Satellite image of Africa, showing the ecological break that defines the sub-Saharan area (Photo credit: Wikipedia)
Written by Kaiyu Shao (1)
When riots broke out in Libya in February 2011, nearly 40,000 Chinese nationals were evacuated. The world was surprised to see so many Chinese doing business within this relatively small African country. Given the close economic relationship between China and Africa since the 1990s, one can, however, understand the central role ‘Chinatowns’ play in China’s existence in Africa. This discussion paper looks at Chinatowns in Africa, focusing on Namibia and South Africa as examples. It then introduces local attitudes towards Chinatowns, followed by a discussion of the factors that dictate their location.
Chinatowns in Africa
The rise of Chinatowns in Africa and the quick development in the Sino-African relationship could be seen as two sides of the same coin. Since the 1990s, Sino-African trade has enjoyed a rapid increase, both in absolute terms and in proportion. In 1990, Africa’s imports from China were valued at US$ 533 million, making up only 1.10% of its total imports. In 2009, this value reached US$ 30.4 billion, and composed 11.54% of Africa’s imports.(2) In this process, Chinatowns played two important roles. On one hand, the large scale of imports from China into African countries bred the development of Chinatowns, and provided the basis of their growth. On the other hand, it is the existence of these Chinese import-distribution centres that made further trade possible – by establishing relatively stable trade channels, while at the same time making Chinese products, as well as the Chinese image, familiar and acceptable to local citizens. It can thus be said that the existence and location of Chinatowns play an important role in Sino-Africa trade.
Though they vary in size, there are Chinatowns in almost every African country. Some are made up of only a few Chinese restaurants, while others contain several hundred businesses with thousands of Chinese merchants. Among these Chinatowns, South Africa and Namibia deserve special attention for the following reasons: South Africa, China’s biggest trading partner in Africa, possesses most of the Chinatowns on the continent. Namibia represents a new trend in Africa’s Chinatowns — not only do they provide products to the country itself, but they also possess international influence and have become ‘transfer stations’ for Chinese products as they ‘export’ the imported goods to their neighbouring state—Angola.
South Africa was one of the earliest destinations of Chinese merchants in Africa, with the first Chinese traders opening their businesses as early as the 1990s. An investor from Hong Kong built the first Chinatown, which opened in 2001. Currently, Johannesburg alone is home to six Chinatowns, each possessing anything from dozens to several hundred booths or shops.
The biggest among all these, China Mall, was founded in 2004 and currently owns three separate shopping centre buildings with more than 450 occupied shops. It has created more than 3,000 jobs, including security guards and the employees hired by tenants and shop owners. Both wholesale and retail markets are represented in the building, which present many opportunities for trade, both locally and internationally.(3)
After years of development, these malls are not only attractive to Chinese businessmen, but also merchants from both local communities and other states, who sell products that are no longer limited to those that are ‘Made in China’, with the mall describing itself as “a place where the [E]ast meets the [W]est.”(4)
Most recently, a China mall opened in Durban that integrated a customs office, law firms, shipping and insurance agencies as well as the usual shops. All situated in one building, it provides a one-stop service to both its tenants and consumers, with the aim of becoming the biggest Chinatown in South Africa within the next three years.
Namibia’s largest Chinatown is located in the northern industrial area of its capital city, Windhoek. Founded in 1998, this Chinatown currently contains three wholesale markets, with nearly a hundred stores. During its early years, the shops in Chinatown only provided wholesale products. But as more and more locals — the final consumers — were attracted by the low prices, it began to offer retail products as well. Currently it is the main distribution centre for Chinese products for the whole state. Moreover, its influence goes beyond national boundaries to nearby states. Indeed, it is said that more than 90% of the products sold will eventually be transferred to Angola, where there is a great need for cheaper goods given the state’s post-war reconstruction efforts.(5)
The products available vary from clothing and textiles to household appliances and motorcycles, the vast majority of which are Chinese produced, with the exception of some local agricultural products. In recent years, another Chinatown has emerged in Oshikango, a village in northern Namibia near an Angolan border post, aimed at the Angolan market and the increasing number of Chinese traders gathering in the area.
In its founding days, there were less than 50 Chinese nationals doing business. However, the current Chinese population has exceeded 1,000. This number has exploded because, after the first group of Chinese businessmen achieved high profits in Namibia, their relatives and friends in China arrived one after another seeking similar opportunities. Also, the successful Chinese traders tend to bring their fellow Chinese people to help their businesses grow in Namibia. The reason for this phenomenon could be found in the tradition of Chinese Nepotism and also as resulting from the lack of trust between Chinese businessman and the local people. For example, Ms. Liu, the owner of one such store, as well as a farm, which regularly provides products to the China-aided President Palace Project in Windhoek, has invited four of her Chinese relatives to Namibia to work as supervisors there, though she also employs local people to work in her store and farm. These Chinese merchants — Ms Liu and her kinfolk — do not see their relations as ‘boss’ and ‘employees’, but as relatives. They believe they are working together for their family business, and each of them put numerous endeavours into their store.(6)
Local attitudes towards Chinatown
Generally speaking, most Chinatowns are warmly welcomed by African locals. They offer vast economic choices to Africans with their inexpensive Chinese products and in less developed states, Chinatowns represent advanced facilities and technologies. However, the relationship between Chinatowns and their host countries is not always harmonious, with several potential conflict points that have been noted.
The first concerns the quality of Chinese production. Cheap as they are, Chinese goods are sometimes poor in quality, and it is often said that in Africa, “made in China” means cheap and low-quality.(7) Some critique even claims that China uses Africa as a dumping ground for its low-quality manufactures.(8) But as defended by Lu Shaye, director-general of China’s Department of African Affairs, the phenomenon is primarily the result of African’s low consumption level. It is often an active choice made by African traders to import low-quality Chinese products at low prices—out of the consideration of cost and benefits. (9)
Secondly, the Chinese generally lack legal awareness and sometimes come to conflict with local citizens and/or Governments. It is not uncommon for Chinese employers to refuse to sign contracts with their employees, to not pay insurance or pay less than the minimum wage. Smuggling is another problem, with local Governments confiscating goods believed to have been brought into the state illegally. These incidents tend to lead to intense conflicts between Chinese merchants and their host states. The rapidly growing wealth in these Chinatowns may also become a cause of potential conflict. Many Chinatown merchants have reported being robbed by local gangs, and have turned to hiring large numbers of security guards to guarantee their safety and that of their properties. This growing wealth also induces a feeling of antipathy from locals as Chinese traders can be seen as being wealth predators. In cases such as these, boycotts of Chinese goods have been known to break out, especially in states like South Africa.
The location factors of Chinatown in Africa
Sino-Africa trade has demonstrated a strong tendency toward geographical concentration. In the year 2009, 10 African countries, namely South Africa, Nigeria, Egypt, Algeria, Angola, Morocco, Libya, Sudan, Liberia, and Benin, were responsible for 71.76% of total Chinese imported products for the continent as a whole.(10)
These Chinese ‘trade-partner’ states largely coincided with those same states in which huge Chinatowns, or distribution centres for Chinese products, are located. Therefore, since Sino-African trade has become increasingly important to both sides, and Chinatowns clearly have crucial roles in this process, the factors that determine the location of Chinatowns in each state deserve attention.
The first priority for Chinese merchants is a relatively stable political environment and guarantees for individual safety. Angola, for example, even with its attractive market and huge potential economic development, is not considered an ideal location for business because the Angolan civil war left a shadow in the mind of the Chinese trader. Moreover, the current Government is not seen as capable of guaranteeing the safety of individual lives and property. Therefore, although uneconomical, Chinese traders prefer to base themselves in neighbouring Namibia. The stability of the national authority also satisfies a prerequisite of economic benefit for the average Chinese businessman. As seen in the recent example of Libya’s riots, China’s total economic loss may reach as much as US$ 60 billion, as reported by the media.(11) Africa continent which experiences much turbulence, and its instabilities have become a significant obstacle for international trade, foreign investment, and thus, economic development. Though the political situations in African states are usually difficult to predict, the Chinese have managed to limit their business interests to keeping within relatively stable states with mature Governments, of which South Africa is the best example. Secondly, local policies are important for businessmen. Some states have issued laws to encourage foreign investments, which succeed in attracting both investment and traders. South Africa, for example, provides national treatment to foreign investment, as well as some extra preferential policy in tax for foreigners.(12)
Chinese merchants are highly sensitive to these changes in policy, since these policies are directly related to their profits. Market scale is another factor for consideration. South Africa is important not only in itself, but also as the entry point for the whole Southern African Development Community (SADC) region. On the contrary, some small countries, like the Republic of Cameroon, even with stable political situations and a relatively prosperous economy, are still not likely to encompass Chinatown developments on such large scales. Lastly, to take the characteristics of Chinese merchants into consideration, there are also contingencies for the location of Chinatowns. Individual Chinese traders would usually only seek business opportunities in states where they have friends or relatives. Thus, the existence of first generation Chinese merchants in a particular state would play an important role in the further development of larger Chinatowns. Their gathering places, which sometimes seem to be randomly selected, must have opportunities for further development into huge Chinatowns.
Chinatown has become a new type of connection between Africa and China. Most emerged at the beginning of the 21st century, and have enjoyed fast growth, and others, which exist as Chinese distribution centres, play pivotal roles in Sino-African economic relations. Usually situated in politically stable states with large markets and friendly investment policies, Chinatowns are generally welcomed by locals, especially when they offer inexpensive products.
However, they could become cause for conflict. The low quality of Chinese production, neglect of local laws and regulations on the part of Chinese businessmen, and their rapidly growing wealth could all contribute to increased tensions between themselves and their host states. Therefore, it should be a requirement that both sides should make efforts to improve the situation and avoid disputes. From the foregoing discussion, it could be said that Chinatowns in Africa are both the result and a booster of the rapid development in Sino-African trade. Though bringing with them the potential for light conflict, the primary influence of both sides remains positive. The existence and function of Chinatowns is not likely to be replaced in the foreseeable future, but with appropriate guidance and regulation, these distribution centres are likely to make a great contribution to both the Chinese and African economies and cultures in the long run.
(1) Contact Kaiyu Shao through Consultancy Africa Intelligence’s Asia Dimension Unit ( email@example.com).
(2) Liang, M., 2011. Sino-Africa trade—based on a global perspective. International Business, 5, pp. 40-48.
(3) China mall website, http://www.chinamall.co.za.
(5) ‘Namibia’s Chinatown,’ blog, Ifeng, 11 June 2009, http://blog.ifeng.com.
(6) Exploring the Chinatown in Africa’, 6 January 2011, http://blog.sina.com.cn.
(7) Liu, Z., ‘Chinese in the eyes of the African people’, Global Times, 15 June 2009, http://opinion.globaltimes.cn.
(8) Chen, L. ‘Africa and China: Issue and Insights’, Georgetown University Asian Studies, 7 November 2008, http://asianstudies.georgetown.edu.
(9) Adewunmi, F. ’China in Africa: From a Chinese perspective’, How we made it in Africa, 10 January, 2012, http://www.howwemadeitinafrica.com.
(10) Liang, M., 2011. Sino-Africa trade—based on a global perspective. International Business, 5, pp. 40-48.
(11) ‘Tele interview: Chinese investment losses in Libya’. China Network TV, 6 February 2012, http://english.cntv.cn.
(12) Maxwell, C. ‘South Africa: Foreign Investment’, Lowtax, http://www.lowtax.net.
Monday, 04 June 2012 08:14