Economic Transformation in Africa: There's an App for That
BCG’s Sarah Cairns-Smith shows how mobile apps are transforming local economies in sub-Saharan Africa.Watch the video
There’s still much work to be done to reduce extreme poverty and inequality worldwide.
In recent decades, strong economic growth in some of the world’s most populous countries has significantly reduced poverty and hunger. But at the same time, more than one billion people still live in extreme poverty and huge pockets of inequality exist, with more than 70% of the world’s poorest people residing in middle-income countries. to help reduce inequality where it remains.
Sanitation is a crucial challenge for developing countries.
Given the rapid rate of urbanization in developing countries, emerging cities that fail to quickly respond quickly to the resulting sanitation challenge will be at a disadvantage compared to more forward-looking municipalities. Cities can act on at least three fronts:
Different approaches can be effective in combating hunger.
The world faces a conundrum: Even as the food supply expands every year—theoretically already providing enough to feed every person on the planet—over 800 million people in the world, or one in nine, still suffer from hunger. Achieving universal food security will require every bit of agricultural, technological, and economic innovation possible. Among the many actors working to solve this challenge, businesses will need to play a key role—not only in securing sufficient increases in food production, but also in finding novel ways to ensure that those most in need have access to an adequate diet.
Taking a differentiated view of the world's hungry allows organizations to devise tailored strategies to address the needs of people with diverse income levels. For the bottom billion, companies must devise new strategies to address their low purchasing power. The prices that the very poor can afford are often equal or below production cost and subsidies are needed to close the gap. These subsidies can be covered by different sources: external welfare organizations, other consumers, or the business itself. In this context, several models can help tailor marketing and pricing approaches to this segment.
In the simplest case, governments, foundations, and other social sector organizations can provide external subsidies, in such forms as cash transfers or vouchers to people in need through existing or new social welfare programs. This enables the purchase of products at market rates.
Under this model, market forces come into play and consumers with higher incomes, such as global customers in wealthy countries or those in the middle- and upper-income classes in developing countries, provide a subsidy to make products affordable to the very poor.
In the case of a social business model, the company itself accepts a lower profit and thus covers the required subsidy. Social businesses are nondividend companies created solely to solve societal or environmental problems. Investors get their invested capital back over time, but all further profits are reinvested in the company for expansion and improvement. The company can make profits, but it does not distribute them to investors. It can therefore accept a lower profit margin and can pass this through to customers in the form of lower prices.