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Article Excerpt
Abstract: This paper, based on the results of a quantitative and qualitative survey, investigates the role that networks play in the construction sector in Burkina Faso and Senegal. The aim of this study is to uncover the effects of the economy of affection among African owned-enterprises through a comparative study of networks. The results indicate that the networks embedded in the economy of affection have both costs and benefits to actors in the construction sector in Burkina Faso as well as Senegal. Moreover, the degree of those costs is likely to vary according to socio-cultural attributes. Through its informal institutions, the economy of affection facilitates business transactions and fosters networking. At the same time, it encourages relatives and friends to become dependent on the entrepreneurs and limits their chance of succeeding. They become, if not parasites, at least a burden that entrepreneurs have to cope with. These extra expenses may be compared with the legally imposed social expenditures that modern corporations in Japan and Western countries have to carry.
Introduction
In countries like Senegal and Burkina Faso, two of the world's least developed countries, governments have consistently given a high priority to the improvement of basic social services such as education, health and food security. Therefore, local enterprises are still struggling without sufficient support from formal institutions. As a result, entrepreneurs use their own networks, that give rise to what Hyden has called "the economy of affection", to substitute for formal business supporting institutions. [1]
Due to their size and isolation, micro, small and medium-sized enterprises (hereafter referred to as SMEs) face various obstacles: the lack of specialized skills or equipment, inaccessibility of formal financial institutes, and difficulty of obtaining relevant information. [2] In order to find the key to reducing these hindrances, in recent years the aggregate efficiency of clusters and networks has become a considerable tool and drawn increasing attention. [3] However, after the implementation of numerous experimental projects, the results show that the aggregate efficiency is not present among African clusters and networks. [4] The question is why not in Africa? Referring to six case studies in Africa, McCormick concluded that the small size of markets, over-supply of labor, and weak institutions characteristic of many African countries make external economies and joint action inefficient and non-functional. She also laid stress on the absence of "complex industrial clusters," which produce strong aggregate efficiency with diversified size structure and inter-firm linkages. [5] Similarly, Pedersen pointed out that the absence of very efficient large-scale enterprises may be one of the crucial causes. This is because small enterprises often obtain access to non-local resources and markets via the large enterprises. [6] Those two opinions explained what is commonly referred to as the "missing middle" in Africa. [7]
This study was designed to investigate further the socio-economic role that networks play in the construction sector in Burkina Faso and Senegal. [8] The discussion is based on the results of a quantitative and qualitative survey carried out in 2004 and 2005, sampling construction enterprises of various scales. The aim of this study is to uncover the effects of economy of affection among African owned-enterprises through a comparative study of these networks. The author's working hypothesis is that the growth constraints on the private sector in Africa may grow out of the economy of affection. Therefore, this is a preliminary study for clarifying several aspects of networks that may explain the collective inefficiency of African entrepreneurs as well.
Implications of the network in Sub-Sahara Africa
Since Hyden stated that "there are no studies that have attempted to measure the quantitative and qualitative impact of the economy of affection on the national economy of a given country," many scholars have been trying to full this gap in different ways. [9] Since Hyden defined the economy of affection as being formed by differently attributed networks, any examination of networks should focus on these differences. Many efforts by scholars notwithstanding, the amount of empirical economic evidence still remains small. [10] This paper borrows from the existing literature to illustrate the characteristics of entrepreneurs' networks in Sub-Saharan Africa.
Several case studies have been carried out. For the past three decades, Van Dijk has been working on the informal sector in Burkina Faso. His study concludes that "innovations, clustering and subcontracting are not yet the key characteristics of a dynamic informal sector entrepreneur." [11] Van Dijk, however, also found that skilled women entrepreneurs are better adjusted and benefit more from cooperative types of business development than men. [12] Generally speaking, the present situation of informal entrepreneurs in Burkina Faso favors a good location, personal relations, and a number of other variables (such as initial investments, the choice of activity, and the chosen technology). Such elements are still more important than clusters of enterprises and networks of entrepreneurs for achieving collective efficiency. [13]
One of Van Dijk's studies among small enterprises in Accra showed that in many cases, as can be seen elsewhere in Africa, access to employment opportunities and participation in a mutual co-operation are highly influenced by ethnic affiliation rather than professional association. [14] McCormick examines family and professional networks in the garment markets of Nairobi based on three characteristics of the firms' owners: ethnicity, level of education, and gender. He concluded that poorly educated small-sized garment manufacturers tend to use their networks. Besides, social networks are generally sex-segregated and women's networks tend to have less power and resources to stimulate a business than men's networks. In many cases, networks lead back to rural markets where incomes and profit margins are present, but they cannot change their business performance significantly. Furthermore, these networks appear to be based not on clustering, but on the entrepreneurs' other social and professional contacts. [15] Additionally, she explained theoretically how social relations are implanted and influenced in the entrepreneurs' economic relations: 1) different processes of development are used according to specific and interrelated historical, social, and cultural factors; 2) socio-cultural attributes create grounds for trust and reciprocity in inter-firm relations; and 3) the social environment, in which people live or work, strongly influences and is influenced by the processes of innovation and technological change. [16]
With econometric analysis, Fafchamps underlined that in a flea market economy, the emphasis on relationships and the sharing of information in communities and networks minimizes large-transaction expenditures and raise productivity. For instance, when it is difficult to identify reliable trading partners, relationships become their own security or guarantee and start to function as a business referral system. [17] However, his research on agricultural traders in Madagascar showed that once family members are involved in trade, it reduces a productive component of social capital. [18] His latest study (2002), a comparative survey in Benin, Malawi, and Madagascar, also investigated the effects of ethnicity, religion, and gender in agricultural trade. Many earlier sociological studies had stressed the importance of cultural attributes in African trade. Fafchamps, however, found that ethnicity and religion have only limited effects on start-up networks and the accumulation of network and capital over time. Gender matters more. [19] Although they cannot be generalized to all African countries, his results ran counter to the stereotype of strong ethnic, gender, and religious bias in African trading and business.
Noteworthy results have also been generated by numerous recent studies of Barr, which demonstrated econometrically the role played by entrepreneurial networks in the Ghanaian manufacturing sector. [20] Her study identified two types of networks: 1) innovation networks that are large, diverse, less cohesive and best suited to providing access to information about technology and market; and 2) solidarity networks that are small, homogeneous, cohesive, and best suited to reducing information asymmetries and supporting informal credit and risk-sharing arrangements. Using data from the Ghanaian manufacturing sector, she found that in contrast to innovation networks, solidarity networks may have a marginal effect on enterprise productivity which can be seen in the smaller sized enterprises. This is because small enterprises are more likely to focus on reducing uncertainty rather than enhancing enterprises performance.
Besides the above studies, moving from theory to practice, the United Nations Industrial Development Organization (UNIDO) has undertaken many initiatives to promote development projects based on networking. [21] However, compared to those in Asian countries, most of these projects in Sub-Saharan Africa have not been implemented successfully.
Thus, the above studies have produced detailed new evidence of networks in Sub-Saharan Africa and raised several important questions in the context of development policy: (1) Do networks help local enterprises to overcome the growth constraint? (2) Do networks negatively affect the larger leading enterprises?
The Structure of the Construction Industry in Burkina Faso and Senegal
The importance of the construction industry in developing countries as a contributor to socio-economic development has been addressed by policy organizations and several researchers. [22] The author's previous researches have focused on understanding segmented urban labor markets and the presence of horizontal networks and vertical linkages among differently scaled enterprises in specific sectors of Burkina Faso. [23] Although, the research was not detailed enough to illustrate the structure of strong linkages and networks among enterprises, it showed that particularly in the construction sector, larger local enterprises commit a large part of labor-intensive operations to micro and small enterprises through subcontracting. A recent study of Mlinga and Wells (2002), which was carried out in the construction industry in Tanzania, proved that there were strong links between formal and informal contractors in terms of labor, material and equipment supply. [24]
In this paper, due to a lack of time series data in both Burkina Faso and Senegal, only the recent role of construction sector from a macro-economic point...
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