Posts Tagged ‘china’

It’s way past the time to consider the Informal Economy as a distinct commercial environment

Brand stickers on avocados displayed for sale on a highway, Kenya. April 2013

Regardless of continent, it is now high time we accepted the informal economy (unformal or unrecognised or unorganized sectors) as a commercial operating environment in its own right.

The continued oversight is rapidly coalescing into a gaping void of hiccups and failures, by large companies, non profit institutions, and startups, alike. This issue goes far beyond “understanding the informal” or recognizing the fulltime professional status of the service providers that I’ve written about before.

It’s about the problems created by continuing to assume every individual is poverty stricken and struggling to make a livelihood simply because a significant portion of their commercial activity operates outside what is rarely defined but is assumed to be the formal, structured economy held up as the pinnacle of economic development.

It’s why academics can barely conceal their flabbergasted surprise that a person has a better quality of life, and a reasonably viable revenue stream in [gasp] informal market trading, or even agricultural work.

It’s why @pesa_africa questions the continued transplantation of e-commerce business models directly from Seattle to subSahara given that they’ve tended to wither on the vines.

It’s why market women and traders pay the price of daily harassment and abuse by those given authority over their peace of mind.

And, it’s also why the freshest produce gets to you first thing in the morning in Nairobi or Cotonou or Kinshasa.

This is not meant to be a paean to the hardworking women and men who keep the engines of commerce and trade humming in the harshest of environments with scarce resources and inadequate infrastructure.

It’s the first step in acknowledging yet another holdover from a colonial past that decades later still hampers and hinders the social and economic development that should have happened by now, by all rights.

It’s also the necessary counterpart to the recognition of agency required for design interventions to succeed once donor funding ends.

This theme is consistently covered in this blog in the category Biashara Economics and hashtag #biasharaeconomics

Japan’s Indian Strategy for the African Consumer Market

20160818Africa_large_580

One of the most high-profile events Kenya has hosted since independence begins this week when heads of state from across Africa and the Prime Minister of Japan Mr Shinzo Abe jet in for the Tokyo International Conference on Africa Development (TICAD). It will be the first time that Ticad has been held outside Japan and it is an honour to Kenya to have been picked to host this event. ~ Daily Nation editorial

The Nikkei Asian Review has been preparing for days with longform articles on the African consumer market, and other opportunities for Asian businesses. While Indian B2C investments have been closely analysed (and embraced), it is clear that the East Asians are eyeing each other as their closest competitors.

Africa was once dominated by Western investors, due to ties forged in colonial times. But Chinese companies have muscled their way in, and Indian, Japanese and South Korean players are arriving and thriving. This intense competition is no longer just about extracting minerals and materials. It is about tapping the next big consumer market.

Their articles are well researched and provide ample insights for businesses contemplating these new markets. Here are some highlights that caught my eye:

Vivek Karve has a clear picture of the ideal African market. The chief financial officer of India’s Marico, a maker of hair and body care products and other fast-moving consumer goods, said his company targets countries with “per capita GDP under $5,000, many mom-and-pop shops, low penetration of multinationals and political stability.”

There’s little handwringing over lack of data or missing middle class metrics. Inadequate infrastructure and informal retail in Africa is no different for your average Indian FMCG brand than their domestic market, thus the concept of the ideal market being one full of little mom and pop shops.

Marico’s strategy for achieving that includes promoting local brands familiar to African consumers, rather than pushing products that are popular in India. It uses multiple distributors to cushion itself against credit risks.

The Japanese, having already faced off with the Koreans in India’s large, diverse, and fragmented markets, are ready to take a leaf from the Indian playbook for their foray into the African market.

The gap between Asian and Western rivals is expected to narrow over time, with China making up much of the ground. About 3,000 companies from China — Africa’s largest trade partner since 2009 — are doing business in sectors such as infrastructure, resource development and telecommunications.

And even this focus on infrastructure development and large scale investments is changing. The Chinese idea is to boost purchasing power across Africa and turn the continent into a massive consumer market.

csm_Dr.Morimoto_and_Mr.Okabayashi_01_c364aafd49

Nissin Foods launched locally sourced sorghum noodles in Nyama Choma flavour in Kenya

The Japanese are preparing the ground to apply their own strengths in Africa. Japanese companies see Africa as a lucrative but daunting challenge — one they would rather tackle with a partner or subsidiary that is familiar with emerging markets.

This, again, is where India comes in. Toyota Motor, Honda Motor, Nissin Foods Holdings and Hitachi all export from their factories in India to Africa. The Japanese government is actively working to help companies make inroads in India as a springboard to Africa.

A couple of years ago, the Ministry of Economy, Trade and Industry compiled a list of potential Indian partner companies with strong African operations in 16 fields, including beverages, consumer goods, retail, electronic parts and auto components. Godrej Group and Marico were among them.

The lessons of the last quarter century are driving a new collaborative strategy. My rupees and yen are on Asia.

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 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

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.

 

 

“Cheap is expensive.”

Kitchenware stall at open air market outside Kibera, Nairobi Kenya 23 Jan 2012

Kitchenware stall at open air market outside Kibera, Nairobi Kenya 23 Jan 2012

Mama said something very profound when I asked her which of those kerosene stoves she would purchase for herself,

“Cheap is expensive,” she said, making a moue at the low cost imports jostling for space in her kitchengoods shop on the outskirts of Kibra.

While the limitations of cash in hand may drive her customer’s choices, they know full well the trade off they are making when they choose a less sturdy, possibly unreliable product that they can immediately afford over a better quality though higher priced one.

Informal trade is big business in Africa

On my way to Nairobi  from Singapore a couple of years ago, I had the opportunity to observe first hand the phenomenon of informal trade between China and the African continent. The energy and excitement of the traders, laden with goods on their way back, was a palpable part of the inflight experience. Today, I came across this bit of news showing that the airline recognizes the sizeable opportunity available in successfully serving this rapidly growing economic activity.

A Kenya Airways ticketing office at Tea Room area near the intersection of Accra and River roads has sent a signal of the growing significance of the informal economy to big companies seeking to grow their top line.

The Tea Room area is a hotbed of informal traders, who import vehicle spare parts, stationery, mobile phones and accessories, building materials and computers, among other goods.

The traders frequent favourite import destinations such as China, Dubai and Turkey, which offer relatively cheaper goods.

“Tea Room is a prime location, accessible and a central point for a large number of small-scale entrepreneurs in town. This shop will therefore offer opportunities to traders for direct interaction with our staff and this will enable provision of tailor-made services to this market segment,” said Kenya Airways managing director Mbuvi Ngunze in a statement. ~ Business Daily, 11th Jan 2015

This recognition of the important role played by the so called informal market for consumer facing businesses is one that will become increasingly visible. And, I suspect, its an overlooked opportunity for local brands to gain market share and first mover advantage. Here’s a complementary snippet from an entirely different industry:

To win his first mobile network operator licence, Zimbabwean telecoms tycoon Strive Masiyiwa based his projections not on “World Bank numbers” but by studying the informal sector.
[…]
Masiyiwa explained Mascom came to its numbers by recognising the strength of the informal economy and understanding the local market. “I understood the informal sector was real.”

He suggested that even knowing the number of cattle in Botswana can offer insight into spending power. “Cows represent wealth in Botswana.”

Like Masiyiwa, we’ve been able to identify indicators to assess size and value of a particular industry or segment, though it may be undocumented and considered informal.  Some are common across regions, like wealth in the form of the cow, while some need to be identified and validated for the task at hand.

Regardless, the fact remains that the true size of the opportunities still remain undiscovered.

Traveling on the New Silk Route with African traders to the Far East

The 21st century’s version of the old Silk Road that led caravans of traders from around the world to China and back is the flight path between the African continent and China. Bangkok Airport is one of these new oasis for caravaneers on the New Silk Route, where I caught the Kenyan Airways flight on its stopover between Guangzhou and Nairobi.

Sitting next to me were entrepreneurs – the lady from Kigali returning after deal making in electronics and new clothes and the Congolese traders from Brazzaville exuberantly enjoying their after dinner cognacs, all chattering away in French.

The Ancient Silk Route

It was the onboard announcement made just prior to landing in Nairobi that made me realize what I had just experienced – connecting flights out of Nairobi reached across the Sub Saharan landscape from Accra to Kigali, Harare to Lubumbashi – exotic names in distant places, yet gathered under one roof, if only for a short moment in time.

How different was this from caravanserais of yore as the mishmash of “small small English” mingled with la langue francais et every mother’s tongue? Kenya Airways had Thai stewardesses and I heard each safety instruction being repeated in fluent Mandarin, Gujerati and Swahili as well.

Only the technology and the means of transportation and communication have changed, the bazaar is still the marketplace for exchange of goods and services as it has always been.

Until now I’d only read about increasing trade between these two far flung places, the majority of which emerging from the so called informal economy or Neuwirth’s systeme D. But this short immersion in the energy flow in between underlined the reality and scale of what was happening. The flight was full and there were few getting on in Bangkok, the vast majority of passengers returning to their various destinations after their short sojourns in Guangzhou.

 The other flights out of Bangkok – to Brisbane or London – were full of holidaymakers but not this flight unless one counted the group of young Koreans going on a volunteer trip with an NGO.  Perhaps its time the old Silk Road map was updated with current day flight paths in bright purple.

Here’s a short snippet from an article article translated from the Japanese on the unique model of globalization displayed by “Little Africa” in southern China that gives us a glimpse of the tremendous changes connectivity and communication are making to commerce:

 Including undocumented immigrants, it is estimated that there are an astounding 150,000 Africans in Guangzhou, a majority of them male. It should come as no surprise then that among Guangzhou’s foreign residents, those from Africa make up the largest proportion. These immigrants essentially operate on an individual basis. Working in China as buyers, they can be seen determinedly ranging the streets of central Guangzhou’s wholesale district. There are variations in density, but among the passersby on some bustling streets, half will have African features.

There are those from East Africa and West Africa, of all kinds of builds from all different countries. They come to stock up on goods ranging from clothes to cosmetics and sundries, even fake brands – probably collected from factories forced to compete with prices in the Guangzhou region – seeking out deals for everything. Gathering together enough to fill a shipping container, they send these miscellanies home and then flip them for twice the cost, with Guangzhou’s customs duty apparently accommodating such motley trade.
[…]
The individual buyers are supervised by North African or Middle Eastern controllers, and when night comes they gather at restaurants to carry out microloan-style finance meetings.
[…]
There are restaurants serving cuisine from the Congo and Nigeria, stalls with cheap telephone rates to Africa, mobile phone brokers, specialty barbers, vendors hawking cassettes and CDs of African music, and in some buildings that have been completely occupied by African tenants, the rare African-run intermediary wholesaler doing order-made customization.

Informal Economy Problems: Chinese BoP in Africa

Market forces led to the increasing visibility of the street hawkers from China in the informal markets of Africa. Mostly lower income and uneducated, Chinese traders are rapidly becoming the bane of African markets, much like how cheap, Chinese goods disrupted the local informal trade in the early years of the century.

An indepth look at the lives of these enterprising migrant workers has recently been conducted and the findings giving rise to numerous perspectives on the problem. Probably the most critical with respect to future trends is this one from the Financial Times:

Many are independent informal-sector entrepreneurs, and the most visible have been the Chinese traders establishing themselves in marketplaces from Lagos to Lusaka.Using contact networks from home or among other migrants, they establish supply chains which import Chinese goods at a price and volume that existing traders struggle to match.

As well as angering local rivals, these newcomers also raise the heckles of African governments who prefer Chinese migrants to be large-scale investors creating new employment rather than direct competition for established local enterprises.

In July, the Malawian government introduced a law banning foreign traders from operating outside the major urban areas, following protests against the impact of Chinese immigrants on Malawi’s small businesses.

Such complaints are now familiar in other parts of Africa.

Oh dear, history has been known to have a tendency to repeat herself quite well. Sitting here in Singapore, near enough to Malaysia, one cannot help be aware of the history of this region and the role that initerant Chinese migrant labour from Southern China has played in developing this city into a world class capital.

But will that happen in the various African countries responding above in the snippet? And would a little bit of competition provide the impetus for laidback rural markets to suddenly hop and jump like bazaars tend to do in the East? We don’t know, we’ve never seen it happen so in front of our eyes, only recalling bits of history from our pasts. @bankelele tells me about a book he’s reading on the Economic History of Kenya and the tensions inherent in the three pronged population of locals, the British and the Indian traders. Yet, one cannot deny the historical influence of a multicultural trading society such as on the Swahili Coast and by the way of the East African Railway, on the quality of entrepreneurship in Kenya as acknowledged by all their regional neighbours.

Even tiny little Singapore acknowledges the value of injecting external influences on the quality of future innovation by encouraging migrant workers, of all professional levels, to arrive on the island and work. The tensions show up in the newspapers, even as we get accustomed to being served by Filipina sales people and Mainland China waitrons while a Bangladeshi may arrive to paint the house.

Meanwhile, Britain is upto her old tricks of stirring the pot of inter-ethnic discontent among people who live in her former colonies. They’ve been doing it so long that they are probably not aware of consciously recognizing the inflammatory nature of their handwringing “Will China eat our tea while India eats our lunch?” being the essence of the cries. China, in the meantime, emphasizes the opportunity by showcasing their “Africa Towns” springing up in trading cities. What shouldn’t happen, however, is the demonization of the Chinese migrant worker, like back in the early days of the previous century in California.

This is a difficult trade-off to make. Either path, at this point, makes sense.

African Traders in Guangzhou, China: Routes, Profits, and Reasons

While digging around for information after my recent flight where I was offered an upclose and personal look at increasing informal trade between Africa and China, I came across this research paper by Yang Yang from the Chinese University of Hong Kong. A snippet from the introduction:

Based on my fieldwork in Guangzhou, this paper attempts to explore the routes, profits, and reasons of the African traders in southern China through individual stories. It discusses the organization of the market as well as individual economic activities reflecting a globalization from below, where traders with relatively small capital become upwardly mobile by standing on the shoulders of the giants, or more directly, by selling their Herculean sandals out from under them, that is, by taking advantage of the infrastructural advancements made possible in the modern age of globalization, such as fast international transportation, convenient communication, mass manufacturing, brand recognition, for short term gains.
The trading activities of the Africans in Guangzhou represent an economic ―underworld, a world that is not only untraceable by customs or survey institutes, but is also rapidly proliferating throughout the developing world.
[…]
This paper … focuses on the informal economy in China. China’s position in the world system is ambiguous—while China is the world‘s second largest economy, it is also still a developing country; beyond this, it is relatively closed in terms of immigration policy.