By Lauren Hermanus (11 August 2011)

Confronting the question

I think it is a complex muddle in which all these elements are inextricable linked. There often are stories of entrepreneurship, innovation and compassion that shatter my middle class comfortable cynicism regarding our troubled society. But, to be real, we need to recognise that a range of social problems are concentrated at the base of our social pyramid.

The poor face different challenges to those who are not poor. They operate with different pressures, with different information, different possibilities and different incentives. This context creates very specific challenges. It demands specific solutions for which the function, packaging and cost demand innovative approaches.

Overwhelming problems and possible solutions

In my opinion, the biggest problem we face is that our economic system creates a pyramid in the first place. All the old metaphors of wealth trickling down start here: there is a pyramid, an incline for wealth to trickle down (in theory). The possibility of finding this to be a problem – the problem – has been slowly erased from our collective consciousness. The (real and perceived) impotence of the liberal left, the End of History, and the failure of ‘socialist’ or ‘communist’ states has hidden the contingency of this pyramid from view. But, there are constructive and not so constructive voices putting this contingency back into frame. For example,

• The ANCYL and their faithful captain, Julius Malema know this to be so.
• The youth looting and terrorising the streets of London know this too.
• So too do the people who risked their own safety to topple the Egyptian and Tunisian governments and those still out on Syrian streets.
• NGOs and even businesses (see Pick n Pay comments on the food imperative) have been waking up to this fact.

Given the number of people living in poverty in South Africa (75% of the population earn less than R1,800 per month), and the scale, success and reach of businesses here, corporate interest in the base of the pyramid (BoP) may be a reason to get excited. Many companies claim to be able to solve serious social problems and make money at the same time. Unilever, Grameenbank, Telenor (through Grameenphone), Vodafone and Danone are just a few who are waking up to the possibilities of meeting the needs of underserved and unserved markets. Bringing the means to ensure hygiene, connectivity, banking and nutrition can add real value to people’s lives. And this value is not necessarily compromised by the creation of financial gains.

I recently attended an interesting presentation organised by the BoP learning lab, at which MXit announced the development of a new e-wallet function, a service to potentially reach the unbanked in South Africa. This kind of thing makes me really excited. Building on their tremendous reach, success and usability, there is good reason for excitement. But there is also reason to pause before jumping head first into the base of the pyramid…

Reasons to go carefully

If there is fortune at the base of the pyramid, it is not easy to come by:

• Recent reports on microfinance have showed worrying trends about defaulting customers and increasing suicides.
• The success of Grameenbank is also clouded by what is either internal embezzlement or government corruption.

Businesses venturing into the base of the pyramid market can potentially do more harm than good. In an excellent comment on American inequality, Joseph E. Stiglitz writes,

“There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent [of American citizens] increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real.”

I could open a can of worms about paternalism and protecting the freedom of the poor to freely choose a diet of McDonalds and chocolate bars, but that is a whole other thesis. Despite the dangers of state or corporate paternalism, I feel tremendous sadness when I see other young South Africans with less education and less money than I have, ensuring their poverty by racking up debt in the name of consumerism, irresponsibly devouring the credit now freely available to them, keeping up with the Joneses and eating their way to Type II diabetes.

My thoughts on the starting point…

The first thing I think needs to be understood is that, despite the usefulness of the image of a pyramid, we do not live in a pyramid. We live in a complex system of relationships in which not the people, nor the problems, and not even the triumphs at the base of the pyramid are isolated. So we need to understand that it is for the health of our society as a whole that we must focus our energies to explore sustainable enterprises to serve the BoP. One of our clients put it succinctly: “for every job created in our enterprise development, I can take one more brick out of the wall around my house”. It is a little trite but it makes a pertinent point.

The second step, I believe, is to be realistic about the possibility of discovering a pot of gold cunningly hidden by the rural and urban poor. The bodies at the base of the pyramid are vulnerable in a way that we further up, are not – vulnerable to the impacts of climate change, food insecurity, unemployment and bad debt, to name just a few challenges. This vulnerability means that the client base, revenue stream and possibly the workforce or supply chain of BoP business are vulnerable too. A business strategy that seeks fortune here can only, in my opinion, be sustainable if it is sincerely focused on providing services that address disparity, resource scarcity and over-consumption (including unsustainable credit) that create socio-economic vulnerability.

Given all this, given the problems and possibilities, I am still excited by businesses pursuing BoP projects. As with so many sustainability areas, I think there is a wealth to be gained in partnerships and knowledge sharing.

2 Responses

1. Nicola Robins says:

   August 11, 2011 at 21:05

   Thanks for some great thoughts on the BoP. I am wondering if, perhaps, we live in a society of not one but a multitude of inter-related pyramids, each defining different elements of our social fabric – and that pyramids are not good or bad per se, but simply are.

   Reply
2. laurenhermanus says:

   August 12, 2011 at 15:06

   Thanks very much for the response. I agree that there will always be hierarchies and that these are not necessarily good or bad. The necessary hierarchy between a teacher and a pupil, for example, enables learning and guidance.

   I am of the opinion, however, that nothing simply is. Everything is embedded in our systems of meaning and is therefore valued. The way we value certain hierarchies has material impacts on people’s lives. I believe the solution is simple: never close the door to critical engagement.

   If these pyramids are contingent, I am of the idealistic opinion that we should work to try to ensure they change for the better.

   Reply