How MTN is profiting from Nigeria’s informal economyFollow @MadeItInAfrica
Margaret Akiyoyamen is one such umbrella person. She ran a stand in Lagos for several years and started in the business with just five thousand naira, or about $34, of recharge cards. She knew her customers didn’t have lots of cash, so she sold denominations of between only one hundred and three hundred naira. She set up her umbrella, table, and chairs (the setup cost her two thousand naira – or about $13) on the median strip of the street where she lived, Fifth Avenue in Festac Town (in another fixed cost, she gave the local government thirteen hundred naira, or around $10, for a ticket entitling her to do business on that spot). In total, her initial working capital was just eighty-three hundred naira, or a little more than $50. It was a volume business. She got slight discounts on the cards for buying them in bulk from a large distributor, and she used a cheap handset to offer calls for twenty naira a minute.
In the first month, she reported, she recouped her initial investment. After that, Margaret pushed her business forward over the next five months. Six months in, she was buying more than three hundred thousand naira worth of cards every month – sixty times her initial load – and making a profit of forty thousand naira, or about $270 – five times the government’s minimum wage. Her story shows how much growth there is in the mobile phone industry, how profitable selling airtime can be for sidewalk vendors; we can only imagine how profitable it is for the mobile phone firms themselves.
“It provides a fair amount of gainful sustenance,” Goodluck allowed. Indeed, he suggested, the steady profits that street hawkers make from the airtime biz have encouraged people to shift from criminality to card selling, including a number of people who had been dealing drugs. “Even beggars are selling recharge cards,” he said. MTN says it is putting together a database of the sellers and their locations. But there is one thing MTN does not contemplate doing. The company refuses to invest in these merchants who are retailing its recharge cards. “It works nicely as it is,” said Goodluck, who has since been named MTN’s corporate services executive. “It would not be advisable for us to go out on the street and offer them loans and credit. It’s a very informal business. It would not be a safe investment.”
It may well be true that hawkers and roadside salespeople are not always the most reliable investments. Some have other jobs (Margaret, for instance, had a day job at an insurance company); others may be lousy at record keeping or suffer through periods of slow sales. A few are undoubtedly fly-by-night operators. This would, indeed, make it tough to invest.
But it does seem as if the company could design a programme to work with the sales force that is responsible for the bulk of its income – perhaps a college scholarship programme, or a training institute designed to augment the skills of the best roadside distributors. MTN’s involvement doesn’t have to be limited to investing in the distribution operation. Goodluck smiled uncomfortably at the notion and repeated his mantra:
“The system works well as it is.”
This article is an edited extract from Robert Neuwirth’s book Stealth of Nations: The Global Rise of the Informal Economy (Pantheon, October 2011). Buy now on Amazon.