Informal Economy Problems: Chinese BoP in Africa

By | August 21, 2012

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.

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