South Africa should be one of the most sophisticated centres for innovations aimed at developing products for the world’s poorest nations; the so called “Fortune at the Bottom of the Pyramid”.  With its mix of world-class infrastructure and gut-wrenching poverty it is significantly easier to develop products aimed at the poor and test them, than it is to do so from developed nations where visiting the poor requires visiting another country.

While, in general, South African companies are not especially innovative, preferring to import ideas, quite a few companies are excelling.

Vive Crone, of Spescom, speaks with affection about the engineering breakthroughs in providing electricity to the poorest.  He developed an electronic box, with a digital keypad, that allows individuals to buy their electricity in advance and then punch in a unique code to unlock their power.  Prepaid cellular packages are exceptionally popular as well.  Psitek developed a fixed cellular phone system that is used throughout Africa as telephone centres in containers.

Even in the online world – something that many would regard as out of reach for the average impoverished nation – DatingBuzz and MxIt are wildly successful.  DatingBuzz offers an aggregated model where many companies can use their software and simply change the front-end to accommodate their own needs.  The subscribers are shared which significantly increases the power of a service that, by its very nature, requires a large pool of subscribers to be popular.  MxIt offers cheap SMS communication by utilising 3G and EDGE communications available from modern cellphones.  Subscribers buy packages of Moola, the MxIt currency, where R 100 buys 200 Moola points.  One point for one message.  The price has triggered an explosion of messaging where MxIt’s 2 million subscribers send 5 million messages a day.

What are the lessons from these success stories?

Firstly, admit the limitations of the market:  people are poor with uncertain incomes, people are widely dispersed, societies are fragmented, and infrastructure is limited.

Companies must package their products so that subscriptions aren’t required and individuals can buy and use as much as they can afford.  SMS-based banking services overcome infrastructure limitations by putting the means of payment directly in the hands of customers – they don’t need to travel vast distances to the nearest formal bank, over poor roads, and with a high chance of being robbed of their cash.  Prepaid water and electricity meters allow the poorest to budget and buy when they need to.  Governments can offer a limited amount of free electricity and water through the system every month without needing inspectors to run around and check.  Companies don’t have to worry about collecting money from remote areas and enforcing their contracts in countries with poor legislative protection.

Collaboration also works.  Few companies started locally have the power and penetration to do everything themselves.  In an ideal world you would want to own your entire business and develop your own brand.  Allowing local companies to act as your front end and supporting them to be successful also makes you successful.  MxIt chatrooms and services are supplied by others using the exceptionally cheap and reliable service that MxIt provides.  DatingBuzz runs the back-end that dozens of newspapers and hundreds of private companies promote as their own.  Aggregation of the costs dramatically reduces prices.

If South African companies have an advantage it is in these lessons.  There is no reason to suppose that successful firms here shouldn’t be able to transfer these learnings into profitable ventures in India and China.

And all of this benefits the poorest by providing them with top quality services at prices they can afford, when they can afford them.