Africa: Why Africa’s Slums are Among the World’s Most Vibrant Business Hotspots

In the classic tale of economic development, urbanisation and industrialisation have generally gone hand-in-hand. Cities coalesce around factories; factories fuel urban growth by attracting workers from the rural hinterland. But today, in much of the developing world, urbanisation and industrialisation have become untethered: cities are expanding, but the factories – and the industrial base that they support – have not materialised.

Jobs for the few, poverty for the many

While this account may be simplistic – factories are not the be-all-and-end-all that they once were – the image of a shattered equilibrium between the availability of work and the number of people living in developing-world cities is all too real. From a baseline of around 75 million in 1975, low-income countries have already seen a fourfold increase in their city populations, and this is forecast to become a tenfold increase by 2070. Meanwhile, the GDP per capita of low-income countries has grown by just a quarter of one per cent (0.26 per cent) in the past thirty years, and their economic prospects for the decades ahead are worryingly bleak.

Rampant urbanisation has thus given rise to spiralling inequality. Sprawling informal settlements (or slums), which are characterised by intense poverty, severe overcrowding, and acute shortcomings in basic services, are an increasingly common feature of the urban landscape of developing world cities. Figures recently published by the UN show that 1.1bn people now live in slums globally. In Sub-Saharan Africa, slum settlements house over 53 per cent of the urban population. This surge in urban inequality has been mirrored by a dramatic rise in informal jobs, which are not monitored, protected, or taxed by the state. Upwards of three-quarters of adults living in cities in low-income countries are active in the informal economy; remarkably, more than half of those are self-employed.

“You suffer”

All of this upheaval, then, has yielded intense concentrations of micro-entrepreneurship, the prevalence of which is unimaginable to most of us that live in the more developed nations of the global North. This micro-entrepreneurship, and the societies in which it plays out, have been the focus of our research over the past eight years or so. What is it like to be an entrepreneur in a community in which resources are so scarce? In a community that is profoundly neglected by both the State and the mainstream market? In a community that is itself in flux, existing as it does at the leading edge of a “megatrend” like urbanisation?

“You suffer,” Simon, one of Nairobi’s burgeoning class of young urban “hustlers” told me in 2017, “but we try. We try. Life is hard, but we have to survive.” Simon’s story – and by extension, the story of his friends – is illustrative. It is one that we explored within an ethnographic study that we conducted in Mukuru, one of Kenya’s largest informal settlements in the South of the country, over a period of five months between 2016 and 2017.

Simon, 18, had dropped out of school the previous year, and had found himself faced with the harsh imperatives of economic self-reliance. “I had to drop out because I could not afford the school fees. Now I am just a hustler, I support myself.” His life as a hustler illustrates two important facts about the nature of the struggle that entrepreneurs like him face. First, struggle is – self-evidently – difficult. Eating a decent meal was contingent on getting money, which, for Simon, didn’t happen every day. Proper medical care was also beyond his financial reach; Simon was trapped in the all-too-common cycle of being unable to afford treatment for his chronic back pain, meaning that his capacity for “hustling” was limited, further undermining his ability to access medical treatment.

One car wash operated by 15 friends

But Simon’s story also reminds us that “struggle” is both a noun and a verb. For the entrepreneurs that we spoke to in this study, and in subsequent studies in Kenya and South Africa, struggle was not so much a state of chronic despair as it was a way of life. It was an amalgam of coping strategies that ranged from the personal – like foregoing meals – to the deeply social. Interestingly, the social strategies that people relied upon to keep their small businesses operational revealed a great deal not only about their own economic lives, but also about the communities in which they lived, and about how those communities were being forged by wider social forces like urbanisation.

Simon operated a rudimentary car wash with several friends of a similar age, many of whom shared similar family circumstances to him. The most remarkable thing about this venture was not that it was a joint endeavour between friends – even in wealthy nations, this is a very common business arrangement – but rather it was the mismatch between the scale of the business’s operation and the number of people with “equity” in it. While the car wash had two pumps, the venture had anywhere between twelve and fifteen participants at any one time. As a result, the business typically provided one day’s work – and, crucially, only one day’s income – per week to those involved. Remaining days were spent idling, or looking for odd jobs, the lack of money and food weighing heavily.

Ventures like this one illustrate the sometimes-total congruity that prevails between “acquaintances” and “business partners” in the informal economy. In a similar case, a music group comprising three friends gave rise to a – long-lasting and rather successful – “cyber” (akin to the Western concept of “cyber café”, minus the café) business when the three musicians decided that they needed a means to fund their passion.

But in an environment in which jobs were so scarce, and the level of need so great, tensions between economic and social imperatives surfaced often. When this happened, a person’s candidacy for involvement could be predicated less on their skills or on the operational needs of the business than on strength of the relationship. As an early participant in the car wash business told us, “You cannot deny a friend a job” – even, he might have said, when that job is your job.

No compensation for an abstent state

It is tempting to conclude that such cases illustrate how social obligations can sometimes stand in the way of economic efficiency, but this would be simplistic. In a context in which livelihoods are so precarious and where institutional safety nets like unemployment benefits and other forms of social welfare are non-existent, friends and extended family often serve as a final backstop against severe hardship and destitution.

It may be equally tempting to conclude that such “informal safety nets” provide an adequate substitute for effective and comprehensive state supports, but this, too, would be simplistic – and indeed a dangerous romanticisation of the harsh reality of chronic poverty. When the community at large is so starved of capital, people’s ability to derive resources from their networks in order to lessen the impact of ups and downs in their fortunes is very limited.

Moreover, in communities that are themselves in a state of radical flux – Mukuru, for example, went from a relatively small scattering of rudimentary huts to a settlement of over 200,000 people in the space of less than 30 years – social solidarity cannot be counted upon to support everyone equally. Some entrepreneurs, particularly those that were newer to the community, or those that did not have familial networks that they could tap into, felt isolated and vulnerable.

Social darwinism… or not

When we asked Beatrice, 33, who sold second-hand clothing at a makeshift stall, if there was anyone that she felt might help her if her business ran into difficulty, she replied, “Nobody can help, nobody. Everybody struggles for themselves, because they have their children, they have their problems.” When we returned to Mukuru some months later to perform a subsequent round of fieldwork, Beatrice’s stall was gone, and none of the numerous traders that operated neighbouring stalls were able to tell us what became of her.

Beatrice’s case calls to mind an analogy made by Mike Davis in his 2004 book Planet of Slums, when he likened the intensity of competition in the urban informal sector to Darwin’s classic metaphor on ecological struggle: “Ten thousand sharp wedges backed close together and driven inwards by incessant blows, sometimes one wedge being struck, and then another with greater force.” There is an aptness to this analogy, but there is also room for it to be stretched a little further.

Certainly, making a living in a community which has recently been forged from great social forces like urbanisation and inequality is a relentless and sometimes impossible struggle, but, as in the case of ecological systems, survival strategies are often founded on co-operation more than on competition. What we find most intriguing is that this co-operation is not always guided by the kind of transactional symbiosis that we have come to recognise in the natural world – there is little that is symbiotic about having a dozen people involved in a business that could perform equally well with just two. Instead, it is a co-operation that is predicated on identity, that is, on how shared notions of “who we are” – as women, as musicians, as hustlers – give people something to coalesce around, and indeed to make a profit from.

Created in 2007 to help accelerate and share scientific knowledge on key societal issues, the AXA Research Fund has supported nearly 720 projects around the world conducted by researchers in 39 countries. To learn more, visit AXA Research Fund or follow on Twitter @AXAResearchFund.

Philip O’Donnell, Assistant Professor in entrepreneurship, Dublin City University

Colm O’Gorman, Professor of Entrepreneurship, Dublin City University

Eric Clinton, Associate Professor of Entrepreneurship, Dublin City University

Margot Leger, PhD Candidate in Law, Economics and Governance, Utrecht University