Benin Mwangi, who blogs about doing business in Africa, asked me recently: "should the discussion be about how to get the informal sector to become part of the formal sector or should it be how to cater to the informal sector?" This in an excursion into the morass of African poverty and development.
The short answer is: neither; ending poverty has nothing to do with the informal sector.
This is not to dismiss the question, which is an important one. With the failure of most centralised economic policies and governments in Africa the informal sector is the largest employer and service provider in most of the continent.
However the question conflates symptoms with causes. For starters, how do informal markets even come to be?
Scrogues Converse is a feature presented at Scholars & Rogues, a political analysis blog. In this conversation Martin Bosworth and Gavin Chait discuss the nature of Open-source vs Open-standards and the way in which Web 2.0 is not so much re-inventing the web as in repeating the past at a higher level.
Does web 2.0 undermine net neutrality?
Gavin: I feel that net neutrality is being undermined by all the new upstarts; from Facebook to Digg to Wordpress. My issue is this: closed-standards, like all the Web 2.0 platforms, seem a step backwards rather than a step forwards. Try and imagine if Google declared that henceforth Gmail subscribers could only email other Gmail subscribers? They'd go bang in a week.
Yet, that is precisely how Facebook, Digg, Wordpress, etc all operate. I need new login addresses - new identities - for every single Web 2.0 ap. Yet I only need one email address to contact anyone via email anywhere in the world. Various initiatives (like Identity 2.0) aimed at reducing this complexity seem merely to reinforce it.
Business is cyclical. Innovation changes environments and, unintentionally, destroys profitable status quos. When that happens stronger and more innovative firms pounce to buy up the assets of weaker firms and maintain their competitive advantage.
Customers and society win as inefficient products are removed from the market and the base standard rises. There are losers, of course, but the overall benefit to society is vast. This capacity to slough away dead tissue and rebirth itself is what terrifies most people about business. And one of our greatest businessmen, with an astonishing capacity for renewal, is Rupert Murdoch.
"For twelve years, you have been asking: Who is John Galt? This is John Galt speaking. I am the man who loves his life. I am the man who does not sacrifice his love or his values. I am the man who has deprived you of victims and thus has destroyed your world, and if you wish to know why you are perishing - you who dread knowledge - I am the man who will now tell you."
Published 50 years ago in 1957, Atlas Shrugged is Ayn Rand's magnum opus. The story is simply told.
At some point in human history people have turned against themselves. They no longer aspire to do anything more than enslave the most able and catch a free ride. John Galt, the most talented man of his age, recognises where it must end and decides to rebel. Over a twelve year period he accelerates the decline of society by convincing the most ambitious and able industrialists and thinkers in America to abandon their work and go on strike. They do and society collapses leaving a world free for the endeavours of Galt and his allies.
The characters are cardboard and the voice throughout is that of Rand. But what a voice.
"Man's mind is his basic tool of survival. Life is given to him, survival is not. His body is given to him, its sustenance is not. His mind is given to him, its content is not. To remain alive, he must act, and before he can act he must know the nature and purpose of his action. He cannot obtain his food without a knowledge of food and of the way to obtain it. He cannot dig a ditch - or build a cyclotron - without a knowledge of his aim and of the means to achieve it. To remain alive, he must think."
Corruption is a result of poor disclosure and weak systems and institutions. The bankruptcy process in South Africa is from the Victorian era and tends to place a terrifying burden on all involved. The most lucrative aspect is for the liquidator who can earn up to 25% commission on the proceedings. If a single large creditor has a clear claim and can see themselves recovering a great deal, even after the liquidator's fees, then they may proceed. The result for the bankrupt, and small creditors, is a Dickensian world of debtors courts and the stigma of insolvency.
The liquidation profession is appallingly corrupt with large profits for those being assigned big cases. The following case history written by Dr John Grogan from Lawsure - providers of specialist legal opinions - is a chilling reminder of how far corruption can go as an honest government official falls foul of his unscrupulous minister
GENERALLY CORRUPT
Mr Tshishonga, the general manager of the Office Business Unit in the Department of Justice and Constitutional Development, learned a tough lesson — no matter how high ranking, officials don’t lightly cross swords with their Ministers.
Tshishonga’s troubles began when the former Minister, Mr Meduna, phoned Tshishonga and instructed him to meet one of his (the Minister’s) friends. The friend wished to discuss the allocation of liquidations by the department. Tshishonga was unimpressed by the Minister’s friend, and the matter went no further.
aloft: the whythawk blog 
