Igbo traders: Before these dewdrops become a deluge

By Chuks OLUIGBO

The other day I stumbled on a 2012 article on Sahara Reporters by Rudolph Ogoo Okonkwo of “Correct me if I’m right” fame entitled “The End of Igbo Business Model”. I’ll quote elaborately from that piece to establish the kernel of the writer’s concern:

“The Igbo business model of opening stores in markets across city centres is coming to an end. In a generation or two, there won’t be anything like that anymore. It would all go the way Mom and Pop stores disappeared in American cities where Walmart and Targets set up shop.

“The Igbo business model is simple. At the top is an importer. His job is to import items from overseas and have a chain of wholesalers move the goods across Nigeria. The wholesalers on their own have a chain of retailers who buy from them and sell at markets across Nigeria. In one swoop, the Chinese and Walmart will replace all the Igbo traders on this chain from importers to retailers.”

This may sound alarmist, but the realities are there, even if subtle. First, the Chinese have mushroomed everywhere in Nigeria. As I put it elsewhere, “Across all of Africa, Chinese presence can no longer be denied, nor can it be wished away. China is everywhere – in construction, education, telecoms, technology, oil and gas, transport, just name it – and it is not in a haste to leave. China is here to stay.”

Second, the boom in Nigeria’s formal retail sector – led by foreign retail chains such as Shoprite and Spar – has been widely reported. And it is continuing, with Whitey Basson, CEO of Shoprite, announcing plans to establish up to 700 shops in the country. Just recently, Adebayo Jimoh, managing director of Odu’a Group Limited, an offshoot of the Western Nigerian Development Company (WNDC), told BusinessDay that the Group is building a massive mall in the central business district (CBD) of Ibadan, the Oyo State capital, to be known as Heritage Mall. Estimated to cost N2 billion, the mall, with 18,640 square metres of lettable space, will debut on May 29, and Shoprite is the anchor tenant, occupying 4,750 square metres.

Third, big electronics giants, such as LG, continue to open outlets here and there to take care of their growing customer base. This may not be glaring yet, but traders at the Alaba International Market, easily the biggest electronics market in Nigeria, are already losing customers to these outlets. Many middle-income Lagosians, for instance, would rather walk into an LG outlet than go to Alaba. The reason is simple. As a banker friend told me, “I bought all my electronics from LG outlet at 23 Road, Festac. There, I’m guaranteed of the genuineness of the product, warranty, and a good price. Why risk going to Alaba where I might be sold Aiwa in the name of Sony?”

This is what seems to be happening: As the Nigerian middle class continues to grow, accompanied by growth in disposable income (see, for instance, Gregory Kronsten’s “Household incomes rising even if it is not always obvious”, BusinessDay, April 22, 2013), the formal retail sector is growing along with it, while the informal market is going, though gradually, almost unnoticeably, the other direction.

On the Chinese threat, here are samplers. Just recently, Olawale Tanimowo, a Lagos-based marketing communications executive, in an article published in BusinessDay (Tuesday, April 2), reported that in the last week of March, traders at the Oke-Arin Market in Lagos Island staged a peaceful protest against the practices of some Chinese traders who have practically taken over trading in the market. These Chinese, according to him, came in as investors but eventually began very dangerous practices that are making it impossible for Nigerians to sell. “As a matter of fact,” wrote Tanimowo, “Nigerians who wish to remain in business in that market are made to buy from these Chinese who are also competing with them in the same retail and wholesale business. What this means is that if a Nigerian trader buys a bale of lace material from these Chinese traders at N5,000, for instance, he or she is going to sell at a higher value for any margin to be possible. But this margin is being made difficult by the fact that these Chinese who are now representatives of other traders in home country get their goods at cheaper costs and would definitely sell at lower values.”

Similarly, to buttress his point, Okonkwo referred to a similar case around July last year where the Dealers of Bags and Leather Wears Association of Nigeria at Balogun Market in Lagos also held a protest march against some Chinese businessmen whom they accused of retailing leather products at a very cheap rate, thereby forcing the Nigerian traders to operate at a loss – what the traders termed “a systematic plan to undermine and kill off their business”. According to the protesting traders, they had been facing the problem for over five years – that is, since the Chinese came – and they wanted the Federal Government to come to their aid, saying if the activities of the Chinese were not checked, thousands of the local traders would lose their source of livelihood.

I do not, however, agree with Okonkwo that it’s just about Igbo traders, although I believe we are the most affected because we are in the heart of the business of buying and selling in the country. It’s also almost impossible not to add, in our blind pursuit of money, that we are the ones likely not to observe the change taking place, just as we have stubbornly closed our eyes to the threat to our lives in the troubled north of the country.

What can be done? Chase the Chinese away, or stop Shoprite and co from expanding? Not likely. Their presence is a positive for the Nigerian economy. Moreover, as Christo Wiese, CEO of Pepkor Ltd, is quoted as saying, “There’s enough for everybody. It’s a growing market.” But it’s possible for government to come up with some legislation to protect local traders, as being done in Ghana where the Ghana Investment Promotion Centre (GIPC) Law (Act 478, 1994) reserves small-scale retail businesses for Ghanaians. The law essentially enjoins all non-Ghanaians, including ECOWAS citizens, who wish to engage in trading to comply with the following: “To set up businesses outside places designated as markets, invest a minimum of US$300,000 in cash or in kind, register with the GIPC, obtain immigration quota and employ at least 10 Ghanaians in the business.”

Another way is for Nigerian traders themselves to key into the expanding formal retail market currently dominated by foreign retailers. This, reportedly, is already being done by some small neighbourhood stores who are adapting to the changing tastes of consumers by changing the profile of products they stock as well as the layout and design of their stores, with the ultimate aim of turning themselves fully into one-stop shops.

But for the Igbo businessmen, Okonkwo advocates: “It will be good if they begin to strategise now. It will be great if ten-year and twenty-year plans for transition are put in place. I believe that a plan to transition into manufacturing, turning Aba and Nnewi and Nkpor into manufacturing hubs will greatly keep the Igbo in play as the Chinese and Walmart take their places in Africa.” They either do this or be caught unawares as Balogun, Alaba International, Ochanja, Ogbete, and other markets across Nigeria “are turned into malls, theatres and football fields”. One cannot but agree.

Towards a win-win Sino-Africa relations

In spite of long years of romance with China, and notwithstanding massive Chinese investments in Africa, many analysts believe the continent is yet to position itself to truly benefit from its relations with the Asian country.

By Chuks OLUIGBO

Across all of Africa, Chinese presence can no longer be denied, nor can it be wished away. China is everywhere – in construction, education, telecoms, technology, oil and gas, transport, just name it – and it is not in a haste to leave. China is here to stay.

“Already, trade between Africa and China has grown at a breathtaking pace,” writes Kingsley Ighobor in Africa Renewal. “It was $10.5 billion in 2000, $40 billion in 2005 and $166 billion in 2011. China is currently Africa’s largest trading partner, having surpassed the US in 2009. The Chinese government is eager to cement China’s dominance by burnishing its image through initiatives such as a $20 billion credit to African countries to develop infrastructure and the African Talents Programme, which is intended to train 30,000 Africans in various sectors.”

Beyond these, Chinese construction firms are acquiring enormous construction contracts across Africa. The China Railway Construction Corp. (CRC), for instance, in February last year announced projects in Nigeria, Djibouti and Ethiopia worth about $1.5 billion in total. In September, it signed a $1.5 billion contract to modernize a railway system in Nigeria. In the same month, China South Locomotive and Rolling Stock Corporation, the largest train manufacturer in China, signed a $400 million deal to supply locomotives to a South African firm, Transnet. Hauwei, the Chinese telecom giant, operates fully in 30 out of 54 African countries. And China has made great inroads into Africa’s agricultural sector.

In Nigeria, the nation’s diplomatic relations with China dates back to 1971. Since then, many Chinese leaders have visited Nigeria and vice versa, and bilateral relations between the two countries have been smooth and steady, but especially since May 1999 when the country returned to constitutional democracy. China and Nigeria have since then signed a number of agreements on trade, economic and technical cooperation, scientific and technological cooperation, as well as an agreement on investment protection, and the two countries have set up a joint economic and trade commission.

And the volume of trade between Nigeria and China has grown exponentially. In 2012 alone, according to The Heritage Foundation, Chinese investment in Nigeria was $15.6 billion (the highest in sub-Saharan Africa). These investments, mostly contracts, were in the technology, transport, real estate and energy sectors. 53 percent were energy-related investments and contracts. Equally, according to the Debt Management Office, Nigeria owes China $678.9 million.

Opinions have been divided as to whether Chinese relationship with Africa is a one-way traffic or a win-win. Consider the new African Union headquarters in Addis Ababa, Ethiopia, a towering 20-storey building tagged "China’s gift to Africa” because China picked up the $200 million tab for the state-of-the-art complex. While Ethiopia’s late Prime Minister Meles Zenawi was prompted by that “gift” to refer to Africa’s current economic boom as a “renaissance” due partly to China’s “amazing re-emergence and its commitments to a win-win partnership with Africa”, Chika Ezeanya, a political commentator, considers it an “insult to the AU and to every African that in 2012, a building as symbolic as the AU headquarters is designed, built and maintained by a foreign country”. Yet Faida Mitifu, the Democratic Republic of the Congo’s ambassador to the US, told the Reuters news agency that “the good thing about this partnership is that it’s a give and take”.

On the positive side, in the case of Nigeria, analysts point to China’s efforts to help Nigeria diversify its economy. For instance, China has increased its volume of agricultural imports from Nigeria – cassava chips, sesame seed, etc – and as at 2009, there were an estimated 400 Chinese agricultural experts in Nigeria involved in the construction of small earth dams.

Yet, many believe the answer to China’s interest in Africa lies not in helping African countries grow their economies but rather in the ultimate need to ensure the expansion of the Chinese market by securing the source of cheap raw materials as well as ready market for finished products. China currently buys more than one-third of Africa’s oil. In addition, China’s industries are getting raw materials such as coal from South Africa, iron ore from Gabon, timber from Equatorial Guinea and copper from Zambia. Chris Alden, Daniel Large and Ricardo Soares de Oliveira, editors of China Returns to Africa, rightly note, “The overarching driver has been the Chinese government’s strategic pursuit of resources and attempts to ensure raw material supplies for growing energy needs within China.”

Conversely, Chinese products have flooded markets in Johannesburg, Luanda, Lagos, Cairo, Dakar and other cities, towns and villages in Africa. These goods include clothing, jewellery, electronics, building materials and much more – even little things like matches, tea bags, children’s toys and bathing soaps. In other words, China is re-enacting the era of the so-called legitimate trade in Africa – call it re-colonisation if you like. Thus, former US Secretary of State, Hillary Clinton, sometime ago warned against a “new colonialism in Africa” in which it is “easy to come in, take out natural resources, pay off leaders and leave”.

While the flooding of Chinese products into African markets is not bad in itself, the problem is that many of these products are of very poor quality, and their low prices are responsible for the collapse of local industries. For instance, in spite of massive intervention fund by Nigeria’s Federal Government into the textile industry in the country, textile factories across the country have failed to pick up because they cannot compete with cheap Chinese garments.

As already said, there is no wishing away Chinese presence. Rather, as Maged Abdelaziz, the UN Secretary-General’s special adviser on Africa, has admonished, Africa must develop a strategy for its dealings with not only China but other emerging economic giants such as Brazil and India if it is to truly benefit from its relationship with these countries.

Furthermore, in a recent editorial, a leading business and financial daily in Nigeria made a case for a purposeful engagement with China, saying Nigeria and other African governments need to exploit their relationship with China, and others, by aiming at improving economic diversification and competitiveness, and arguing that it is the only way to achieve a win-win relationship.

According to the editorial, while it is necessary to get benign loans to finance much-needed infrastructure, it is also good to realise that loans alone are insufficient. “Focusing on loans alone is to miss various opportunities that Chinese investments in construction, oil and gas, mines, and consumer products offer,” it said.

“Local private businesses and government need to focus on the strategy – priority sectors, favourable terms that develop skills and transfer technology – and the benefits of foreign investment, from China and elsewhere. These will help diversify the economy, create jobs, and reduce poverty. Economists say that as Chinese manufacturing moves up the value chain, export processing zones (EPZs) will be ideal for low-cost production,” it further said.

All said, there is no gainsaying that Chinese investments are for profit, and the Chinese are profitably employing their competitive advantage in price, risk appetite and access to credit. In concluding, the words of Patience Akpan-Obong, an analyst, are perhaps very instructive here: “I understand the allure of Chinese (foreign) investment for the Nigerian economy, both at the micro and macro levels. It promises an easy ride, jobs and growth, but China is not in Nigeria for missionary work. Heck, not even European missionaries in the first colonisation era returned home empty-handed! Perhaps it’s time that the Nigerian government reassessed its infatuation with China to ensure that it is truly an equal partner. If not, then it should have the courage to renegotiate the terms of engagement.” The same, needless to stress, goes for other African economies.