Growth in Africa’s informal trade with China needs more formal diplomacy

China Southern Airlines announces 3 flights a week between Nairobi and Guangzhou. This can only be a signal of increasing informal cross border trade between the greater African continent and China’s manufacturing hub. Earlier, we’d noted the importance of this trade for Kenya Airways when they announced the opening of a ticket office in Nairobi’s Tea Room area – a hotbed of informal trade that supplies the entire country, and beyond.

 The informal level is often ignored in discussions about Africa-China trade but it plays a massive part in the overall trade relations between the two. African traders based in China act either as direct buyers or middlemen and organise the logistics behind thousands of container loads of consumer goods headed for African ports. Transactions are in cash and all parties watch each other like hunting hawks, as lack of trust is the normal state of affairs.

But the addition of more flights, this time by a Chinese airline implies brisk business in this critical trade corridor. Here’s a key snippet from a recent article in mSafiri, Kenya Airways’ inflight magazine:

One trader said that virtually every flight from West Africa brings around two million dollars in cash, and there are around eight flights a day.

We don’t know the dollar value (in cash!) of the flights from East Africa, but if they are anywhere close, then we can do the math for 3 additional flights a week!

Its not just Kenyans who make the journey, lugging back suitcases bulging with products or placing orders for containers to arrive in Mombasa. Nairobi’s JKIA serves as a connecting hub for traders from both the Congos, Rwanda, Tanzania and more. As the mSafiri article informs us:

Nigerians form the largest group, followed by Malians, Ghanaians and Guineans. There are traders from DRC, Kenya, Tanzania, Zambia, Zimbabwe, Uganda, Sierra Leone, South Africa and a fairly large contingent from Angola.

Some researchers believe that 90% of goods in African markets today come from China, Thailand and Indonesia, and it is the traders in Chocolate City who organise the thousands of containers that make their way to African ports.

Even as we note the benefits of this pipeline of affordable consumer products reaching the smallest village market, there’s an increasingly visible downside. Travelling afar for new opportunities is not just a one way flow, and the Chinese in turn have been coming into Africa’s informal markets as well. How this increase in competition will impact livelihood activities at the local level remains to be seen.

Cultural differences and mutual suspicion seem to run deep.

African smallholders have complained bitterly that Chinese hawkers have been driving them out of the market by undercutting their prices and by operating cabals. There have been protests, riots and violent stand-offs between African and Chinese people at mines, factories, shopping malls and markets. Indigenous building contractors and architects also complain that Chinese firms use underhand means to secure contracts and that their operations are opaque. The build quality of some Chinese construction is so poor that official complaints have been made at the national level, for example, by Botswana.

The thousands of African traders who travel to China and other Asian countries to place orders for consumer goods complain that they receive poor treatment from the authorities, are racially discriminated against and abused and cheated by their trading partners.

As Anver Versi, the author of the excellent indepth article says, in conclusion:

One cannot help thinking just how much this form of business could develop if the African entrepreneurs were treated better by the Chinese authorities and given some protection against crooked dealers. It would also make the large presence of Chinese people in Africa more palatable.

 

 

This entry was posted in Africa, Business, Emerging Markets, Informal & Flexible, Perspective, Prepaid Economy & Informal Sector, Sub Saharan Africa and tagged , , , , . Bookmark the permalink. Trackbacks are closed, but you can post a comment.

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