Coen Welsh | Nov 14, 2017 | 0
You want guarantee or you want cheap?
Overhearing this terse question in one of the dozens of shops in the smaller so-called China Town in Windhoek’s Northern Industrial Area, brought a discreet smile to my face. A shopper was arguing with the vendor over both price and quality when the vendor nonchalantly decided to settle the matter for good, just to make sure there is no misunderstanding in the (oral) version of the fine print.
To me it signalled something entirely different – the meteoric rise of the Chinese presence in Africa and the subsequent adjustments required from both newcomers and consumers.
During the week, a TV channel broadcast a programme on the travels of one Jonathan Dimbleby from Kinshasha in the Congo to Durban in South Africa. For me the highlight was Mr Dimbleby’s visit to the Chinese ambassador’s residence in Kinshasha. The ambassador informed the intrepid traveller that the Chinese government has earmarked US$6 billion for investment in the DRC, mostly in extractive industries, but also in infrastructure. Now, that is not an insignificant amount to invest in any single African country.
Another telltale remark to define Chinese intentions came from the ambassador when he boldly stated the Chinese are in every single country, world wide, so why would Africa be any exception?
Avoiding an ethical slant to this question, one has to pose the counter question: Why would the Chinese want to be in every single country in the world?
In 1998 at a business forum organised by The Economist, Chinese expansion and the opportunities it creates, was very much a feature of the programme. We advertised this widely and all sorts of interested parties subscribed to attend the forum. At that time Chinese operations were still under wraps and it was only in informed circles that one obtained information about their aggressive entry and expansion. The Chinese embassy ignored us flatly but, interestingly, three Chinese individuals registered and attended. To me they appeared very similar to all the other secret service agents from many other countries I have met in my life.
At that time, Chinese contractors, after successfully beating the powerful Stocks & Stocks on several large tenders, did not advertise their presence at building sites. It was only their building methods and their sloppy work, like the High Court for instance, that gave them away. It was only some years later that Chinese contractors, emboldened by their success in avoiding labour issues, suddenly started showing off on huge billboards and banners on their overhead cranes.
This is all fantastic for investment, particularly infrastructure investment but the Chinese will ask for their pound of flesh somewhere in the not-too-distant future. Our naive political leaders, defending all the underhand deals and dealings with Chinese individuals and companies, are fond of reminding us they gave Swapo guns during the war. But I doubt they ever used them to shoot because these were so unreliable.
Since 1998, China’s presence has become entrenched and publicly visible. The Chinese Embassy in Windhoek illustrates this point. In earlier commentaries I have asked the probing question why they need this armoured monstrosity if they only need to serve the visa requirements of a small number of building contractors’ employees.
But Chinese nationals and goods are forcing the rest of the world to make a reality check in terms of their own competitiveness and market share.
German companies have been doing this rather successfully, taking on Chinese products at comparable prices, but selling under the quality label. Yet it is common knowledge that German goods will not be able to compete indefinitely on price, and the Germans know this.
This game of chicken will come to an end, depending only on who flinches first.
On average, I believe European price levels are simply too elevated for the run of the mill stuff that ordinary consumers in Africa need. For this very simple reason, Chinese goods will only grow in popularity, trailing the expanding footprint as more and more small vendors penetrate Africa’s largely unserviced rural areas.
To the African home owner of a modest property somewhere in the bush, after-sales service and refundable guarantees are not important. The thing must just work, and it must be affordable. Local consumers are extremely price sensitive. Chinese vendors know this. That is why the only consideration during a sale is: You want guarantee or you want cheap?