Africa alcohol black markets is booming
In some parts of Africa, barter trade still exists but it is more pronounced in the illicit alcohol market.There are a range of markets available to buyers and sellers of alcohol that allow them to exchange goods with a bottle of liquor or beer. But whereas some markets are highly regulated like Kenya and Tanzania, others are not regulated at all like South Africa and Uganda. The sale of tobacco and alcohol is fairly heavily regulated in many African countries, while there is little regulation governing the exchange of a second hand jackets between two individuals.While there are organised markets that we all know and understand, lesser known avenues of trade like the black market, grey markets and dark pools are all being increasingly relied upon by investors when buying or selling large blocks of financial securities. By definition, a black market is one which operates illegally within its particular country. Black markets develop quickly to fulfil unmet needs wherever there is demand for a product but restricted supply. The black market in drugs is an obvious example of illegal trade. There is also a black market in tobacco, a product which is heavily taxed and regulated in African countries like Kenya.Black markets usually arise where trading is restricted in some sense. For example a black market could arise in order to avoid taxes or price controls, or it could arise to meet unmet demand for illegal products or services.In Africa, grey markets differ in that they are not illegal, but they are not authorised or controlled in the usual way. Goods and services may be acquired in Tanzania and then legally taken to Kenya and sold. There may be no legal restriction on this kind of activity but it does affect the profitability of those trading in the normal manner in the country where the good or service is sold.One example of a grey market is the growth in online shopping that has occurred in Africa. African retailers have expressed considerable concern over the burgeoning online retail market, which has attracted the attention of shoppers due to its ability to provide cheaper, sometimes tax-free products. The popularity of this particular grey market is so strong that some of the most trenchant critics of online trading when it was first established, are now working within this market.
Recent estimates suggest online sales had reached $1.3 billion for the year ended June 2016 in East Africa.Grey markets exist outside of the usual market structures we have come to know. As a result these markets are often able to offer goods and services at lower prices, or offer a greater range, than what existing local markets can achieve.In terms of technology markets, a grey market for smartphones has recently emerged in Africa. This grey market is driven by the movement of phones from India, South Korea, Malaysia, Indonesia, Thailand and mainland China, given that smartphones were generally made available in those countries well before they were released in Africa. Furthermore, such countries source smartphones that tend to be sold at lower prices than those that were available to regular consumers in Africa. The result is a booming demand for smartphones in Africa, followed by the resale of these smartphones into the African market. In fact, the smartphone grey market has become such a key player in Africa’s technology sector that Samsung was forced to launch some of their devices in the western world markets and Africa simultaneously.In the case of dark pools buyers and sellers with large bundles of financial securities to trade are aligned with one another to complete their trades quickly and at low cost.This option has always been available to Nigerian, Kenyan, South Africa and Egyptian investors in the form of off market trades, though dark pools provide an alternative to the organised markets. This is particularly important for investors like large mutual funds or superannuation funds. Were these traders to push all their trades through organised securities exchanges, their trading costs would increase substantially because organised exchanges do not always have sufficient depth to deal with large trades. Prices can move dramatically when there are mismatches in supply and demand.Dark pools are informal in the sense that buyers and sellers identify each other, either directly or through intermediaries, and execute large securities trades without going to an organised securities exchange like Johannesburg Securities Exchange, Nairobi Securities Exchange or the Nigerian market.