I recently came across an article on investing in Africa by South African journalist Thabang Mokopanele:
A private Chinese company has built a big new hotel in Lusaka: the Golden Bridge (right). But in my recent visit it was not easy to find any prominent reflection of the more upscale Chinese retail sector. Little Chinese shops were scattered here and there. Chinese were selling chickens at the city market, and vegetables at the Tuesday market. I walked through Kamwala market several times, and found a few Chinese shops, but staffed by Zambians; their Chinese bosses were not on the premises. An upgraded section of the Kamwala market was constructed by the same Chinese firm that built the Golden Bridge in a joint venture with the city of Lusaka, but their tenants seem to be mainly Zambian.
Chinese cities have the fanciest of malls, just as South African cities do. But while the South African companies that invest in Zambia's retail sector come from the prominent side of South African retail, that doesn't seem to be the case for the Chinese. Why not?
South African retailers are driving commercial development in Africa. As they expand so does the need for retail and office space in cities such as Lagos, Ghana, Nairobi, Maputo and others. "If you look at Lagos and Ghana the buildings around these cities are old and derelict and were built in the 1960s," Mr Mackintosh said.What happened to the Chinese? Although a lot of people comment that the Chinese are "everywhere" in the retail sectors in Africa, I see a lot of small-scale Chinese activity and a lot of large-scale South African activity. Look at Arcades, Manda Hill, or another of the new malls cropping up in Lusaka, Zambia, for example. You can get a cappuccino at Mugg and Bean, groceries at Shoprite or more upscale food at Woolworths, appliances at Game, clothes at Truworths or Uzzi, have lunch at Ocean Basket, and did I mention the South African banks: Standard Chartered, FNB, Stanbic, and so on. If all that shopping tires you out, you can take a room at South African-owned Protea Hotel.
A private Chinese company has built a big new hotel in Lusaka: the Golden Bridge (right). But in my recent visit it was not easy to find any prominent reflection of the more upscale Chinese retail sector. Little Chinese shops were scattered here and there. Chinese were selling chickens at the city market, and vegetables at the Tuesday market. I walked through Kamwala market several times, and found a few Chinese shops, but staffed by Zambians; their Chinese bosses were not on the premises. An upgraded section of the Kamwala market was constructed by the same Chinese firm that built the Golden Bridge in a joint venture with the city of Lusaka, but their tenants seem to be mainly Zambian. Chinese cities have the fanciest of malls, just as South African cities do. But while the South African companies that invest in Zambia's retail sector come from the prominent side of South African retail, that doesn't seem to be the case for the Chinese. Why not?
3 comments:
Chinese infrastructure investments in Africa are often driven by state-owned enterprises, with capital provided by state banks. Whereas retail in China is dominated by private capital.
The Chinese government is currently attempting to stimulate a more consumption-oriented economy. Thus, for a Chinese retailer, the home market is more attractive than foreign markets, where they'd have to go it alone.
Plus, retail is very culturally-dependent. Look at Best Buy's failure in China, or Wal-Mart's difficulties in Japan. You really have to understand your customers' mindset to succeed in retail. The South Africans have an advantage because they understand the cultural factors.
Is it possible that South African retailers understand African consumers outside of South Africa and thus tailor their products to consumer needs. Whereas , if I'm not mistaken Chinese high end retailers have not seen the necessity (yet) to understand the needs and desires of African consumers?
Recapping the question: In African retail, why are Chinese working class people or even rural migrants establishing shops but medium or large private companies aren't likewise investing?
I can make one observation that goes a long way towards explaining why there are so many small Chinese shops and maybe it explains a little bit about why prominent companies are missing in action.
Rural/working class Chinese are particularly bold and are very energetic about moving up. Possibly the most energetic rural people in the developing world. That explains why thousands of Fujian shop keepers have moved to southern African in a short time. I even saw a BBC article about dozens of Henan chicken farmers in Zambia.
However, in strange contrast, Chinese people born in large cities from middle class backgrounds are more risk averse than most other middle class people in the world. (I think it has a lot to do with Chinese parenting which emphasizes a lot of studying and tolerates computer gaming addiction as the main two components of childhood in China. But I digress.) Middle class Chinese are not an intrepid lot and are focused on going to first world, English speaking countries. I remember an employee of the Confucius Institute organizing office in Beijing telling me how hard it was to recruit Chinese teachers to less traveled parts of the world. For instance, a posting in Chihuahua was waiting for an institute teacher to volunteer for a long time despite the pay of 280,000-300,000 RMB/yr, in contrast to the pay of about 60,000 RMB/yr for a Chinese teacher at the institute in Beijing. These middle class attitudes might explain a little why private developers don't often leave China unless its a real estate investment in a first world English speaking country.
Much is anecdotal but I think it's a general observation that resonates with people with a sociological curiosity for China.
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