It has been over a month since my last post – a dead computer, unreliable internet connections, and an increasingly busy schedule (World Bank folks from DC are coming to visit us on Monday, so we’ve been preparing for that) have kept me from posting, but I knew it was time to write something after I thought of the hella clever title for this post.
I mentioned in a previous post that I would get my thoughts together on Purchasing Power Parity vs. the Poverty Premium – I’ve sorta done that, but lack of a computer has kept me from digitizing the 2x2 that I sketched in my notes (gearing up for business school!). Instead, I’ve gathered some thoughts about the Just-In-Time (JIT), or Pay-as-You-Go (PAYGO) mentality that I’ve observed here. Demography and supply chain experts can correct me on the extent to which JIT and PAYGO are really related, but my rough understanding is that they’re both in play here in Tanzania.
Unlike the US, it seems like people tend not to commit any resources for future needs here – I’m not talking about saving money for the future; I’m talking about buying more than $2 worth of gas at one time. This could make sense in manufacturing, but it is carried to an extreme here.
I sorta see why that would be the case. I guess the reasoning is that impoverished populations are unlikely to have access to credit, because they are not deemed credit-worthy (which is a questionable claim). Instead, they are forced to pre-pay for everything with cash, which they may hold very little of at any one time. As a result, they are likely to buy only limited quantities of goods, only when they need them. Instead of going to CostCo and buying a 4-gallon bottle of cooking oil, for instance, they may buy a cup of oil at a time.
That makes sense to me, but I think that mentality has spread throughout the region – from personal spending to commercial and public spending; from the impoverished to the wealthy. In many commercial, government, and household settings, PAYGO approaches are not necessary; however, people still live by them. This is partly because the forced pre-payment approach is applied to everyone – not just the impoverished.
For example, less than 5% of transactions at major department stores – which cater to expats and wealthy Tanzanians – are paid by credit card; all else is paid in cash. I recently walked into a South African department store, in which 2 prices were posted for washing machines and refrigerators: a cash price, and a higher check / credit card price. Even rent, for which almost all landlords require pre-payment for 6-12 months, is often paid in cash. It is not uncommon to give a landlord 20 Million shillings in cash (~$15,000) all at once [which, as we’re finding, can lead to non-responsiveness when you ask your landlord to fix things, if you’ve already paid him for a full year…we’re still waiting for the luxury of running water].
The above few paragraphs are a little abstract, and may sound like a boring textbook (which might be an upgrade in stimulation from my voice), but I think the following anecdotes – all of which happened since the last blog post – illustrate this reactive mentality:
- The Barclays ATM has run out of cash several times when I have tried to use it. Barclays waits until the ATM runs out BEFORE filling it with cash. As a result, I am forced to go across the street to a competitor ATM, and pay out-of-network ATM fees
- I found myself at a copy center / internet café, in urgent need of some printing and copying. I asked for 4 copies of a 5-page document (20 pages total). The man at the counter had me wait while he went across the street to buy paper to put in the machine. He explained that he didn’t know I would be coming in to have copies made, so naturally, the copy machine wasn’t stocked with the 20 sheets of paper needed to meet my request. [By the way, the stationary store across the street didn’t have paper for him, because they hadn’t been notified in advance that he would be coming in for it]
- About 50% of taxi rides start with a drive to the nearest petrol station, where the driver has the attendant load his car with just enough petrol for the ride (e.g., $1-2 worth of gas). I have only once seen a taxi with more than a quarter tank of petrol. The drivers explain that they don’t want to spend a lot of cash on petrol until they’re sure they’re going to use it. As a result, I’ve found that it’s a good practice to allow a few extra minutes for any car trip, for a stop at the nearest BP station
- The iStore (an Apple retailer and repair shop in Dar Es Salaam) didn’t have restore discs for my computer, because I had not called ahead to tell them that I would be bringing it in. (In contrast, Apple repair shops in the US have restore discs on-hand for every type of computer, since it is a typical troubleshooting tool). I then waited 2 days for the iStore guy to go to his headquarters, and find out from them that they don’t own the restore discs at all
- All cell phone minutes are pre-paid, and only the caller pays; the person receiving the call doesn’t pay. Many calls I receive start with the caller saying “I’m about to run out of minutes, so I’ll need you to call me back”. That’s an improvement from another typical scenario, in which people call you and hang up before you can answer, so that you’ll see their number and call back. The typical re-charge amount is under 1000 shillings ($0.75)
- This mentality has spread to my habits, also: Electricity is pre-paid (at 14.5 cents per KwH, for anyone who’s curious), and I once forgot to buy electricity for our house before the electricity office closed. I found myself taking a “shower” in the dark (with pre-paid buckets of water) to conserve electricity until the next day…then turned on the air conditioning before I went to bed (my mistake)
There’s a lot of inefficiency that arises in this PAYGO / JIT / pre-payment economy – wasted time, wasted effort, wasted money, etc, during the above experiences. I’m not sure I can definitively say how to completely solve this…Maybe LED lights and solar panels will do the trick?
