Velkommen til lørn.tech - en læringsdugnad om teknologi og samfunn, med Silvija Seres og venner.

Silvija Seres: Hello, and welcome to lørn.tech. I am Silvija Seres and our topic today is tech4good. My guest is Ylva Santesson, a charming Swedish lady who is running or is Head of Growth at a company called Red Flash Mobile. Welcome. 

Ylva Santesson: Thank you very much, I am very happy to be here.

Silvija: Ylva, we will talk about Red Flash Mobile that does digitalisation on micro-taxation in Africa, it’s a mouthful, but I will hope you will make us understand. Before we do that, could you tell us a little bit about yourself and what brings you to impact work.

Ylva: What brings me to impact work. So, my name is Ylva and I am from Sweeden, I have a background within engineering biotechnology and also business and economics. I have been working a lot with emerging markeds through the military, since I am educated as a military interpreter and that brought me actually to Africa.

Silvija: What languages? 

Ylva: I was originally educated in Russian, then I have been working with French due to the Swedish UN forces in Mali. So that brought me to Ivory Coast, Cöte d’Ivoire, where I met Red Flash for the first time. 

Silvija: You met them.

Ylva: I met them, basically. Yes. 

Silvija: What do they do?

Ylva: After we pivoted we did micro-taxation in Africa. That means that we enabled governments to tap into the economy of the informal sector. 

Silvija: How does one do that?

Ylva: We basically create a digital plattform for taxation. We talk about micro-taxes.

Silvija: What is a micro-tax?

Ylva: Micro-tax is small, small taxes, in small volume with high frequencies, from many people high volume. 

Silvija: So basically transactions that would normally not be registered anywhere, but that should be a part of this formal flow of capital.

Ylva: Well, there is a system before taxation of micro-taxation, we talk about enterprise taxes here. It is not citizen taxes, but micro enterprises. Micro enterprises could be any type of small business going on in the streets, it could be a taxi driver, a merchant on the street, it could be someone with a stand on the market.

Silvija: Basically lift them from being a part of the black economy into the white economy. 

Ylva: We help these people to migrate to the formal sector, creating financial inclusion. On the one side we have the government for which we increase tax revenues, obviously. Since everything is digitised, we create traceability and you can guarantee that the taxes actually reach the destination where it should be, they don’t disappear into the pockets of any middle men, or something. We fight corruption too, in that way, by creating transparency. On the other side you have the individual, and by creating traceability we build credit record, credit record supports the migration to the formal sector which creates financial inclusion. That gives the individual access.

Silvija: I can understand the drive that the government has for these kind of services, but isn’t it better for people to just be informal and not have to lose any part of their revenue for taxes, or are they getting some advantages from this inclusion?

Ylva: Absolutely. The cost outside of the system is much larger than we can see, because these individuals don't have access to healthcare, education, insurances and all those things. But by inclusion in the system, we can start offering them access to public services and social security. For example, we are already collaborating with health insurance companies, so we can offer micro insurances, micro health insurances to these individuals. And these are just one of the products in our pipeline, so it’s really exciting. And also, I want to include that there is already a system for taxation, so these people already do pay tax, the problem is that the tax doesn’t reach the destination, it disappears on the way. So actually, the incentive for the individual is huge. What we do is we create an efficient system. Before it was a paper based ledger and receipt system.

Silvija: And we know where most of it ended up.

Ylva: Or we don’t really know. That’s the problem.

Silvija: Some time ago I visited Myanmar and one of the things that struck me in the countryside was poor villagers struggling to get into financial inclusion, because basically all the money they make disappears in one stroke when somebody get sick, for example. So this is the importance of having some sort of stability in your life by being included in the whole public sector that actually should be there to help you if you actually need to have an urgent surgery at some point. What happens is that the middle man actually borrows money, but with a very high interest rate, that we should never really kind of get out of in the end. If you can give people financial and social inclusion, you are also giving them an alternative for the future. 

Ylva: Absolutely, there are so many upsides, so we can’t even see all of them. When you talk about micro insurances, if for example a farmer can ensure their harvest, they can start to take more risk, meaning that they can actually invest in harvest or different types of seeds that might be more sensitive to dry periods, but also have a greater retrieving. If you can ensure these harvesters and they know that one year out of five it will fail because of the dryness, then they will be ensured for that single year, and for the four other years they will have a great return. That will in the longer run make up for the lost harvest, but if they don’t have the ability to ensure this harvest, they know that the single year when it fails their family will starve, so they can’t take that risk. So this is good, not only for the individual, but also for the entire economy. It creates sustainable economic growth. 

Silvija: Do you roll this out in Mali or Africa, or?

Ylva: We are operating in Senegal, currently. Senegal is our operative marked for now, but we just signed last month with four new countries, Gabon, Togo, Central African Republic and Guinea-Bissau.

Silvija: Could you extend the system into being more of a reporting tool of the individual towards the country and help them expand it from basically taxation into other things, or does it actually go the opposite direction to incubator and narrow it down?

Ylva: We can definitely expand it. The solution is an open source plattform, so there are any possibilities to expand it in different ways. But for now it is important for us to focus, just focus to get running and create revenues.

Silvija: Get concrete roll out.

Ylva: Yes, and focus on the single product we have today.

Silvija: What is your business model?

Ylva: We have today a tiered fixed recovery revenue model, so we basically tax or invoice our tax authorities based on the size of the immunity polities or the size of the market that we are operating in.

Silvija: Can I ask you about a political question? In some of these countries there might be powerful individuals who do not want this transparency. How do you get rolled out anyway?

Ylva: We haven’t met those yet. We need to collaborate with the international organisations, so now we are collaborating strongly with the World Bank and they already have agendas and programs for this. So that is super important of course.

Silvija: You might make some of the financial support these countries contingent on them and actually showing transparency.

Ylva: Yes, now for example we have Senegal, Goban and Togo and they have budgets from the World Bank. It is meant to be working with digitisation and financial illusion, so those money actually are coming from the World Bank. It is a very good question, because it is interparent of the support, the political agendas, since we don’t have a mandate ourselves.

Silvija: You said that you are building an open plattform. Tell us how you build your product. What is the uniqueness of it, is it the application? The data? The tools? How do you bake your thing?

Ylva: It is the application. For now it is actually the APC are closed. but we can easily open them up. I'm not going to tell the secrets here, but the uniqueness of it is the application of it. What was the question again?

Silvija: I was just asking, how does a plattform like that work. Is there a block chain thing?

Ylva: It is not a block chain for now, it is actually quite easy. 

Silvija: I have a mobile phone, I'm a taxi driver, I register…

Ylva: No, no, no. It is not a taxpayer that is actually using the product, it is the tax authorities. Our customers are tax authorities and they have agents. The first step that we do is that we digitize all the data about the municipalities. We are basically creating digital geotags, everything is geotagged. In the second step you register the micro enterprises.

Silvija: So I am a taxi driver and I got registered.

Ylva: You get registered by the tax authorities, one of their agents or one of us in Red Flash. 

Silvija: And they have a way of checking my revenue.

Ylva: They register you in the system and you get a QR code, so basically you get a digital ID. That QR code will be scanned. So every time agents come to control if you paid your tax or not. You are supposed to pay your tax every week or month it depends on your business. They check your QR code and all data related to you and your business are connected to that QR code. So the agents are working with a tablet scanning QR codes. But you can login via app, via your mobile phone or your computer, if you have one, and you can see all your data and you can print a receipt or you can go to the bank and show them that you have paid all your taxes.

Silvija: I think it is very nice because mobile phone is a technology that is really well spread, so you kind of leapfrogged a whole generation of infrastructure.

Ylva: That is amazing in Africa by the way, they are so keen on technology and very good at adapting. 

Silvija: It is, I guess, what gives them the access that they have. What is the difference between a micro credit and a normal credit, or a micro lending or a normal lending.

Ylva: All those micro financial products is about small volumes/high frequencies from a large number of people. So it could be like two NOK per payment, or even 50 cents per payment. Then you have a huge market in Africa. 

Silvija: I think we in the very well structured, rich west don’t understand what a society without a working bank system looks like. Which is why they need this micro stuff.

Ylva: In Africa, 86% of the working labour force is in the informal sector. The informal sector has an economic output of about 30-50% of GDP, while the contributed tax is only 3%. As you can see there is a huge gap and that offers us of course a huge opportunity. So the African continent can actually increase the revenues by 99 billion US dollars just by making the current system more efficient. 

Silvija: What do you think are the most interesting controversies in what you are doing?

Ylva: You have touched up on that already. It is of course always this thing about fighting corruption and how do we create incentives, because we don’t have a mandate to force anybody to do anything, so we need to create incentives. It is basically making people understand why it is good to pay the taxes. We need to work with culture here, because we can not guarantee that the authorities or the governments are actually using the money they increase in tax revenue to reinvest them in social, society infrastructures, we don’t have that mandate. That is why it is important for us to collaborate with international organisations. That is one of our biggest challenges in terms of political and also cultural aspects. 

Silvija: Ylva, you mentioned this Std 2030 project. We know that the UN came up with 17 sustainable development goals, but what is Std 2030?

Ylva: It is the program to the UN who has created all these goals that we want to achieve.

Silvija: …By 2030. What I think we are forgetting is that we are quickly approaching 2030. It is faster than we realise.

Ylva: I think it is super important to understand that all these goals need to work together and everything is integrated. You can’t achieve one without another, it is not separated silos, it is like everything is connected. 

Silvija: Very nice. Is there a book that you would recommend people to read to get inspired to work on this, or where should we go?

Ylva: I can’t really say that there is a book that is inspiring to what we do exactly. What I had in mind was this powerful book, Good Strategy/Bad Strategy, talking about business strategy in general, not especially talking about impact or anything, but definitely everybody could learn from it. I think it is interesting too to keep in mind that the most important thing at the end of the day is actually culture not strategy. Strategy is super important but culture...

Silvija: ...Culture is what makes it happen.

Ylva: Yeah, and culture eats strategy for breakfast. So even though you have the perfect, best business strategy, at the end of the day you come to Senegal and nothing really matters if you don’t understand the culture. 

Silvija: Do you have a quote you would like to leave to our listeners as a little parting gift?

Ylva: I have a favourite quote from a very famous man or a very famous businessman, it says that When you put the right business people together and they start becoming friends, they will end up doing business together. 

Silvija: Do you have friends like this in your business?

Ylva: Definitely, I think its all about people, everything is relation based at the end of the day. 

It is so important to build strong networks.

Silvija: I think also the power of individuals is something we shouldn’t underestimate. Many really amazingly, big things have happened by somebody starting and then managing to attract people and inspire them to move.

Ylva: Of course, and the individual is the smallest part of the relation, everything is mutual, cross into relation wise.

Silvija: I agree. What you do, you actually end up building a movement for better transparency in Africa, I think you have created a really powerful change.

Ylva: At least we are working on it. 

SS If people were to remember one thing from our conversation, what would you like it to be?

Ylva: I liked that you actually touched upon one of the key problems or challenges, talking about how do you create incentives, why should we pay checks and how can we make people understand that it is a good thing to contribute to the public goods. If we do it together it will benefit everyone.

Silvija: I guess it might take a Scandinavian to help the world understand.

Ylva: Probably, I think we Scands are probably tax kings and queens. 

Silvija: We see that it is used well and wisely. Ylva Santesson from Red Flash Mobile, thank you so much for coming to Lørn and helping us understand the value of digitising financial services but also understanding the values of good financial services.

Ylva: Thank you very much.

Silvija: Thank you for listening. 

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