Archive for the ‘China’ Category

The Strategic Entry of China’s Transsion into the Vacuum Left by Nokia in Africa

Branded storefront in Karatina, Kenya (April 2013)

If you’re outside Africa, you’ve never heard of them before, but a mobile phone brand called Tecno has been painting Kenya blue ever since I started fulltime fieldwork there in late 2011. It was in Mombasa that I first noticed the name and wondered what it was about. Over the years, I saw the line up of phones even in the smallest market towns and began wondering if this brand would be the new Nokia of Africa.

Transsion, Tecno’s manufacturer, has two other brands on the market – Itel, and Infinix catering to different price points and consumer segments. What sets the company apart is that they are solely focused on the African continent and do not even sell in their domestic market of China. This was a strategic decision, as a recent article says, and their rapid success very likely due to the vacuum left by Nokia. They’ve customized completely for the African market, going as far as to develop cameras suited for local conditions, something no other phone manufacturer has done anywhere on the planet.

“For African consumers, a main medium of entertainment is photos – they love to take selfies and share them with friends. The traditional camera was not optimised for the African consumer because often, for those with darker skin, the photos don’t come out well especially in low light. We did research using over 10,000 photos of African consumers to create a special algorithm to optimise the camera to attract 30% more light on the darker face. We call this ‘Africa Focus’. It’s been heavily popular. It improved our cameras and won the hearts of Africans who like to take selfies.

In fact, Itel is so popular among traders in the Uganda Kenya borderland due to its low price and long battery life, that our research associate went as far as to capture the mound of Itel packaging seen on the rubbish heap.

They’ve brought in local languages and messenger apps. They’ve established a factory in Ethiopia to show their commitment to Africa, and they’ve set a full customer care facility – something glaringly missing from any other imported brand’s portfolio.

In my opinion, they’ve done what Nokia could have and should have done, cater to the emerging markets across the developing world where they’d originally begun connecting people.

And, they’ve shown us that it is indeed possible for a consumer product manufacturer to not only focus solely on the African consumer market but to make an outstanding success of it.


Quartz echoed the story to share the factoid that in Africa, not only have featurephones sold more than smartphones but Transsion’s brands lead the way.

India’s Hidden Middle Class and the MNC Conundrum

The Economist writes a rather breathless take on a theme very popular just over a decade ago – the Great Indian Middle Class so longingly hoped and wished for still hadn’t emerged to satisfy the consumption habits preferred by the global multinational brands. Where were they, the article shrilly asked, unquestioningly promoting China’s middle class as an MNC success and overlooking all the challenges documented theretofore.

There’s an undeniable consumer boom visible across India, I’ve seen it and documented it myself. The difference this time around is that its a “hidden middle” – hidden from the lenses that MNCs use to identify their preferred customer for iPhones and IKEA, pizza and burgers. Having worked for both an MNC – All India advertising for Hewlett-Packard India in 1996, and an advertising agency – McCann Erickson 1994-1996 during the first decade of market liberalization, I discover I’ve so much to say to this Economist nonsense that I’ll bullet point my thoughts below to grasp some order from the ramble.

  • One of the first things I’d noticed in the March 2017 trip was that the style and flavour of the markets we’d used to frequent had changed. There was indeed a consumer majority now but it wasn’t the global elite preferred by MNCs. Where once malls were full of western style wear, and one could identify a woman’s economic and social strata by her fashion choices, these lines had blurred and democratized so much so that the market itself had changed.
  • Aspirational purchasing meant that pricing had to suit the pocket of the ambitious though the clothes were local versions of global styles. Everyone in the city wore western wear, though obviously of Indian cut and make. What I saw happening was what India has always done for centuries – absorb the foreign influence and make it uniquely her own. Its been two decades and the time is about right for the unique Indian middle class to emerge.
  • This hidden middle harks back to the original concept of middle classes – perhaps a factory worker who is now paid enough to maintain a motorcycle, an ATM card, and all the mod cons in his one room home. Or, the now grown up children, educated in English, taking over the discarded jobs of the former English educated elite in the call centers and the banking halls, the plethora of hospitality outlets and airlines, to bring a sheen of polish that hitherto never existed for their parents’ generation.
  • This middle class prefers their spicy Indian food, dolled up in a fast food outlet, looking like a Big Mac but tasting like home. This middle class will add paneer to their pizza and cumin to their soda water. You won’t see them at all if you’re hawking your pineapple on your ham.
  • This middle is 300 million strong I’d agree with the Indian executives mentioned in the Economist article. They can sense it but they can’t deliver it up in the manner that the research reports and multinationals require. That’s why there’s a huge missing middle, the same reason why Africa’s consumers are invisible for the most part, they don’t look like the Consumer nor fit the segmentation attributes.
  • One quick example that ports across cultures and countries is the taxi hailing app divide – there’s a local variant, Ola, that’s 1/3 to 1/5 the price of the global giant, Uber. The Ola driver accepts a variety of payment mechanisms including cash. He said to us that Uber was more popular in the better parts of town and considered an upper class product, while Ola was for everyone, even his own wife. This kind of brand segmentation exists up and down the spectrum of goods and services, rooted as it is in elements of India’s heritage and culture. And the mass majority brands will always take the lion’s share of consumers away from any imported brand. Unilever is quoted in the Economist article but the company had been known as Hindustan Lever for decades before hand and has faced its own struggles with indigenous upstarts like Nirma.

And, I suspect, that global multinationals, barring a few who’ve been around forever and a day, may never really crack the Indian market, just like they haven’t really done what they’d set out to do in China either. An ideal moment, on the other hand, to rethink the consumption driven growth frenzy required of these brands.

NB: The shopkeeper’s sign claims to sell both wholesale and retail.

Trading economics: a new theoretical system

From the Financial Times, a snippet from a guest post by Wang Zhenying, director-general of the research and statistics department at the PBoC’s Shanghai head office and vice chairman of the Shanghai Financial Studies Association, summarising the arguments in his new Chinese-language textbook on economics.

“Trading economics” is one new theory emerging against this backdrop. Mainstream economics deduces the macro whole by extrapolating from the behavior of individual “representative agents”. Trading economics replaces this with a systematic and comprehensive analysis approach. It stresses that in an interconnected world, the interaction between trading subjects is the fundamental driving force behind the operation, development, and evolution of economic systems.

Trading economics first analyses the actions of trading subjects, then builds a dynamic trading network among trading subjects through trading relations, and finally reveals the operational rules of the economic system. The rules could be examined from two perspectives: short-term and long-term. The business cycle and price changes are examined in the short-term perspective. The long-term perspective would focus on the rules of economic evolution as well as changes in technology, knowledge, system, and network.

Throughout the history of economics, trading economics is the first and foremost theory to incorporate all economic phenomena into an all-encompassing logical system. It changes the long-standing scenario in the economics field, that is, the macro was separated from the micro, and the short-term from the long-term. Trading economics is a revolution of mainstream economic theories and is bound to exert a great and profound impact on all areas, including economic theoretical research and practical application.


NB: I thoroughly enjoyed reading this summary and expect to contextualize future research with some of the theoretical frameworks as presented here.



A Unique Path to Development Seen for the Informal Economy

Just recently I stumbled over this slim book < 60 pages that analyzed existing data sources in order to frame an answer to the research question they posed:

How did the informal economy―markets and the private sector―develop in the absence of legal and administrative frameworks to support it?

Some of the most intriguing insights extracted here:

And they echo my own statements regarding the East African Community that its the informal sector that’s growing faster and responsible for employing the majority of the population. This makes integration and bridging efforts between the formal and global together with the local and informal even more critical.

The path to integration as described in the book may not apply to the African economies but holds some unusual insights for those in eastern Europe which may struggle with some of the same issues of top down planning and grassroots income generation.

All in all, the step by step approach over the past decade to recognize, and thus integrate the informal sector was much appreciated and if you’re interested, you can download the book here.

Absolute Numbers 2007-2017: The “Developing” World Now Dominates the Internet


Traditionally, the data on ICT usage across the world tends to be presented proportionally – per capita usage, or penetration in the form of percentage of population. This made sense 10 years ago, when the world had just begun to notice the rapid growth of mobile phone adoption in developing regions. The typical example shown above was extremely popular – many of you will recognize it – Africa was outstripping the world in phone sales, and the prepaid business model had opened the floodgates.

At this time, however, devices were still at the feature phone stage, and Nokia owned the market. Voice and SMS were the real time communication disruptors, and smartphones only just entered the public consciousness. Internet penetration was still in the future.

Recently, however, I came across current data on internet usage presented in absolute numbers – shown above – of people online. The difference is rather stark, when compared to the proportional representation – see below.

Not only are the next two billion online, but the absolute numbers re-order the regions in a very different way. Asia leads the world online, and even Africa ranks higher than North America. Here’s the same data presented, by region, as a pie chart.

The distortion created by proportional or per capita presented skews the true landscape of the actual human beings who are using the internet. Ten years ago, this might have made sense given the passive content consumption nature of much of the early world wide web.

Today, given the dominance of social media, and the frictionless ability for anyone to share their thoughts, their photos, or their music video, its the absolute numbers that actually make a difference. There is more content available in Mandarin than in English, though we may not know it, and there are more Africans talking to each other every morning than there are North Americans.

I’ll be following up with more writing on the implications of this historic decade in human history – between 2007 and 2017, the long awaited next billion not only came online, but began showing us how to disrupt everything from cross border payments, to cryptocurrency adoption. They are my hope for a more peaceful, inclusive, and sustainable future for our grandchildren.

As global firms (MNC) pull back from emerging markets, what does this mean for Africa?

tumblr_nwsbz0ytDw1qghc1jo1_500Last week’s issue of The Economist drilled down deeper to cover the retreat of globalization – at least in the most visible form, that of the multinational brands dotting cityscapes around the world. The retreat of the global company, they trumpet, the end of Theodore Levitt’s vision.

Credit Suisse takes a concise yet comprehensive look at these weak signals in their well-written report that frames the situation as a transitional tug of war between globalization and multipolarity – an inflection point, rather than a retreat. They make it sound like missing the turn at an intersection and having to come back to the traffic lights to figure out which way to go.

Duncan Green of Oxfam captured the essence well:

But the deeper explanation is that both the advantages of scale and those of arbitrage have worn away. Global firms have big overheads; complex supply chains tie up inventory; sprawling organisations are hard to run. Some arbitrage opportunities have been exhausted; wages have risen in China; and most firms have massaged their tax bills as low as they can go. The free flow of information means that competitors can catch up with leads in technology and know-how more easily than they used to. As a result firms with a domestic focus are winning market share.

In the “headquarters countries”, the mood changed after the financial crisis. Multinational firms started to be seen as agents of inequality. They created jobs abroad, but not at home. The profits from their hoards of intellectual property were pocketed by a wealthy shareholder elite. Political willingness to help multinationals duly lapsed.

Of all those involved in the spread of global businesses, the “host countries” that receive investment by multinationals remain the most enthusiastic.

The first thing to note is that the global MNCs being considered by The Economist are primarily the legacy ones  – fast food chains like McDonalds and KFC (Yum Brands) – whose shiny logos used to represent the liberalization of the closed markets of India and China.

Even at powerhouses such as Unilever, General Electric (GE), PepsiCo and Procter & Gamble, foreign profits are down by a quarter or more from their peak.

or the few examples of emerging market brands that have gone global such as China’s Lenovo which purchased IBM’s Thinkpad and India’s Airtel which bought into the African market.

What’s being touted as their competition are regional brands, who aren’t as stretch out globally in terms of their supply chains, and less vulnerable to currency volatility. Further, the majority of these global brands are heavily dependent on their B2C marketing and sales – the question of whether they ever managed to understand their new markets is a topic for another post.

And so, we ask, what will this mean for the emerging economies of Africa, who are only now seeing the first fruits of FDI? Who will come and develop their consumer markets?

India and China apparently. And strategically – through unbranded affordable commodities and the acquisition of successful regional consumer brands – rather than the legacy MNC approach influenced by Levitt. Even Japan recognizes this, as they seek to piggyback on the Indian experience.The economics of scale that propelled the first rounds of growth for the manufacturers of washing machines and the automobiles never did make sense infrastructurally for the majority of the African consumer markets.

Instead, the patterns pointed out by The Economist and Credit Suisse imply that opportunities will lie among regional stars – Equity Bank of Kenya, for instance, whose regional footprint is surely but steadily creeping outwards across the East African Community and trading partners – or, the telcom brands such as Tigo (Millicom) who innovate for each of their local markets.

The jobs and exports that can be attributed to multinationals are already a diminishing part of the story. In 2000 every billion dollars of the stock of worldwide foreign investment represented 7,000 jobs and $600m of annual exports. Today $1bn supports 3,000 jobs and $300m of exports.

Godrej, for instance would be considered a regional Indian giant rather than a multinational in the conventional sense of a Unilever or P&G.

Where [MNCs] get constrained is, they are driven by lot of processes that are global. For a smaller organisation like us, we are completely empowered; decision-making is quick and we can initiate changes very fast. We are more agile and have an advantage over them.

Yet their expansion outside India shows a “pick and choose” strategy of markets they’re comfortable entering.

The group’s acquisition strategy hinges on identifying unlisted companies built by entrepreneurs looking for capital, picking up stakes and working with them to scale up their businesses.

At least two homegrown Kenyan FMCG brands – skincare by a global giant and cosmetics by private equity – have been acquired. As have snack foods, spices, dairy products, and other products that cater to local tastes. The best known being Fan Milk of West Africa. Private equity such as Abraaj make no bones about going after consumer driven opportunities.

Given these choices, sustainable African businesses who understand their consumer markets have an opportunity to establish their brands and grow – with the financial help that’s strategically becoming available.While Chinese imports make the market highly competitive and price conscious, fish and tyres are substitutable goods in a way skincare and cosmetics are not.

African consumer companies – formal, informal, or semi-almost there-formal – need to hustle right now.

The retreat of the MNCs offers a chance to exhale, and expand, and grow, but the advent of the East implies waking up to the need for serious strategic thinking about domestic comparative and competitive advantage – one of which is incomparable knowledge of local consumers, culture, and needs, and critically, experience of their vast informal sectors and cash intensive economies.

Le commerce direct des produits fabriqués en Chine est-il susceptible de perturber le marché des consommateurs africains?

This article has been translated into the French by Yacine Bio-Tchané

La première plateforme d’e-commerce spécialisée dans la vente directe des produits fabriqués en Chine vient d’être lancée au Togo, un pays de l’Afrique de l’Ouest. Coincé tout comme la République du Bénin entre deux grands pays davantage connus, le Nigeria et le Ghana,le Togo est un petit pays francophone d’environ 7 millions d’habitants.

frenchComme l’énonce l’article :
« Nous voulons être les pionniers du commerce électronique au Togo et tirer parti de la forte coopération multiforme entre la Chine et le Togo, le premier pays carrefour commercial en Afrique de l’Ouest “, a déclaré Yuan Li, fondateur de JMSA-MALL, à Xinhua vendredi dernier à Lomé.
«Nous faisons la promotion d’échanges commerciaux directs, entre les clients africains et les commerçants chinois, de produits authentiques chinois à des prix intéressants “, a-t-il expliqué.

Des appareils électroniques jusqu’aux machines agricoles, la plate-forme offre une large gamme de produits chinois, qui sont vendus au Togo, ainsi que dans plusieurs autres pays de la sous-région tels que le Bénin, le Niger, le Ghana et le Burkina Faso.

Toutes les principales cartes de crédit sont acceptées comme mode de paiement ainsi que le système de paiement local via mobile money – Flooz (Moov). Il y a une politique de garantie avantageuse, et les articles sont entreposés à leur arrivée dans un bâtiment local pour les livraisons, au cas où l’article commandé n’est pas déjà disponible en stock dans leur entrepôt local. En outre, JMSA-MALL offre aux PME locales l’occasion de vendre leurs marchandises à travers leur plateforme. En apparence, cela semble bien – en supprimant les intermédiaires, ils peuvent offrir des meilleurs prix.

Yacine Bio-Tchané, notre collègue béninoise a aussi ses marques à Lomé. Ensemble, nous avons discuté de l’impact potentiel de ce lancement dans le contexte local, ainsi que des implications plus larges. Voici quelques réflexions:

Est-ce que cette plate-forme de vente « directe au consommateur» a un impact sur les commerçants locaux qui se rendent en Chine pour se procurer leurs produits?

Yacine a fait observer qu’à partir du moment où la plate-forme vend tout, des appareils électroniques aux machines agricoles, si certains éléments coûteux et lourds ne sont pas facilement disponibles au Togo, mais pour lesquels il existe une demande,ils peuvent être achetés en ligne et les utilisateurs pourront profiter de cette occasion. Aller à la Chine, identifier le bon produit au bon prix et l’expédier au Togo est long et coûteux (1). La plate-forme e-commerce réduit considérablement les coûts de transaction, ce qui la rend très attractive pour les acheteurs locaux.

Les produits chinois sont connus pour être moins cher (en prix et parfois en qualité) que les autres produits de sorte qu’ils sont très compétitifs et accessibles à de nombreux Togolais, surtout compte tenu du faible pouvoir d’achat. Si, au lieu d’aller au marché et de se promener à la recherche de ces produits, tout le monde pouvait acheter en ligne, les gens préfèreraient le faire. Cependant, alors que le Togo a 67% de pénétration des téléphones mobiles, moins de 10% de la population a accès à l’internet. Cela implique que la solution de commerce électronique est accessible à peu de personnes, mais cela pourrait déclencher une utilisation accrue de l’Internet par les commerçants.

Bien que l’article ne dise pas quels sont les principaux acheteurs (nationalité), il dit qu’ils couvrent plusieurs pays. Il ne serait pas surprenant de voir que la demande soit plus orientéevers le Ghana par exemple.

Le commerce direct de la Chine crée des marchandises

D’autre part, étant donné les coûts, le temps et les tracas pour aller en Chine à la source et expédier des produits à vendre au pays, cette plate-forme pourrait être attrayante pour les commerçants locaux eux-mêmes, à la fois au Togo, et au niveau régional. Comme le fait remarquer Yacine, la demande pourrait ne pas émaner du Togo même mais plutôt des pays voisins. Selon le fondateur de la plate-forme, le Togo est une plaque tournante du commerce en Afrique de l’Ouest pour la Chine.

La Chine a accru le commerce et les relations diplomatiques avec le Togo au cours de la dernière décennie. Il est même dit que la Chine est devenue le premier partenaire financier du pays. Les entreprises chinoises opèrent dans les industries, l’agriculture, le commerce et la construction. Ils créent de l’emploi et sont en concurrence avec des entreprises locales dans la vente de certains produits tels que les tissus.

Le fait que cette plateforme d’e-commerce soit tournée vers les consommateurs et qu’elle soit soutenue par un entrepôt local rempli de marchandises produits par la Chine est symbolique. Pour Yacine, le message le plus fort que la plateforme envoie est que les Chinois sont entièrement installés au Togo. Ce genre d’investissement à long terme, associé à leurs investissements accrus dans les industries, est déterminant. La Chine n’est plus un simple partenaire qui vient pour des projets périodiques, maintenant c’est un acteur important qui influe sur le comportement des consommateurs. Elle est sa propre image de marque, avec le lancement de ce consommateur face à la boutique en ligne.

Géographiquement, le Togo est bien placé pour toucher facilement l’Afrique de l’Ouest anglophone et francophone. L’e-commerce est déjà en train de décoller de façon exponentielle sur le marché géant du Nigeria, mais il en est encore à gagner du terrain dans les autres pays voisins. La Côte-d’Ivoire a quelques acquis, mais elle est encore à ces premiers jours. Traditionnellement, les Chinois ont attendu que les marchés soient à maturité avant de les inonder avec leurs prix plus bas – le marché du téléphone mobile illustre cela.
Ce lancement de la plateforme semble précoce pour les perspectives de l’e-commerce (de même que les paiements mobiles), mais pas du point de vue des tendances du marché et du commerce mondial.

Les industries manufacturières de la Chine ressentent les effets rétrécissement du marché mondial, et les problèmes de surcapacité. Le marché intérieur a toujours l’axe majeur de leur développement, ceci semble êtreleur première tentative sur un autre marché. Le commerce informel entre l’Afrique et la Chine n’a pas entièrement été sous le radar –les compagnies aériennes africaines et chinoises ont été les premières à répondre à la demande. En outre, il y a d’autres changements en cours de réalisation qui impacteront directementl’Afrique de l’Ouest, comme cerécentarticle de CNN le montre:

Au cours des 18 derniers mois, bien que des chiffres concrets soient difficiles à trouver, des centaines – peut-être même des milliers – d’Africains sont soupçonnés par les habitants et les chercheurs d’avoir quitté Guangzhou.

La dépréciation du dollar dans les pays d’Afrique occidentale dépendante du pétrole, associée à la politique d’immigration hostile de la Chine, le racisme généralisé, ainsi que le ralentissement et l’échéance économie, indique que Guangzhou perd son avantage concurrentiel. […] Alors que la Chine devient moins rentable, de nombreux Africains ressentent avec plus d’acuité les aspects négatifs de la vie la bas.

Si la montagne ne peut pas soutenir Mahomet, pourrait-elle au moins réduire les coûts en construisant des entrepôts appuyés par des marchés en ligne? Les centres d’entreposage de marchandises chinoises ne sont pas inédits sur le continent africain, l’Afrique australe dispose déjà d’un certain nombre, tandis qu’il a été dévoilé que la Chine finance la plate-forme logistique de la Tanzanie. Comme l’a déclaré le fondateur de JMALL, cette “plaque tournante du commerce qu’est le Togo semble être un nouveau pays partenaire. Est-ce que la plateforme d’e-commerce est un projet pilote pour tester efficacementle coût régional du marketing B2C?

Les géants du e-commerce Chinois comme Alibaba ont montré la voie avec les efforts de leur agent pour ouvrir les marchés ruraux difficiles de l’arrière-continent. C’est seulement une question de temps avant qu’un autre type d’intermédiaires n’apparaisse au Togo (et ailleurs) et offre des services similaires pour faciliter le commerce. Cette fois, cependant, ce sera depuis le confort de leur pays d’origine, car ils assistent les commerçants et les consommateurs avec les achats en ligne. Pris ensemble avec des investissements continus dans les systèmes de paiement via mobile money, les initiatives d’inclusion financière et l’utilisation du modèle d’agence – la Chine semble avoir saisi un excellent espace d’opportunité à explorer.


(1) Voici un documentaire qui suit un commerçant congolais pendant son shopping à Guangzhou, en Chine, cherche à remplir son conteneur avec des marchandises exportables. Il donne une assez bonne idée de l’expérience client.

Will Cross Border Mobile Money Boost intra African Trade and Regional Integration?

cross border MMTOver the past 18 months, since I started tracking the spread of cross border mobile money payments across the African continent, there has been visible progress in leaps and bounds, as documented by the GSMA. In fact, back then, I’d written:

Top down reportage on banking and interoperability seems to focus only on the customer’s individual needs, and overlooks their agency as entrepreneurs, traders and business people.

The map above has been taken from the GSMA’s Mobile Economy 2015 report, and the 2016 report reproduces it as well. Now, the role of mobile money transfers in facilitating cross border and intra African trade is finally being recognized for its potential and cost savings. Author Ashly Hope lays out clearly the high cost of remitting money in the SADC region:

cost of remittance sadcSouth Africa and Tanzania are the largest sources of remittance, yet their transaction costs are significantly higher than the Sub Saharan average of 9.7% (which in turn is the most expensive region in the world where the average cost is now ~7.4%). And this is only one regional grouping.

It is when we look at the penetration of mobile money, that we see something that hints at the digital economy emerging in East Africa (birthplace of Mpesa in case you weren’t aware).

Given teh pace of change, we can safely assume that the figures given above have only increased since 2014. Tanzania’s mobile money market has been frequently cited for its growth and opportunity – it is also outstanding for the level of interoperability within the telco ecosystem.

In the previous article, we noted that Tanzania had just flagged off a Chinese funded regional logistics and trade hub which would include a local footprint for the distribution and sales of China made goods in the form of a warehouse.

“The trade hub will also help Tanzanians especially women to buy products here instead of travelling all the way to China, hence cutting costs down,” said Ms Janet Mbene, Deputy Minister of Industries & Trade.

Savings on travel and shipping is bound to translate into increased inventory purchases, and thus value and/or volume of goods traded. Taking the context of the entire East African Community’s “informal” cross border trade, and the visualization of the interconnections now provided by various mobile money transfer systems in the map above, one can safely start to forecast the potential gains to both traders, and the telcos, as the landscape of the local operating environment begins to change in response to infrastructure investments.

Whether this potential opportunity is exploited by the region’s traders, or overlooked and missed due to the existing digital divide, is the question that remains to be answered. The EAC’s mobile economy (~96% prepaid) needs to start thinking of itself as more than just telco led and impact hub driven, and get down to the ground at the fringes for the future.

Will Direct Access to China-made Goods Disrupt Trade in West Africa’s Consumer Market?

jmsamallThe first e-commerce platform for direct trade of China made products has just been launched in the West African country of Togo. Squeezed together with the Benin Republic between the larger, and better known countries of Nigeria and Ghana, Togo is a small francophone country of around 7 million people. Per the article:

“We want to be the pioneer of e-commerce in Togo and to capitalize on the strong multifaceted cooperation between China and Togo, a premier trade hub country in West Africa”, Yuan Li, founder of JMSA-MALL, told Xinhua Friday in Lomé.

“We are promoting a direct trade of genuine Chinese products with fair price between the African customers and the sellers in China,” he explained.

From electronic devices to farm machines, the platform offers a wide range of Chinese products, which are sold in Togo as well as other countries like Benin, Niger, Ghana and Burkina Faso in the region.

All major credit cards are accepted for payment as well as the local mobile money payment system – Flooz. There’s a generous return policy, and shipments arrive at a local brick and mortar shopfront for pickup and returns. That is, if the item ordered isn’t already available in stock at their local warehouse. Furthermore, JMSA-MALL offers local SMEs an opportunity to sell their wares through their platform. On the surface, this looks good – by cutting out the middleman, they can offer lower prices.

Yacine Bio-Tchane, our Beninois colleague also has a footprint in Lome, Togo. She and I discussed the potential impact of this launch in the local context, as well the broader implications in general. Here are some thoughts:

Will this ‘Direct to Consumer’ (DTC) platform have impact on local traders who travel to China for goods?

Yacine made the observation that since the platform sells everything from electronic devices to farm machines, if some pricey and heavy items are not readily available in Togo but for which there is a demand can be bought online, users will take advantage of that opportunity. Going to China, identifying the right product at a good price and shipping it back to Togo is timely and costly (1). The e-commerce platform significantly reduces transaction costs, which makes it very interesting for local buyers.

Chinese products are known to be cheaper (in price and sometimes quality) than other products so they are highly competitive and accessible to many Togolese, especially given the low purchasing power. If, instead of going to the market and walking around in search of those products, anyone can buy it online, people will prefer doing so. However, while Togo has 67% penetration of mobile phones, less than 10% of the population has access to internet. This implies that few consumers have access to the ecommerce solution but it could trigger an increased use of internet from traders interested in China made goods. Although the article doesn’t say who the top buyers are (nationality), it would not be surprising to see that increase in demand is being pulled by Ghana.

Direct trade of China made goods

On the other hand, given the costs, time, and hassles of going to China to source and ship products back home for sale, this platform might be attractive to local traders themselves, both in Togo, and regionally. As Yacine observes, demand might not be from Togo itself but rather the neighbouring countries. As the founder of the platform says himself, Togo is a critical trade hub in West Africa for China.

China has increased trade and diplomatic relations with Togo in the past decade. It is even said that China has become the first financial partner to the country. Chinese companies operate in industries, agriculture, commerce and construction. They create employment and compete with local companies in selling certain products such as fabrics.

The fact that this e-commerce platform is a B2C marketplace backed by a local warehouse full of China made goods is a signal of this investment. For Yacine, the strongest message the launch of this platform has sent is that the Chinese are fully settled in Togo. That kind of long term investment, coupled with their increased investments in industries is a game changer. China is no more a simple partner coming in for projects but has now become an important actor with influence on consumer behaviour. This is a big pivot in its brand.

west_africa_2_storyGeographically, Togo is well positioned to easily access both anglophone and francophone West Africa. E-commerce has been taking off exponentially in the giant market of Nigeria, but has yet to gain traction in other neighbouring countries. Ivory Coast has seen some gains, but it’s in an early stage. Traditionally, the Chinese have waited for markets to mature before flooding it with their lower priced variations – the mobile phone market is one such example. The launch of this platfrom seems rather early from the e-commerce (and mobile payments) perspective but not from the point of view of global trade and market forces.

China’s manufacturing industries are feeling the pinch of shrinking global trade, and the problems of over capacity. The domestic market has been one major focus for development; this initiative seems like an attempt at creating another. Consumer goods trade between Africa and China has not entirely been under the radar – both African and Chinese airlines were the first to respond to demand. Further, there are other changes afoot that directly impact West Africa, as this recent article from CNN shows:

Over the past 18 months, although concrete numbers are hard to come by, hundreds — perhaps even thousands — of Africans are believed by locals and researchers to have exited Guangzhou.

A dollar drought in oil-dependent West African nations, coupled with China’s hostile immigration policies, widespread racism, and at-once slowing and maturing economy, means Guangzhou is losing its competitive edge. […] As China becomes less profitable, many Africans feel the downsides of living there more acutely.

If the mountain cannot support Mahomet, could it cut costs by building warehouses fronted by online marketplaces? Warehouse centres for China made goods are not new to the African continent, southern Africa has quite a few, while Tanzania’s China funded logistics hub has just been flagged off. The JMALL founder’s opening statement positions Togo as another such ‘trade hub’ in West Africa. Is this e-commerce platform a pilot to test regional B2C marketing cost effectively?

Chinese e-commerce giants like Alibaba have shown the way with their agent led efforts to open up the challenging rural markets of the mainland’s hinterlands. It’s only a matter of time before a different kind of intermediary springs up in Togo (and elsewhere) offering similar agent services to facilitate trade. This time, however, it’ll be from the comfort of their home countries, as they assist traders and consumers with online purchases. Taken together with ongoing investments in mobile money payment systems, financial inclusion initiatives, and the utilization of the agency model – China seems to have grasped an excellent opportunity space to begin exploring.


(1) Here’s a documentary following a Congolese trader during her shopping spree in Guangzhou, China, looking to fill her container with tradeable goods. It offers us insight on her customer experience.

This article has been translated into the French by Yacine Bio-Tchané