A simple model of the productive core of an economy is that it is made of three primary levels: the informal base, small & medium enterprises (SMEs), and the large corporations.
While size and scale are the obvious differentiators, there are other equally important markers.
The informal sector is noted for its decentralised nature, its flexibility/adaptability, ability to exploit inefficiencies, and the ease of regulatory evasion.
On the other extreme, the bigger corporations are known to be internally centralised, eternally obsessed about efficiency, and possessed of greater capacity to comply with regulation, enabling higher degrees of formalisation.
SMEs fall somewhere in between, and are themselves heterogenous.
In fact, all these factors are actually a spectrum. Elsewhere, I have argued that in most of Africa, “formalisation” is a dial that businesses turn on and off based on perceptions of advantage. Most businesses, regardless of their size and scale, do this, to varying degrees.
An obvious inference of the model above is that within the ecology that is a national economy, informal business actors can play the role of de-risking innovation. Their brinkmanship with regulation could point the way for other actors as to how they can experiment on the edges without falling off.
At least, that is how I see the grilled farmed fish trade in Ghana. Let me start with the two farmed fish species that constitute over 98% of the trade: tilapia and catfish.
In 1990, barely 450 tonnes of catfish and tilapia were farmed in ponds and cages in Ghana. Neither fish was considered “classy”. Most of the yield went into specialty condiments. Tilapia was dried and heavily salted into “koobi”, a flavouring for soups and stews. Catfish underwent further treatment via fermentation into “momoni”, a more potent garnish. Small quantities in dishes once in a while was fine. Eating too much momoni and koobi was seen as “rural” and somewhat “unpolished”.
Today, more than 135,000 tonnes of the two fishes are farmed every year. What happened is simple. Small informal grillers positioned their shacks in inner cities and started pairing the fish with staples like corn dough “balls” (“banku” and “kenkey”). Urban tastes were soon hacked.
It didn’t take too long before restaurants, those quintessential SME businesses, got in the game, further gentrifying the new tastes.
So far, so obvious, so what exactly is my point? Well, what about the apex of the model? The larger corporations? Are they playing their ecosystemic role? In this context, I am referring to the modern retail, cold-store, fish processing, and allied industries. In my humble view, they have so far failed to step up.
True, some hotels now regularly serve tilapia and the occasional catfish. But the rest of the formal sector has not fully stepped up to play their role in the ecosystem: scaling and standardisation. When it comes to filleting, flaking, and canning, Ghana has been stuck at tuna for eons. Tilapia, catfish, triggerfish, all of them, have been totally neglected.
Given the above critique, imagine my excitement when I saw a few days ago that one of Ghana’s largest retail chains is getting into the “point and kill” game.
“Point and kill” is the cutting-edge of the catfish-eating experience. I assure you that the phenomenon is entirely homegrown but it has Asian vibes sprinkled all over it.
It works this way: the fish cage is positioned close to the grill, the customer walks over decides which creature is to be murdered, and takes a seat. Whilst they check on the latest Man City and Arsenal shenanigans, the master griller transforms the once slithering pond-dweller into a spiced, juicy, gingery dish right there and then.
Grilled catfish-eating gurus tell me that catfish has peculiar taste-characteristics that make it taste far better when grilled straight from the water. Tilapia can hold its taste for longer even when frozen. Catfish, on the other hand, is more delicate. Less forgiven. Texture is more critical. Unsurprisingly, some point-and-kill operators position the experience as “healthier” for consumers.
Talking about informal experimentation and the spectrality of regulatory conformity in Africa, it is not entirely clear that most of the current point-and-kill operators are operating fully within the law.
Ghana has very elaborate aquaculture rules. Ordinarily, mounting a cage for intensive farming requires a permit from the environmental authorities as a matter of law, and other agencies may have a word or two to say about the health & safety aspects.
But there is a catch: the law only requires a license for “intensive” operations. What qualifies for “intensive” is left helpfully vague. Would keeping hundreds of catfishes per day in cages on standby to grill qualify or not? Or is this strictly about the size of the cage? Some argue that informality thrives precisely because regulations are made all the time without genuine conviction about their universal applicability.
The lack of regulatory clarity and the looseness of enforcement of food-service and sanitation rules are perfect media for informal exploration. Hence why point-and-kill is today the fastest growing sales driver for farmed fish in Ghana.
But to return to my key argument: in countries where integration across the different layers of business activity – informal, SMEs, and corporations – is tighter, big companies would have long absorbed the lessons and learnings from the lower tiers of the market and scaled the point-to-kill model to a level far more massive and, at the same time, resistant to regulation.
Of course, doing so means SMEs, micro-entrepreneurs, and informal actors would then need to quickly find something new. In the most advanced economies, the process kills off low-capacity informal economy actors and keep SMEs super-sharp. In fact, a subset of SMEs, through this process, become the high-growth startups that are themselves seeds for the next generation of corporations.
In Ghana and many African countries, the crane for lifting lessons and learnings from the lower tiers of the market appear broken for many reasons. Ecosystem plumbing appears clogged. The interactions among informal players, SMEs, and large corporations aren’t dynamic enough within the innovation ecosystem, obstructing opportunity discovery.
In the specific context of fish farming in Ghana, consumption of catfish is still heavily concentrated in Accra, where the rebranding of the fish from unclassy to classy found the most resonance. Fish feed continues to experience price inflation exceeding 50% per annum. And despite a demand gap of over 50%, forcing fish imports to the tune of nearly $400 million, there is still no large-scale tilapia and catfish cold-logistics network for the domestic value chain.
The limitations of intra-market integration assures that interesting products and services apparently desired by a significant number of customers can remain confined to the informal or SME sector for years in many African countries.
All of the above is why one shouldn’t be holding their breath if they expect to be seeing canned catfish at Accra Mall marts, or mechanised fish ponds from Katanka, or point-and-kill plus grill setups at their favourite fast-food chain anytime soon. In my next post, I will look at another example and sow the seeds for some solutional thinking.
