Sunday, 31 May 2015

Why do managers in the DRC choose their industry?

Why do business people in the DRC choose their industry?  The motivation of business people has long been a topic debated by economists.  People could go into an industrial sector because they think it is an exciting area to work in, or because they think it offers the best opportunities to make money.  What people think has policy implications - for example, if a government wants people to work in a certain industry, then reducing taxation or providing incentives in it will work best if people move around easily in pursuit of the highest revenue.

Recent data from the DRC points to the major importance of personal aspirations when senior managers choose their industry:

Nationally, almost half of them are motivated by personal aspirations, and under a quarter say that expectations of high profitability drove them.  That's not to say that the money isn't important, but it isn't their primary motivation.  Over a quarter say that they followed the path of a relative or friend, indicating the importance of personal ties or learning.

These responses suggest that if the DRC wants to attract people into an industry, the starting policy shouldn't be sector-specific tax cuts or investment incentives.  These can be expensive to apply and administer, and are also given to people who would go into the industry anyway.  Instead, effective measures would be advertising the industry, providing information about it, facilitating entry by training and apprenticeships, and supporting people's advancement.

Tuesday, 26 May 2015

The latest news from Burundi, and hopes for the next government

Demonstrations continue, and police and protestor clashes are ongoing.  The details are here.

I hope that whoever forms the next government adopts a more active role in promoting competitive capitalism in the economy while continuing to provide social development and protection.  This is basically the Rwandan model, which has made people there richer, and seems to be the recent drift of the DRC government too.  Goodwill from international donors helps a lot, in facilitating access to international capitalists, giving local market development assistance, and granting funds for the social projects.  It is a mainstream economic plan in developed countries, so I think goodwill would be available.

Sunday, 24 May 2015

Product innovation rates across the DRC

Enterprise economics praises cities, particularly capital cities.  They are talked about as hubs of commerce, a place for exchange of ideas, and centres of innovation.  When enterprise economics isn't praising cities, it is often eulogising on places that share features with cities, such as industrial zones and business clusters.

The latest DRC data from the World Bank allows us to see where innovative companies are based in the country.  Here are the rates of introduction of new or improved products, split by region:

Nationwide, over four in ten companies have innovated in new products in the last three years.  Surprisingly, the rate is lowest in the West around the capital Kinshasa.  The region has many advantages that should make it innovative: it has the capital city, it is by the coast for easy trading, it has a measure of security, and it is easiest for international expatriates to reach.  But the most innovative region is the South, which does have the large city of Lubumbashi.

Innovation in new or improved products could be an introduction to the company (but rivals already make the product), or it could be stricter innovation of products that are new to the whole market.  When we look at this stricter, new-to-the-market innovation, there are even more surprising results:

The West has even lower innovation rates with only a quarter of companies innovating, while in the South and East over a third of companies have innovated in the last three years.  The East's innovation occurs despite its relative isolation from other knowledge centres and the predations of armed groups.

Assuming that the self-reported data is correct, I would guess at explanations like "the region is catching up", "necessity is the mother of invention", or "there is competition to take part in the extractive industries".  But these are only plausible guesses.

Budget reduction at the East African Community

There's a report that regional governments are planning to cut the East African Community budget.  I'm not surprised that governments want to keep control on budgets of supranational bodies, but the timing is a bit surprising as integration and regional growth are increasing the demands on the organisation.

Tuesday, 19 May 2015

The Congolese state backs out of company ownership

I've had a first look at the latest data on companies in DRC, provided by the World Bank .  The data is part of a new wave of surveys published by the World Bank and other sources, giving very detailed quantitative descriptions of business operations, finance, and experiences.

An attraction of the DRC data is that it follows companies over time, surveying the same firms in 2010 and 2013, which allows people to see how they are changing and why.  A quick investigation of these companies shows that for every one company whose government ownership has increased, about seven companies have seen their government ownership fall.  The Congolese economy seems to be becoming more privately owned quite quickly, if this data is representative.  I'll have a proper look soon.

Saturday, 16 May 2015

The coup in Burundi has failed

The coup in Burundi has failed.

The last three weeks have not been good for democracy or the economy in the country.  Information on the economy is likely to become more difficult to get.  Many news outlets have been destroyed or damaged, and probably will be reluctant to be critical of the government in the future.  In respect of government activity, information from the press in Burundi was often freer and more useful than in Rwanda, where journalists generally praise the government.

Thursday, 14 May 2015

Coup attempt and conflict in Burundi

There's been a coup attempt in Burundi and fighting is continuing, at least in the capital Bujumbura. Independent news sources inside the country are mostly or all shut down, but international sources continue to operate from the capital - the live report of the BBC is in French here, and in English here.

Monday, 11 May 2015

How the Burundian economy is being damaged by the clashes

- People are being injured or killed.
- People are leaving the country.
- People are staying off work.
- Customers are staying away from businesses.
- Hospital bills are being incurred.
- Education is being disrupted.
- Infrastructure is being damaged.
- Business property is being damaged or destroyed.
- Security forces are being paid extra, at least for equipment and fuel and probably overtime, for a non-productive activity.
- Donors are withholding funds.
- Investors are almost certainly going to avoid the country.

All this has happened after two weeks, and the clashes haven't become a full conflict.

Burundi's income per person in 2014 is around US$800 per year in purchasing power, so the inevitable fall in income due to the crisis will be likely to result in an increase in preventable deaths from diarrhea, malaria, and other diseases of poverty.

Latest news from Burundi on the protests, day 13

On the 13th day of the protests in Burundi, the news as supplied by Iwacu is here in French, and here in English.

Friday, 8 May 2015

The latest news from Burundi

The latest news about the demonstrations in Burundi is available in French here, and in English here.

Concerns about the situation in the country have been raised by the international community, including from African civil society, the African Union, European Union and its members, and the US.  Rwanda and the East African community are also exerting pressure (verbal at the moment), which may be the most significant influence given the close political and economic ties that exist in the region.

The Burundian army is reportedly and thankfully remaining neutral in the disturbances, so far acting to prevent violence and lynchings (again, reportedly)

Thursday, 7 May 2015

Motivations for the new international market being constructed in Kinshasa

There's a new market being constructed in Kinshasa at the moment.  It will be a centre for intermediaries to buy from farmers, and then sell on to further buyers.  The 36,000 square metre market will provide refrigeration facilities, and aims for international standards in packaging.

I am not sure of the thinking behind the project.  One rationale may be substituting domestic goods for foreign goods, and another may be increased international exporting of more finished products.  If the next business up the value chain has greater market power than farmers, then the latter may be losing much of the potential value of their goods at present.  Catering for the oil-rich country of Congo-Brazzaville on the other side of the river is another likely motivation for meeting international standards.

Tuesday, 5 May 2015

Today's news from Burundi

There is live blogging inside Burundi at Iwacu, and in English translation here.  Across the border in Rwanda, IGIHE are providing a current accounts, with English translation hereThe government's website is down, for some reason; there are many verifiable reports of divisions in the seat of power, and more speculative reports.

Monday, 4 May 2015

A full, publicly available Rwandan business census

Away from the cliff edge in Burundi, I came across the Rwandan National Institute of Statistics online and their surveys.  It seems to have been around for a while, but I missed it.

The survey that immediately attracts my attention is a 2011 census of businesses.  Given its size (123,256 establishments) I think it may be a comprehensive survey of business in the country.  It is a useful complement to the detailed but small World Bank surveys on the country, as it (with luck) allows the diversity of companies to be explored in full.

Injuries to police in Burundi

The links to the Burundi press I gave in earlier posts have shown badly injured protesters.  As a reminder that both sides are suffering in the civil disturbance, the TV news station France 24 in its main report on Monday was showing pictures of a badly injured police officer being carried away, and police losses are reported following a grenade explosion.

Live reports from Burundi on the demonstrations

There are live reports about the demonstrations in Burundi in French here and in English here.

Saturday, 2 May 2015

How much is peace worth?

As there is civil unrest at the moment in Burundi, it is worth considering what peace is worth, just in terms of lost income per person.

The graph below shows income per person in the DRC from 1990 to 2013.  There was full war in the country from 1996 to 2003 (with some conflict persisting afterwards).  Income only starts recovering after 2002, when the war ends, and only reaches the pre-war level in 2003, or 18 years later.  So 18 years of development seems to be lost.  Income was falling before 1996, but the country before 1996 was under an entirely different regime with a long history of reducing national income, so can perhaps be considered to be fairly distinct economically from the country after 1996.

Source: World Development Indicators

If the DRC graph isn't convincing, the Burundi graph below shows that since the civil war in 1993 (which became hot and cold by turns over the next two decades), income per person hasn't recovered.

The clearest example of the effect of a war comes from Rwanda in 1994, which was brief and followed by unbroken peace from 1995 to 2015.  The graph is shown below.  Income per person almost halved in 1994, and only recovered to its pre-war level 12 years later despite successful economic management.

The decades of lost development due to recent Great Lakes conflicts, applied to the millions of people in the region, resulted in hundreds of billions of US dollars in lost income, I think.

New survey of companies in Burundi

There's a new survey of businesses in Burundi that has just become available from the World Bank Enterprise Surveys.  It was undertaken in 2014-2015 and is available here.  From a viewpoint of understanding what makes companies successful or challenges them, the Enterprise Surveys are a great resource.

I have been using the 2006 survey, so a more recent one is going to be informative.  Looking at the data variables, it looks like there is new information on sources of revenue, and on innovation.  I haven't checked yet whether the data is from all over the nation, which would be welcome.  The 2006 survey only had data from Bujumbura.