Wednesday, April 18, 2012

The lonely world of Chinese Traders in Africa

Researcher (me) interviewing Chinese trader
The Brenthurst Foundation in South Africa has just published a sensitive, detailed and eye-opening study by Terence McNamee (with others) of more than 200 Chinese traders in several South African countries: "Africa in Their Words: A Study of Chinese Traders in South Africa, Lesotho, Botswana, Zambia and Angola." It's also beautifully written!

The study's main points match my own research and experience, particularly the bitter belief by nearly all small traders and "China shop" owners that the Chinese government does nothing for them. As a trader in the Kariakoo market in Dar Es Salaam told me: "The Chinese government helps the Tanzanians. It doesn't help me." Highly recommended.

I'm sorry the researchers apparently never saw the very good paper by my former student Rachel Laribee, who did similar research in South Africa with Chinese shop keepers, "The China Shop Phenomenon: Trade Supply within the Chinese Diaspora in South Africa." Rachel pointed out how competitive the different China shops were with each other, not just with African shops. There was no "China, Inc." in her study, either.

Another hat tip to Yoon Park.


Tom said...

Not so different, really, from the Chinese government's historical attitude towards the Chinese diaspora in Southeast Asia. Ever since the Bandung Conference, it was "hands off."

The Chinese government's primary goal in Africa is to secure access to oil and minerals. Hence its very accommodating attitude presented towards African governments. Its goals would not be advanced by advocating the interests of the Chinese diaspora.

Indeed, if more of them are driven to return to China by the heightened competition and restrictive laws, the Chinese government would not mind one bit. This would simplify its dealings with African governments by reducing a major point of friction.

Matthijs van den Broek said...

China had no political nor moral agenda. Unlike the West whose trading activities over the centuries went hand in hand with moral superiority (religion, democracy)

Anonymous said...

Thanks for sharing those two papers! They made an interesting read. I would also like to contribute another layer of Chinese diaspora traders to the discussion.

Prime real estate for shops is often limited in supply and are often at the mercy of landlords, resulting in Chinese traders expanding to venues traditionally privy to locals, i.e. local open markets or rural areas. Many traders arrive in Africa with little capital and have to begin small as source providers for larger, more established traders. The importing of consumer goods into Africa is a very complex and sophisticated logistics operation characterized by pooling limited resources for investment, division of labour and distribution of risks- an example of macro global capitalism at its best/worst. This increases the variety of goods by different bulk importers to retailers; responds quicker to market demands at a larger scale from retailer feedback for the next shipment; efficiently reduces waste and risks for importers, middlemen, distributors and retailers. It is very hard for African traders to compete with the Chinese operating at this scale, the wiser ones end up collaborating- directly behind many local shops to street vendors are now Chinese suppliers.

Some Chinese traders hop from country to country for better opportunities, visa/immigration restrictions, debt/tax evasions, exploitation, etc. Usually, when their economic situation improves, they become more willing to stay on a more permanent basis. The talk of returning to China some day is common among diaspora, or for any diaspora for that matter (I still hear some English expats pine for Blighty everywhere). In reality, the opportunities are slim for those returning to an even more competitive, restrictive and ever-changing China, especially for those who have invested so much in Africa. The Chinese enjoy more freedoms in Africa than in China; enjoy a relatively higher social status and standard of living; have the opportunity to own their own business; have the chance to enroll their children in international schools as foreign nationals- increasing their opportunities globally for the next generation; etc.

For better or worse, the Chinese are here to settle in Africa, too much is at stake for them. It is their "American dream" on a different continent. If prosperous enough after generations, some manage to move onto Western nations like the Chinese-Malaysians in England for example. The migration of peoples in search for opportunity has always existed- the Chinese are no different from the English, Spanish, Dutch, French, Portuguese, Italians, Africans, Indians, Pakistanis, etc, in this respect. Many see themselves as pioneers or venture capitalists with an unique opportunity.

The assessment that the Chinese gov't. does nothing for them is correct in my experience. Bureaucratic snobbery is rife at upper levels, but there is a host of other reasons. It is hard to keep track of country-hopping Chinese nationals in Africa, often with dubious records. Disputes among the Chinese community are often among each other, given the tight-knit nature of their network, and are better solved by themselves. Disputes with Africans often arise from questionable business practices that the Chinese embassy would rather distance itself from. In any case, the dispute often has a better local solution- raise in wages, raise in price for acquiring raw materials, change of retail location, etc. All the mechanics of capitalism in operation, but attracting more attention than necessary for reasons otherwise.

Africa needs these Chinese businessmen more than it would like to admit- many products imported are essential to African daily life. Where else can you get cheap 2nd-hand reconstituted tires for the fleets of minibuses that make up the bulk of local transport? The cheap 2nd hand cell phones that provide the communication networks in many areas with no land line infrastructure? It is an uneasy partnership and will remain that way for the foreseeable future.


Anonymous said...

@Matthijs van den Broek

Can it be argued that China's lack of political and moral agenda vis-a-vis the West with regard to Africa is in itself a political and moral position?


Deborah Brautigam said...

KF, thanks for your thoughtful and detailed comment. Sounds like you know quite a bit about this, appreciate your sharing it with the blog.

Anonymous said...

@Deborah Brautigam

I am always happy to join in and share some views on your blog. I am not an economist or an international relations expert, but I hope that I can make a positive contribution to the discussion.

I grew up in Africa and witnessed the arrival of some of the first Chinese traders. We knew some of them personally and helped them gain a foothold in getting their products on the market through Indian traders/shops. Some have done quite well for themselves and have become SME industrialists in their own right, bringing over their families to help run their factories and lifting themselves out of poverty.

New arrivals are a different breed of trader because the conditions are not what they were 20 years ago. The highly competitive nature of their trade can make them quite aggressive business people exploring every conceivable possibility. The more established traders now outsource some of their operations to the newer arrivals or even rent out their shops/warehouses for them to run while exploring other more larger and lucrative ventures.

One related, but interesting, topic for research would be the money trail and underground banking arrangements used to sustain these businesses, especially with many African nations restricting forex. Many Chinese returning to China have been caught at the airport trying to leave with US$10,000's of their earnings. One reason the Chinese like to trade in "China Shops" is the quick returns for their investment. In Africa, cash is king. The ready flow of hard cash, often escaping the scrutiny of the tax collectors, make it easy to accumulate capital quickly for the next venture- ideal for small traders with limited capital and loan sharks to repay. There is a bustling trade in black market forex that naturally gravitates to "China Shops" with the flux of cash exchanged there. Chinese restaurants+casinos popping up all over Africa perform a similar function.

While all this vibrant business activity may seem overwhelming, in fact, it is very small scale compared to the contracts at the government level. It's no wonder the Chinese embassy are unconcerned with Chinese traders given the scale of their operations. Their effect on the local economy has been exaggerated for other purposes- the myriad of "Mom and Pop stores" are hardly in a position to dominate the economy at any rate.


Deborah Brautigam said...

I like your suggestion of research into money transfers. Doing research in Ethiopia, we heard interesting stories of "guanxi" networks where business people paid in local currency could lend it to other Chinese businesses locally, and be paid in RMB back in China. Certainly a safer way to "transfer" money.

Anonymous said...

Can someone remind me what these Chinese traders do for Africa that African traders could not do?

Anonymous said...

Hi, here is an interview I did with one of the authors of the report at the Brenthurst Foundation that went out on French Radio.

Nice post!

Deborah Brautigam said...

@tipilakota: Thanks for the link to your interview on French Radio.

Anonymous said...

I would be careful to attribute a sense of moral superiority only to those in the west. After all, the true English translation for China is "Middle Kingdom". In addition, generally speaking, the Chinese do carry a strong racial and ethnic prejudice against Africans and other Asians - and have done so for hundreds if not thousands of years. That the sense of superiority may not be attached to western norms (i.e. western religion & democracy) does not mean it isn't there and extremely potent. In fact, it is Chinese racism against Africans that I believe will be the greatest and most harmful rift in years to come. It may raise its head as anti-Chinese backlash, but its roots will also lie deeply in the existing Chinese prejudice.
This is all unfortunate, and is a result of both small and large actors prioritizing economic exchanges ahead of mutual understanding.