A Different Business Model

I’ve heard before that business is a universal language. Whoever said that has clearly not worked in Africa. Business operations and models here operate very differently than in the US. Let me present a case study:

I went to the University Guest House to see about possibly renting a room for the next 4 months. When I got there it was pretty much dead. I was shown 3 available rooms that look like they haven’t had a guest in a while. The other people currently living there are the head of University security (whom I’m sure is living there free or as part of his compensation package) and 1 other guest. There is a staff of at least 3 that I saw, possibly more in the kitchen/restaurant. After looking at the rooms and deciding they were decent enough standard that I could live there I inquired about their costs. They run on a daily rate, kind of like a hotel, and for the three rooms I was shown the rates were 4,000 Naira per day, 4,500 per day, and 7,500 per day. This is equivalent to $800, $900 and $1,500 per month. Seriously. That’s WAY more than they are worth, considering all of them were a bedroom and bathroom only, they don’t have hot water, and the only difference seems to be amount of space per room. Also, because there is no kitchen I would have to buy all my meals either from their restaurant or elsewhere. Not cheap. So I said I might be interested in the 4,000 Naira one but I would need to get a discount. I explained that I would be here for FOUR MONTHS and that I would be paying cash. First they said they’d prefer that I stay in the 4,500 Naira one because it has a fridge and a more spacious bathroom. Whatevs. I still wanted to know the discount. They said they would have to call the Manager and ask and they’d get back to me. So they call me back a few hours later and say “The Manager wants to know what you’d like to pay.” So I said 2-2,500 per day. The girl gasped. “Oh no Aunty, that is only half of the rate of the room! I was thinking we could offer you 4,000 for the 4,500 Naira room.” Seriously? That’s $100 a month discount for a room worth less than half of that. If they are to let me stay they are guaranteed (at my higher rate!) $2000 over 4 months. And that doesn’t even include the money they would make from me ordering from the kitchen everyday, which could easily add up over time! But instead they will make around $0 because I’m sure they will have nearly no visitors in the next 4 months. Even if they have one guest who stays 2 days every week (which I’m sure is a gross overestimate) they will only make $240 a month instead of the $500 I would be willing to give them (just for the room) and I’m sure I’d order more from the kitchen. I have the ability to give you some serious money and you want to try and gouge me for a sub-par room even though you will probably not be able to make anything close without my patronage? No thanks, I’ve got other options.

The same thing happens when Emil & I travel with the Juniata students to Senegal & The Gambia. We usually have a lot of students for a total group around 25 or 30. Emil tries his best to negotiate discounts but the restaurants won’t budge. They without fail will say “Pay full price this time and I’ll give you a discount next time” knowing that we either won’t come back or if we do, the “discount” is usually free cokes for me and Emil. Hardly a discount. After pondering this for many years Emil postulated that these businesses are so used to not making regular money that rather than making a discounted amount of money (which we would generally regard as good) they’d rather take the risk not making any money at all on the off chance you actually end up patronizing their business and then they can charge you full price and therefore make more money. Seems like a big gamble to take to an American, but clearly we have a different business model. We kill ourselves to make the customer happy and attract more customers, but in Africa, they seem resigned to the fact that you won’t make much anyway, so if you do make any money it’s like a bonus. It can be very frustrating to Americans who aren’t used to working with this frame of thinking.