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Friday, May 16, 2014

AMAZING SLUM ECONOMICS

Most of us would agree that slums should be destroyed from our cities and wiped off the face of the earth. Yet we are surprised at their ability to crop up and cling to cities like parasites in the most unlikely places. Sometimes in the city center. Sometimes right beside posh suburbs. Sometimes on a railway line and at other times in the heart of industrial waste. There does not seem to be a way to predict the location of their formation.

However, all slums have an economic code that holds the key to their life. In economics, only profitable things survive and thrive. Though slums are ruled by poverty, cheap goods, shanties, poor sewage and absent social services, slum economies have an amazing capacity to sustain themselves in the face of such appalling infrastructure. Slum economics must be profitable!

It takes an evening to set up a shanty house at a cost that will be recovered in one week's rent. Compared to an up market home that takes two years to build and twenty years to pay the mortgage. The shanty makes financial sense. By the time you pull down a slum dwelling, the owners have made a return on investment many times over. They are ready to begin the next project as soon as they can find ten square feet of unoccupied space.

You can survive for a month on slum meals at the price of one lunch at MacDonald's. In a slum, you can sell sweet by sweet and make 200% profit on each sale. You can sell one biscuit at a time instead of a whole box at once and still make more money by selling the box on its own. Capital can be accessed from shylocks at horrendous interest, but a good business like selling second hand shirts can pay back the interest in a few days. Security is a risk for outsiders not insiders. Nobody talks about "tax" while "legal vs illegal" is just a moral argument. There is really no place in the world where you can get such amazing returns for such small investments. No wonder people flock to slums while big retail chains make sure they have secure outlets in slums. Slums never leave; they find a place to live.

Allan Bukusi

  

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