Three Tips for Entering a Market After a Humanitarian Crisis
With the number of people affected by humanitarian crises almost doubling in the past decade, more people than ever are recovering from these crises and need new investment and business opportunities as they rebuild. Sometimes an emergency is an opportunity to grow a new market – for example, to scale up sales of natural gas […]
With the number of people affected by humanitarian crises almost doubling in the past decade, more people than ever are recovering from these crises and need new investment and business opportunities as they rebuild. Sometimes an emergency is an opportunity to grow a new market – for example, to scale up sales of natural gas canisters to populations that have lost access to foraged cooking and heating fuel. But more often than not, the challenge and opportunity is to find a market solution for businesses and households to restore their normal production and consumption behaviors.
This is the first of a series of posts written by OnFrontiers expert and humanitarian response practitioner Benjamin Barrows. Ben is an expert in economic and community development programs across the Middle East and Africa. He specializes in engaging with private sector actors and governments to prepare for disaster, increase resilience, and recover from natural disaster and conflict. Here are Ben’s best practices for entering the market of a country emerging from a humanitarian crisis:
Tip #1: Stay grounded
Early investment after a humanitarian crisis can provide attractive returns and be socially impactful. Working with crisis-affected businesses to meet their short- and medium-term needs while emerging from a crisis can also be a good way to establish a fruitful long-term relationship. But getting involved after a crisis shouldn’t be undertaken without help: local expertise, connections, and vetting are essential to accurately assess risk and understand opportunity. Local expertise can provide insight on current events and the intentions of key actors before that data shows up in reports, the media, or the risk and investment models wielded in the offices of competitors.
Additionally, a crisis that alters the dynamics of supply or demand creates pressure on market actors all along the value chain for affected goods and services, both within and beyond the geographic area affected by the crisis. Those actors will have an unrivaled understanding of what they need from an investor or new business partner; these needs may include an alternate buyer for their inventory, financing to replace equipment, or expanded access to regional markets.
One example that comes to mind is the 2016 El Niño effect drought that led to a major cereal production shortfall in Mozambique. Actors who considered the big picture nationally and regionally – the drought was compounded by an active civil conflict in the north and discouraging macroeconomic trends – and also solicited detailed local knowledge were able to seize an opportunity to source large volumes of cereal from the world market to the affected areas.
Tip #2: “What’s past is prologue”…
If there are similar emergencies in the country’s recent past, it’s helpful to look at how markets behaved at that time. As a humanitarian response practitioner that has responded to emergencies on four continents, I find that history tends to repeat itself: emergencies from the past can be invaluable to predicting how things will play out in today’s crises. The type of emergency and how the national government, private sector, and international community responded to the emergency provide basic indicators – such as changes in price and availability of supply – that can be useful to gauge if, how, and where to enter the market.
Areas that experience regular humanitarian emergencies borne of natural disaster over, let’s say a decade, will display a similar profile of need, risk, and opportunity across those emergencies. For example, Sindh province in Pakistan falls into this category as it has experienced emergency-level flooding along the Indus flood plain nearly every year since 2010, when a massive flood affected 20 million people and caused billions of dollars in damage to infrastructure and crops. Chronic, seasonal emergencies punctuated by large-scale emergencies sap consumer purchasing power and debilitate less resilient private enterprise.
Tip #3: …But don’t expect markets to pick up where they left off
If courting national or subnational markets, beware that consumer purchasing power and spending habits are distorted by a humanitarian crisis and subsequent interventions. Less resilient households and businesses are sometimes forced to liquidate productive assets as a coping mechanism in response to the crisis. The post-crisis “new normal” in market dynamics may be important in different ways from pre-crisis, particularly if there was significant displacement of persons and/or damage to critical infrastructure. Reacquiring productive assets can be a barrier to the resumption of normal supply and demand.
If the humanitarian crisis is one of civil or political unrest that has stoked social tensions, particular care should be taken to be appropriately sensitive. It’s also important to bear in mind that conflict can act as a sorting mechanism, dividing people along identity lines with profound implications for production and consumption patterns not just during the crisis, but also during a lengthy time of social healing following the end of the crisis.
Next up in our series: red flags when operating in a country experiencing a humanitarian crisis.
Featured image was taken by Colin Crowley in Port-au-Prince, Haiti.