Making Sense of Digital Disintermediation and Development: The Case of the Mombasa Tea Auction

Abstract

Firms in the Global South often suffer by being at the end of long value chains full of middlemen (intermediaries) who capture value and inhibit information flow. But as ever more of the world becomes digitally connected, digitally-driven disintermediation is seen as one of the key benefits of adoption of information and communication technology (ICT) and internet connectivity for firms in the Global South. However, few analyses have delved into the detail of disintermediation and potential uneven impacts that may emerge from such processes. To support such an analysis, we explore transaction cost theory in detail to highlight potential gaps in analysis of disintermediation related to institution-, normand powerdriven analysis of transactions. We do this by looking at the East African Tea sector. Within the sector, the Mombasa Tea Auction was seemingly a good candidate for digital disintermediation, but with strong resistance for well embedded institutions attempts to create an ‘e-auction’ have yet to fully come into being. At the same time new channels of disintermediation are emerging between well connected firms which are less inclusive. This work then highlights key points in analysis and practice around disintermediation. Perspectives that privilege economic aspects of transactions may miss out on important processes as disintermediation emerges. We suggest that a greater awareness of the ways that actors exert power and strategically use institutional resources are important in understanding the wider developmental impacts of digital disintermediation.