies, with a best fit line included.

Data: http://www.enterprisesurveys.org/

There is very little relation between growth and utilisation.  It's a similar story for the relation between growth and hours worked per week.

Tuesday, 15 September 2015

What type of companies do banks fund in Burundi?

I wrote in the last blog post about how innovative companies get a larger share of their funding from banks, compared with non-innovative companies.  I tested for other features of Burundian companies that are associated with higher bank funding, using a correlation analysis (which is quick and subject to uncertainty).  The company characteristics that are loosely associated with bank funding are:
  • Size
  • Male owners
  • (Direct) exporting
  • Long inventories
  • Suffering theft and other crime
  • Paying for goods after delivery
  • Purchasing land and buildings
  • Spending lots of time dealing with government regulations
  • Experienced employees
Data: http://www.enterprisesurveys.org/

These are features that either suggest the company has assets and is creditworthy, is reputable, or is spending on things.  So it is reasonable to think that they would be connected with bank borrowing.  For the importance of male owners, there are studies elsewhere in the world that suggest that men can access credit networks more easily than women, so the same may be true in Burundi.

Saturday, 12 September 2015

Are banks financing Burundi's innovative companies?

Banks have various important roles in an economy, and one of them is lending to firms with good prospects.  A way of measuring whether a firm has good prospects is whether it is innovative.  Are banks in Burundi fulfilling their role of financing innovative companies?

Data: http://www.enterprisesurveys.org/

The graph shows the amount of working capital in Burundian companies financed by banks, for companies that introduced a new or significantly improved product over the period 2011-2014 (right side) and didn't (left side).  Innovative companies raised more of their funding from banks.  In both cases, bank finance accounted for the majority of companies' external funding requirements.

It might be that companies are not innovative because they couldn't get bank finance, rather than banks selecting innovative companies to fund.  However, the innovation is in the recent past, and financing is current, so it looks like banks are providing funds to more innovative companies.

Wednesday, 9 September 2015

Legal constraints on women's economic involvement in the DRC

My blog last week mentioned how business in the DRC is having some difficulties with hiring married women, because permission from the husband is required first.  I didn't know at the time whether women's rights to work are legally restricted there.

It transpires that their work rights are indeed restricted.  The World Bank report "Women, business and the Law" on page 108 describes the law in the DRC as it relates to married women operating in business.  The detailed questions are on page 47.  Married women have to get permission to get a job, sign a contract, register a business, open a bank account, and choose where they live.

These are severe constraints on married women engaging in the economy, and there is clear evidence from surveys that they damage the DRC's competitiveness.

Sunday, 6 September 2015

Is it profitable for businesses to avoid DRC bureaucracy?

Politics in the DRC are challenging at the moment, as the current president may be moving to a controversial bid for a third term in office (with similar situations in Burundi and Rwanda too).  Businesses would be prudent to avoid strong alignment with either side in the debate.  But is it a good idea for businesses to avoid DRC bureaucracy as much as possible?

Data: http://www.enterprisesurveys.org/

Here's a table showing the engagement of the best performing companies (growth champions, with annual growth above 20 percent in 2012-2013), compared with the engagement of other companies.  The first row shows the average number of tax inspections or meetings in the previous year. Growth champions had slightly fewer than other companies.  The second row shows the percentage of companies who applied for government contracts over the same period.  Growth champions applied less often, but again there's not a big gap.  The third row shows the percentage of annual sales paid in informal payments, which can been seen as a means of getting bureaucracy out of the way.  Growth champions pay a bit more.

Overall, growth champions seem to be a bit less engaged with DRC bureaucracy, but the differences are small.

Thursday, 3 September 2015

Computer assembly in Rwanda

The "East African" newspaper is reporting that a Rwandan factory is to start assembling laptop parts, and supplying the computers to local schools.  The article says that there is a shortage of laptops, citing problems with the quality of currently available models.  I suppose that computers of sufficient quality are too expensive in the market, and that the manufacturer is producing them more cheaply than available computers of an adequate standard.

It is exciting to read of a Rwandan factory able to compete on the international market, even if only in a niche market linked to the "One Laptop Per Child" program.  The foreign owners of the factory say that they intend further expansion in the region, exploiting economies of scale.  A welcome longer term outcome would be international sales in mass-market computers.

Monday, 31 August 2015

Restrictions on working wives damage DRC businesses

Many countries have only recently given women the right to work without their husband's permission, and others have not given them the right yet.  I am not sure of the legal requirements in the DRC, but in practice a husband's approval is frequently required for their wife to work.  For data over the period 2011-2013, if a company hired married women, 37 percent of the time it had to get the permission from the husband to employ at least one of these women.  When it didn't hire any married women, 21 percent of the time the company said that it didn't do so because written permission of the husband was required.

It would be surprising if a husband's permission is legally required in the DRC.  It is an extra cost on business, and is preventing them hiring the employees they want.  It is a further employment restriction on women when they already face restrictions linked to violence.  The population, like many political leaders, is young and presumably has been exposed since childhood to ideas of female equality before the law.

Friday, 28 August 2015

What is the typical highly innovative company in the DRC?

Innovation seems to be important to growth among DRC companies, but what does a highly innovative company in the DRC look like?  I ran a rough analysis looking at correlations of innovation* with different features of companies using data from 2013.  The typical highly innovative company looks like this:

Origin and size of the firm
  • It was formally registered when it began operations
  • It is part of large firm
  • It has more employees

Finance
  • It has a bank account
  • It has an overdraft facility

Composition of the workforce
  • It has a greater percentage of production employees (rather than non-production ones)

Training
  • It has a formal training program

Employment practices
  • It recently hired a married woman
  • It didn't hire another married woman because of her family commitments

*in a wide sense: products or methods, from abroad or domestic, preparation or output.  Innovation was measured as an index from zero to ten.

Tuesday, 25 August 2015

E-mail: connecting DRC businesses nationally or internationally?

E-mail is an advantage for business people in the DRC, as it allows them to connect with international suppliers and clients.  It is also an advantage for doing business within the DRC, as it allows communications to regions where it is difficult or dangerous to visit.  Which advantage is stronger?

Table: Level and ease of business transactions across the DRC, for companies who don't use and do use e-mails.
Data: http://www.enterprisesurveys.org/

The first row of the table shows the average percentage of supplies that come from domestic sources, for companies that use e-mail and those that don't.  E-mail users have far fewer supplies from domestic sources than email non-users.  The second row shows the percentage of goods that are transported to consumers by river (which can take goods to less accessible parts of the DRC).  E-mail users transport fewer goods by river than e-mail non-users.  The third row shows the percentage of female ownership of companies.  Both men and women are subject to high levels of sexual and non-sexual violence in the East of the country, but women outside of the region might be more adverse to travelling there if the level is higher for them or if they are more aware of it.  Female ownership is lower among e-mail users than e-mail non-users.

There is a lot missing from this analysis, but on the surface of it, e-mail use seems to be more of a solution to problems with international business rather than domestic business in the DRC.

Thursday, 20 August 2015

Helping the Burundian hotel and restaurant sectors to recover - a clarification

My last post discussed tax suspension for the hotel and restaurant sector in Burundi.  I should clarify one point on taxes at the moment.  Many Burundian companies will be losing money and may be entitled to carry these losses over to future years, to offset their tax liabilities when they return to profit.  Suspension of income tax can actually be costly to them.  It is the same reason why income tax breaks for new companies can be disadvantageous to them.

Burundian companies would be more likely to benefit from suspension of taxes that are always positive in every year, like taxes on property ownership, particularly if they are very complicated to administer relative to the size of revenue collected.  They would also benefit from simplification of tax administration.  The idea is to reduce the amount of company expenses at a time when there is little income coming in to them.

Better still would be restoration of peace and hence demand.

Wednesday, 19 August 2015

Helping the Burundian hotel and restaurant sectors to recover

The current unrest in Burundi has badly affected the hotel and night-life industries (here and here in French, and here and here in English).  What can be done to help them?  A survey from last year found that 41 percent of hotels and restaurants thought that tax rates were the biggest obstacle to their operation.  Although reducing tax rates may seem to be an attractive way of protecting struggling businesses, profits are likely to be low and so companies will not pay much income tax anyway.  However, a further 18 percent of hotels and restaurants thought that tax administration was their biggest problem.  A temporary suspension of the more administratively burdensome tax regulations may help companies to remain in operation at this difficult time.

Saturday, 15 August 2015

Workforce education in Rwandan companies

The education level of workforces is a concern of business globally, and a constraint on the performance of companies and countries.  The graph below shows the extent to which Rwandan companies have problems with an inadequately educated workforce.  Half of companies say that they have no or only a minor problem.  However, the other half say that there is a moderate, major, or very severe problem.

Data: http://www.enterprisesurveys.org/

Things are a bit better for service sector companies, as shown in the next graph.  54 percent of companies have no or minor problems:


For industrial companies, workforce education is more of a challenge.  55 percent of companies have moderate or worse problems:


Thursday, 13 August 2015

Do Rwandan companies led by women have stronger health promotion among their employees?

There is a hypothesis about how companies are affected by their senior management, called upper echelons theory.  The idea is roughly that senior management make many of the important decisions in a company, and their decisions are influenced by their personal characteristics.

The theory has been applied to the role of women in senior management.  Some arguments are gender neutral - for example, if people are more familiar with their own gender and so tend to prefer it in business transactions, then women may be disadvantaged when men are in a majority, as they usually are.  If women were in a persistent majority, then men may instead find themselves excluded.  Other arguments are not gender neutral, but assert that there are essential differences in the management styles of men and women.  One claim is that women are more caring and supportive of their staff.

If women have a more caring attitude, then it may be apparent in the amount of health messages provided to their staff.  The table shows how frequently companies provide HIV prevention messages to their staff, split by the gender of the main manager.  The data is from Rwanda in 2010.

Percentage of companies with HIV prevention messages

 Companies headed by women provided fewer HIV prevention messages to their staff.  The figures are perhaps not comparable, as women are more likely to lead smaller companies which may not have many resources or need for such messages.  The next table shows the message provision, divided by company size.  For small and medium sized companies, male leadership was associated with more HIV prevention messages.  For large companies, there were more messages under female leadership.  However, the number of large companies led by women is so small that the results are determined by messages from a single company.

Percentage of companies with HIV prevention messages, by company size

Overall, it doesn't seem that female leadership was associated with more HIV prevention messages, at least in Rwanda (which may be anomalous, as it has very high gender equality).

Friday, 7 August 2015

Business policy in Burundi after the unrest

The unrest in Burundi is dominating economic as well as political life in the country.  When the country exits from the unrest there are many fiscal and regulatory policies that would benefit business and help the economy to grow.  In a survey published last year, businesses reported on the challenges that they face when dealing with government.  They described how serious they found each type of challenge, as shown in the table below.  The percentages are the proportion of companies who find the challenge severe, fairly severe, and so on.  Companies seem to be most concerned about the tax rates, followed by corruption.  Policies to address these matters would assist businesses.  Business licensing and permits are a lesser concern.


Major fire in a central Burundian market

There's been a major fire at a food market in the Burundian city of Gitega, according to a report in French here and in English here.  The livelihoods of traders seem to have been badly affected.  Hopefully, the authorities or residents will quickly redevelop it, with internal or external assistance as necessary.  The delays on the redevelopment of Burundi's central market will hopefully not be repeated.

Monday, 3 August 2015

Unrest in Burundi

The unrest in Burundi looks threatening.  An army general, generally described as being at or near to the top of the security apparatus, was assassinated on August 2nd in the capital city.  Reportedly, the perpetrators were wearing military uniform, and the army has retaliated against its own members (here in French, with a disturbing picture).  Alarmingly, the civil society seems to be a particular target, with a journalist severely beaten and a leading human rights activist shot in the head earlier this evening.  The journalist and activist are both internationally recognised and described as distinguished, so reputation seems to have a limited protective effect.

Friday, 31 July 2015

The growth rate of Rwandan manufacturing companies - a puzzle

This post was going to be about balance in the industrial structure of the Rwandan economy, but my results have produced something that I can't explain, probably partially due to my error.  But I think there might be something going else on too, beyond any of my mistakes.

Data: http://www.enterprisesurveys.org/

The graph shows the growth rates of Rwandan manufacturing companies over the period 2009-2011, when the companies were operating at the start and end dates and didn't grow faster than 100% per year.  The average rate of annual growth is -11.6 percent, which I am finding difficult to believe.  I have subtracted the average inflation rate (11.4%) from the data, but perhaps the data is already adjusted for inflation and it should be added back.  But the average Rwandan manufacturer that survived the period would then still have had a negative growth rate.  The Rwandan economy was growing rapidly during the period, hence my continued confusion.

The results could be explained by very rapid growth in very few companies, or by new companies creating a lot of value.  These explanations may work, but still...

Here's the Stata code:
use "C:\Rwanda-2011-full data-999.dta", clear  //From http://www.enterprisesurveys.org/
gen annual_sales_perc_growth=100*((d2/n3)^(1/3)-1) if d2>=0&n3>=0
replace annual_sales_perc_growth=annual_sales_perc_growth-11.4
gen manuf_sector=(a4a==1) if annual_sales_perc_growth<=100
hist annual_sales_perc_growth if manuf_sector==1, percent xtitle("Annual percentage growth rate, 2009-2011") ytitle("Percentage of companies")
mean annual_sales_perc_growth if manuf_sector==1

//More carefully, using the survey structure
svyset idstd [pweight=median_weights], strata(strata) singleunit(certainty)
replace manuf_sector=(a4a==1&annual_sales_perc_growth&<=100&d2>=0&n3>=0)
svy, subpop(manuf_sector): mean annual_sales_perc_growth

Wednesday, 29 July 2015

Does innovation increase sales growth in DRC companies?

One way companies can increase their sales is through innovation.  The increase can come if companies improve their products while keeping the same price.  On the other hand, a company may innovate but fail to bring their product to market successfully, and rivals may capture the benefits.  In the Democratic Republic of Congo, does innovation increase sales growth?

Table 1 shows the average growth rate of sales for DRC companies, split by whether they introduced a product new to the company (data from http://www.enterprisesurveys.org/).  Both the average sales rate and new product introduction are over the period 2010-2012 inclusive, and only apply to companies that survived during the period.

Table 1: average growth rate of sales for DRC companies, split by new product introduction
No new products: 11.5%
New products: 34.1%

Companies that introduced new products grew much more quickly than those that didn't.  However, it might be that fast growing companies had more money and so could innovate, rather than innovation leading to faster growth.  Table 2 looks at companies that were using high speed broadband internet to research new products and services in 2010.

Table 2: average growth rate of sales for DRC companies, split by use of the internet for new product research in 2010
No internet research: 19.8%
Internet research: 29.5%

Companies that were doing internet research for new products and services in 2010 did better in the next few years.  The rate of growth over 2010-2012 is less likely to influence what happened in 2010, so there is clearer evidence for innovation leading to growth.

It might be argued that internet use brings other advantages unrelated to innovation (like the ability to make long-distance sales), and these other advantages may account for sales growth.  Table 3 looks at the performance of companies with the internet, and split by whether they did research with it or not:

Table 3: average growth rate of sales for DRC companies who had the internet in 2010, split by its use for new product research
Internet access and no internet research: 4.0%
Internet access and internet research: 29.5%

If a company had the internet but didn't use it for research, they had much lower sales growth.  Innovation seems to have been an important part of sales growth in the DRC over 2010-2012.

Saturday, 25 July 2015

Obstacles for DRC companies, split by the firm growth rate

In my last post, I wrote about how DRC companies can be divided by their rate of sales growth.  A majority of companies experienced declining sales, but a few had very rapid growth.  What makes these types of companies different?

The tables below show the main obstacles to operations reported by flat or declining companies (0% growth or less), marginal growers (more than 0% and up to 5% growth - a slightly different definition from my last post), growers (more than 5% and up to 20%), and growth champions (more than 20% growth).

My immediate impression is that the worst performing companies have the biggest problems with electricity supply.  It is possible that they are having problems just in running their productive operations, even before problems occur in the market.  For better performing companies, practices of informal competitors become a more prominent problem.  It seems that better energy supply will disproportionately help struggling companies.

Data: http://www.enterprisesurveys.org/

Wednesday, 22 July 2015

An account of the economic consequences of the Burundian disturbances

There's an account here of how the Burundian economy is being affected by the ongoing political unrest.  The description focuses on business in the capital Bujumbura, and on macroeconomic numbers.

It isn't pleasant to read.

Monday, 20 July 2015

Sales growth in DRC companies

The DRC economy has been growing at an annual rate of seven percent in the last few years, so a similar growth may be expected in the total sales of DRC companies.  For individual companies, the rate will vary substantially as they differ in their ability to capture part of the national growth.

The graph shows the distribution of annual growth rates for DRC companies who stayed in operation over the period 2009-2012.  I have used an inflation rate of 11.6 percent to adjust the annual growth rates, which was calculated from a World Bank source.  I have also omitted the few companies who say that their growth rate exceeded 200 percent.

Data: http://www.enterprisesurveys.org/

The companies can be split by their rate of annual growth:
  • 55 percent of companies had flat or declining growth.
  • 23 percent of companies had moderate growth rates of between zero and ten percent per year.
  • 6 percent of companies had good annual growth rates of between ten and 20 percent.
  • 16 percent of companies were growth champions, with an annual growth exceeding 20 percent.
Life has been tough for the majority of companies, but some companies have done very well from the DRC's national growth.  For companies as a whole, their sales rose by 12.7 percent.

Thursday, 16 July 2015

Rwandan competitiveness recognised in global business indices; Burundi and DRC lag behind

Rwanda has performed solidly on two recent indices measuring the business environment of countries around the world.  In the Foreign Policy magazine's "Baseline Profitability Index", the country was placed eighth globally out of 110 countries, in an index aiming to measure the ability to get profits from foreign investment in a country.  It comprises of three parts: generation of profits, erosion of profits, and repatriation of returns.  There is more discussion here.  The DRC was third from last, due to low scores on generation and erosion of profits.  As I mentioned in my last post, the security situation in the east of the country presents a severe challenge for running a profitable business there.  Burundi was not assessed.

The second index is the "Global Competitiveness Index" from the World Economic Forum, aiming to measure the productivity of a country.  Rwanda was in 62nd place out of 144 countries.  Arguably, the overall moderate placing is misleading, since for low income countries like Rwanda, the index consists of components like health and macroeconomic environment, while for richer countries the index consists of components like financial market development and innovation.  The indices for countries with very different incomes per person are therefore only partially comparable.  If we only look at the 37 low income countries with similar index components, Rwanda is top.  Burundi is in 32nd position.

It is worth treating any indices with a great deal of caution, and using them as rough guides, on average.  As well as the issues of index construction and comparison, the original data sources may not be honest or accurate, and the collectors may be biased or influence the outcomes in some way.

Thanks to the Rwandan New Times for pointing out these reports.

Tuesday, 14 July 2015

Tourism development in the Virunga National Park

There are plans to develop tourism in the Virunga National Park, in the East of the DRC.  One of the planners says that the Congolese tourism sector could equal that of Kenya.  Certainly, the region and lodging looks glorious, and the price of the accommodation is reasonable for high quality international tourism.  The climate is also suitable for visiting all year.

Evidently, the critical issue for many tourists will be security.  The UK government advises against all travel to Eastern DRC.  The DRC faces competition from the Volcanoes National Park in Rwanda, which is praised to the skies by tourists, and is far safer.

I think Virunga certainly could be a viable proposition, but the regional or park authorities would have to provide more security.  It is financially possible.  If a tourist is spending $5,000 on a three week trip, then dozens of security staff could be hired over the period, and the holiday would still generate a healthy profit for the company running the project, and tax for the government.  The area of the visit would be necessarily fairly circumscribed, perhaps a hundred square kilometre area near the Rwandan border.  The security would have to be established before the tourists came, of course, so risky investment would be required by investors or the government.  The administrators on the Rwandan side may be a good source of advice and expertise.

Friday, 10 July 2015

Update on the security situation in Burundi

I haven't written about the security situation in Burundi for a while.  There are reports today of heavy weaponry being used on the outskirts of Kibira forest, near the Rwandan border (French here, English here).  Since the failed coup in May there have been frequent grenade and gun attacks, although not full conflict, so today's news is another unwelcome stage in the unrest.

The government has a new website with more frequent updates and commentary, describing recent infrastructure projects among other things.  The projects would probably benefit the economy, but are dwindling in importance compared with the security situation.  The cost of recent civil conflict in the Great Lakes region has probably been hundreds of billions of US dollars, and outbreaks often result in tens of thousands to millions of deaths (here, here, here, here, here, here, and here).

Monday, 6 July 2015

Does being part of a group help start-up companies in DRC?

In my last post, I discussed the innovation advantages enjoyed by Congolese companies when they are part of a larger group.  Start-up companies may get an even larger advantage from group membership, since they are setting up their structures from new, and don't have much experience to use.

 
Data: http://www.enterprisesurveys.org/

The table shows rates of different innovation types for start-up companies, split by group membership.  There is again a large advantage for subsidiaries of larger groups.  Comparing with the table in my last post, it is apparent that start-up companies get more advantage from group membership than established companies in innovation in new production methods and organisational structures.  These results are broadly as expected.

Friday, 3 July 2015

Innovation advantages for subsidiaries compared with stand alone companies in DRC

If a company is a subsidiary of a larger group, then it may enjoy advantages over "stand alone" companies which are not part of groups.  Among other things, a larger group may offer its subsidiary access to increased finance or specialised management knowledge.  The extra resources may be especially felt when companies are innovating in products or practices, since innovation can be demanding.

The table shows the rates of innovation for DRC companies, for various types of innovation.  Innovation is assessed over the three year period running up to 2013.

Data: http://www.enterprisesurveys.org/

Being part of a larger group is associated with increases in all types of innovation.  For innovation of products new to the company, 14 percent more subsidiary companies innovated, compared with stand alone companies.  For new production methods, the gap was 22 percent.

I haven't controlled for size and other features of the companies, so it could just be that subsidiary companies are larger, for example, and therefore innovate more.  But something that is noticeable is the larger gap in innovation of internal company processes, and the smaller gap in product innovation.  To me, this says that stand alone companies could benefit from business advice on improving their internal processes, and that this advice is already available to subsidiaries.

Tuesday, 30 June 2015

Education and innovation in Burundi

Many forms of innovation require formal education.  In medical sciences, for example, innovation often comes from large teams of people with biology doctorates.  However, other forms of innovation may not require many highly educated staff, as it may not have much technological demand, or could be handled by a small team.

Here's a graph of the percentage of Burundian companies who have recently innovated in new products, plotted against the percentage of the workforce who completed high school:

Source for data: http://www.enterprisesurveys.org/

It doesn't look like there is a strong relation between widespread high school education in companies and innovation.  Perhaps university education might give a different result.