Technology: How is the Movement helping stop extreme inequality?

By Odrek Rwabwogo

The Spanish seaside city of Barcelona received an impressive nine million tourists in 2015, a surge from 7.4 million in 2013.

These are numbers that any city in the world would envy but bizarrely, the Barcelona residents, along with some key city officials rose up in arms and instead opposed further arrivals of people in sun hats, bulgy cameras on chests, many half naked, strolling their streets with careless abandon.

Barcelona is one of the world's largest destinations for cruise ships that offload sometimes up to 5,000 people in one arrival.

At the centre of the row was a computer Application launched in 2007 by two university graduates, Joe Gebbia and Brian Chesky, (then both 27 years of age) thousands of miles away in the city of San Francisco, USA, who while walking the streets in search of jobs and about to be thrown out of their apartment due to rent defaults, developed an idea; the idea that one could advertise their house for guests just as much as a hotel, put an air mattress on the floor, make breakfast for guests and charge a night's stay, for 30% less than the average hotel room.

This idea birthed a hospitality industry disruptive room-letting company, Airbnb (short for Airbed and Breakfast), which offers accommodation in houses of ordinary people instead of traditional hotel rooms and makes its money through a 6-12% reservation fee.

In only eight years, the company has listings in 34,000 cities worldwide, physical presence in 190 countries and has booked over 40 million visitors.

To use the late Apple computer founder, Steve Jobs' famous remark, Airbnb ‘has put a dent in the universe' by disrupting and flattening costs of the traditional hotel business model, which tends to run high, costs in service standards, maintenance, inspections and local city taxes.

What more, from young graduates about to lose their accommodation in 2007, Gebbia and Chesky's company now is worth $30b or equivalent to about 90% of Uganda's total GDP.

The Airbnb story is matched word by word by another runaway success story in the transport industry-perhaps now familiar with the reader - UBER, an online taxi hailing network firm that allows consumers to rent taxis off their smart phones and put car owners with free time on the road earning extra money without needing special municipal/city taxi licenses.

Just by the use of a phone App, UBER just like Airbnb in the hospitality category, is threatening a global taxi industry (estimated by sources at $100b) that generates taxes and revenues for cities through their licensing certificates and jobs for the cartels of cab owners and drivers.

There are huge battles with major cities worldwide to restrict the expansion of UBER and protect local taxi drivers' jobs. Just like the young men behind Airbnb, the founders of UBER, Travis Kalanick and Garret camp (40 and 38 years of age respectively) now have an entity with a private valuation of $62.5b (approximately 45% of total East Africa's GDP).

Consumers worldwide in love with what is called ‘the sharing economy' that cuts travel costs significantly aren't letting up and are voting with their wallets against traditional municipal licensing systems as well as hotels. An Uber ride in Kampala, for example, for an average distance, say from Luzira to the Kampala Road Post Office Building where the traditional ‘special hire taxis' charge sh30,000, one makes it for slightly less than 50% of this cost.

The sharing economy is a function of technology rapidly changing the way we travel, live, work and earn. By simply applying an algorithm, young people in developed markets are splitting open the traditional forms of social class formation creating room for new class conversations.

They are forcing a realignment of our thinking towards socio-economic growth in the new economy in each nation that wants to focus on the future of her youth. 

There is no doubt that these technologies lower costs of production and increase demand by delivering their services at low prices, better selection to match the needs of a customer and their convenience at a delivery point anywhere in the world. These technologies in the transport and hospitality industries are the equivalent of fast food outlets or the various middle class cafes mushrooming in Kampala.

Traditional hotel owners who invest large capital need to recoup their investment while urban authorities want stable sources of tax revenue yet the ordinary person who has a house and; perhaps is unable to pay a mortgage or out of work, finds respite in putting up their dwelling for a fee, even if this might come at a risk sometimes to their lives.

Technology, therefore, throws all the balls in the air and forces new thinking about such things as entrepreneurship in an unchartered territory. The traditional models of both capital and labour class warfare are being forced daily in our times into a mutation mode as both classes now have access to markets previously controlled by those with huge capital only.

In fact both Uber and Airbnb are good examples for young people in turning everyone into an entrepreneur overnight, irrespective of age. This is because their technologies cut rapidly through layers of capital formation that in the pre-internet age would take decades to build. These tools give workers a quick building up of capital for as long as one has a car or a house, one can now find a customer on a cellphone without laying the necessary brick and mortar infrastructure and capital costs that traditionally go into transport and hospitality industries.

But let me warn the reader; not all that glitters is gold for there are two troubling aspects of these new technologies for Uganda and other developing nations to watch lest they leave us with a poor and dependent youthful population.

The scalability (the level of customer uptake) is so rapid that there is hardly any ‘learning curve time' to build local knowledge. These technologies, therefore, have tendencies to exacerbate the fault lines of inequality in our weak and disjointed societies.

When an internal combustion engine was invented, a car, electricity or railroads in the West, they took over 50 years for the technologies to scale and they did within small bands of population. In fact as the reader might possibly know, there are still many parts of Africa with no electricity when this form of energy has been with us since at least 1879 when the electric bulb was invented or where it exists, the power efficiencies are so low that there is insufficient supply holding down national growth.

The Democratic Republic of Congo, as an example, sits astride the second largest river by discharge, in the world after the Amazon (the river Congo), with capacity to generate over 40,000MW and supply the entire African continent including export to Europe. DRC, however, still has less than 10% of her population with access to electricity! 

To demonstrate the effect of technological scalability and its potential for accelerating inequality, I will introduce Ms. Nakibuule, a 26-year-old mother from a very small trading centre, aptly named ‘Kigali' after the large numbers of Rwandan refugees in the 1970s in the area of Musubiro, in Lwengo district who left in 1994. She dropped out of school at primary five and has never seen her father. Her mother too left for Sembabule to find land for growing food.

Nakibuule and her husband, Isaac Kiddu, own no land and have to rent two acres every season at sh150,000 to grow 14 bags of 120kgs each, in a year fetching a gross of sh1,170,000 (2016 prices). She uses over 50% for food purchase (this aligns well with the average consumer spending in 2013 of sh244,400, according to UBOS, with 52% of this income spent on food alone).

Nakibuule and her husband do not own a cellphone for fear of cost because she has to take her five-year-old child, Kawuuki, to a private nursery school for sh50,000 a term, because according to her "the UPE schools here do not offer the kind of care and attention these private schools do for children". Now, I want the reader to compare Nakibuule with Gebbia and Chesky, the owners of Airbnb.

They live on the same planet as her but Nakibuule is in a technology rain shadow; she has been left behind and her lack of opportunity means that the more Gebbia and Chesky earn, the less and less Nakibuule gets unless (IMF estimates that a 1% raise in income share by the top 20% of the population, has very little to no impact on the GDP of a country while a similar increase in the income share by the bottom and middle classes, raises GDP significantly because the poor tend to spend on education, health and better food while the rich save extra earnings) as a country, we find a way to lift her and people of her calibre and their families from the crushing failure of small scale, landless, low calibre tools agriculture.

When I visited, she was making her evening meal of maize and a few vegetables, her Gomesi half tied around her chest and she told me "I cannot get good seeds, I have no land and I have missed the season for maize and my fear is that I will get a low price".

On whether she saves a little of this paltry earning in a year, she said "Ebyo ebya banka ne accounti, nokuteleka sente, bikyaali wala nyo ku nze. Sebbo sinabitukako" (literally translated ‘the matters of bank accounts and saving are still far away from me'). The question is how does the rapid uptake of technology really lift Nakibuule?

A recent report by an Education NGO, Twaweza, indicated that 20 of the lowest indices in school enrolment, child retention and teacher class attendance is in the North and the Eastern parts of the country. How will these kids along with Kawuka, Nakibuule son in Lwengo compete on a global level and ride the wave of the technological change? 

Young people and leaders of institutions in our country need to know that the largest gains in technological change are for the software developers and rights owners (capital holders) who take a significant chunk of the aggregated returns.  To go back to Uber, even traditional cab drivers (read workers) have to adjust to a new reality and, perhaps transit to a new ownership level/class in order to join the sharing economy or risk sliding into absolute inequality.

Our next installment will be about proposals to mitigate the effects of technology on the Nakibuule's of Uganda, shield them from extreme inequality and perhaps improve their earning capabilities in spite of their current status.

The writer is a farmer and entrepreneur