Risk of new business models to traders

A woman hawks fruits in downtown Nairobi. FILE PHOTO | NMG 

By BITANGE NDEMO
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Summary

• Concentrating the food business in a few hands will also eliminate many jobs.
• If any such plans are implemented, there needs to be extreme transparency and accountability.
• Many studies have shown that poor people can be trusted to spend money wisely, but many of us have prejudices that giving people money will cause them to waste it on things like alcohol and gambling.

In the past two weeks, several theories have been advanced in the social media on how best the country can distribute food in the event of a total lockdown.

There have also been rumours swirling around that digital food stamps will be put into effect and only a few established companies will distribute food.

Either way, the prevailing circumstances point to the fact that Kenya’s food systems will undergo rapid change in the coming weeks. It is very important that people can get food and other necessities at a time like this, but there are dangers with running centrally-managed experiments.

One risk is that honest mistakes will cause our food systems to become more fragile. Another risk is that greed will cause corruption and monopolistic behaviours among the chosen food distribution companies, which will prevent innovation and competition from small businesses in the future.

Concentrating the food business in a few hands will also eliminate many jobs. If any such plans are implemented, there needs to be extreme transparency and accountability.

Many studies have shown that poor people can be trusted to spend money wisely, but many of us have prejudices that giving people money will cause them to waste it on things like alcohol and gambling. This is why there is a preference for food voucher systems. But we rarely remember to compare the benefits with the costs—it is much more expensive to run a food voucher system than it is to just distribute cash and let people buy their own food.

The next argument will be that small businesses like mama mbogas could become carriers for the Covid-19 virus, and that we can trust big businesses more.

If this is the argument that is used, then there needs to be strong, transparent standards of cleanliness and an impartial judiciary system for checking on the companies. There is no evidence so far that a properly regulated mama mboga system with proper social distance features would spread the virus.

There should also be a licensing system that allows small businesses to prove that they, too, have high standards so that we don’t come out of this crisis with only a handful of food companies running our entire country.

This type of standards is how countries like the United States keep their food clean even in small “mom and pop” restaurants, corner shops, and grocery stores.

The thought of few established companies distributing food may sound like a good idea, but it is an idea that can cripple mama mboga and set this country on a path towards monopolies and oligopolies.

If the chosen e-commerce organisations do well and Mama Mboga is displaced, we may cherish the convenience but there are repercussions to society and families that eke a living from food distribution. Further, if these tech companies fail, it could leave very fragile food systems in the country. In the Vision 2030 document, we envisaged building several food aggregations centres. They were to be linked to last-mile kiosks to modernise the current expensive and chaotic distribution system. The plans were either scuttled by cartels in the food sector or the government did not follow through. Covid-19 may be the reset button to organise the sector. The entire world too is resetting by focusing on public health to ensure a clean environment.

The current food markets will be required to maintain cleanliness and to achieve that, they will have to revisit the Vision 2030 documents and begin reforms in the food distribution in the country.

The reforms needed are necessary both to mama mboga and the economy in general. Although Kenya is a free market economy, micro entrepreneurs often have no knowledge of seeking opportunity-based enterprises. Majority of them do business informally. They are therefore unregistered. This means that even when governments want to help them, there is very little knowledge about these enterprises.

These enterprises are, however, the largest borrowers from digital lending platforms. The best approach is to leverage Huduma number (biometric identity) and blockchain technology to map out all these enterprises and assist them to understand the use of technology in streamlining the supply chains.

Covid-19 crisis is forcing governments to rethink how best to manage the situation while ensuring that people have food and incomes. This may require new business models that could disrupt mama mboga’s current model. In my view, it is not the right time to disrupt the current model.