African Merchants in China: The Mobile Phone Trade
To many, poverty alleviation and economic development in Africa can mean two things: resource extraction or foreign aid distribution. However, the emerging mobile phone trade between African countries and China indicates the potential of an alternative growth strategy centered on small African traders that can deliver more equitable distribution of profits throughout Africa.
The authors interviewed 20 African traders and wholesalers at major mobile phone markets in Guangzhou, China. Interviewees were identified through intercept survey and snowball sampling and were conducted in June 2014 and July 2015.
To many, poverty alleviation and economic development in Africa can mean two things: resource extraction or foreign aid distribution. However, the emerging mobile phone trade between African countries and China indicates the potential of an alternative growth strategy centered on small African traders that can deliver more equitable distribution of profits throughout Africa.
From 2000 to 2013, the trade volume between China and Africa jumped 20-fold, reaching an unprecedented $200 billion. Sino-African trade volume is now twice that of U.S.-African trade. Western critics are quick to decry China’s exploitation of Africa’s natural resources, and shortcomings in China’s huge investments in Africa’s infrastructure. The lack of local employment opportunities and poor project quality are held up as examples of the one-sided nature of this trade relationship. However, these critics often overlook certain important Sino-African trade sectors where the role of Chinese government investment is minimal. Rather, these sectors are actually controlled by individual traders from Africa, who capture most of the profit of the trade relationship. Nowhere is this more evident than in the mobile phone trade.
From 2005 to 2014, the number of mobile phone subscribers in sub-Saharan Africa rose from 90 million to 683 million. Many of Africa’s mobile phones are imported from China, providing opportunities for Africa’s enterprising traders. Nigeria now has almost 140 million subscribers, or 20 percent of the African market. Half of its $1.1 billion imported telecommunication equipment in 2012, including mobile phones and accessories, came from China. This represents a seven-fold increase from 2003, when China’s share in the Nigeria market was only 7 percent. In Kenya, China’s share rose even more dramatically, from one percent in 2003 to 52 percent in 2010, while the total trade volume in telecommunication equipment increased by almost eight-fold.
Affordability is a driving force behind this rapid-growing market. Mobile phones often cost less than 10 dollars, with no contractual requirement. African vendors and traders have also demonstrated an entrepreneurial drive to capture the import market for Chinese mobile phones, further promoting growth in their home countries.
This Sino-Africa mobile phone trade was initiated and is still controlled by small-scale traders from Africa. Thousands of these individuals travel back and forth between China and Africa countries every year, buying from Chinese wholesalers and selling indirectly or directly to customers back in Africa. In interviews with traders hailing from countries across the continent of Africa, some reported purchasing a large quantity of mobile phones and shipping them back through containers, while others prefer to carry their products onto airplanes as luggage—meaning that official trade numbers may be vastly underestimated. Traders tended to stay in China from several months to several years, depending on the individual’s role in the value chain.
In the city of Guangzhou, the capital of mobile phone production, the African population is estimated at 200,000, constituting the largest African community in Asia. The traders interviewed for this piece explained that most members of this community trade textile and electronic products (including mobile phones). The exact number of African mobile phone traders is unclear as some traders trade multiple products or shift their focus from one sector to another. Many people believe, however, that number is still rising, as mobile phones replace conventional products like DVD players, cameras and MP3 players. According to interviews, many African traders in these conventional sectors have switched to the mobile phone trade.
The ability of African traders to identify and exploit lucrative areas in the mobile phone value chain allows a large portion of profit to flow directly to these entrepreneurs. Interviews with these traders indicate that most of the profits are kept in Africa for personal consumption or business reinvestment—as opposed to higher-profile Chinese trade investments, which largely flow out of the continent. Given the size of the mobile phone economy, the Sino-African phone trade has the potential to significantly benefit growth and alleviate poverty. (Unlike textiles, most mobile phones are not manufactured in Africa, meaning that the influx of Chinese products does not damage local manufacturing.) These exchanges have helped build Africa’s burgeoning telecommunication industry.
Despite their successes, African mobile phone traders still operate with minimum support from their governments or other international organizations. Government corruption and inefficiency, as well as a discriminating business environment in China, often impede their businesses. For example, in Africa, traders’ luggage can be confiscated at airports if they do not bribe custom officials; in China, mobile phones at wholesale centers that target African traders, such as those at Dashatou market in Guangzhou, can have an unusually high rate of malfunction, sometimes up to 30 percent.
In Africa’s growing mobile phone market, competition is strong. Interviews with traders revealed the perception that mobile phones from Chinese traders in Africa often have a better quality and similar prices compared to those from African traders. Although these products benefit African customers in the short term, Chinese vendors’ profits tend to be sent back to China, instead of staying in Africa. Facing such competition, many of the African traders interviewed reported that profits have declined significantly in recent years.
The early success of African entrepreneurs in the mobile phone sector demonstrates both the viability of a development strategy centered on small scale traders as well as the risks it faces going forward. To sustain their business model and its potential to distribute profits, traders expressed a need for support from African governments and international organizations who can remove existing policy barriers, particularly on excessive regulations at customs. These actors could also establish platforms or associations to encourage information sharing and collaboration among individual traders, provide financial support, or protect local businesses from unfair competition in the form of Chinese subsidies.
Governments and donors can also assist traders by working with Chinese officials to improve the business environment in China. Better visa policies, relaxing stringent regulations on airplane luggage, improving quality control in the wholesale markets, and improving shipping arrangements would all benefit African traders’ business.
The interviews conducted for this research support data and external reports indicating that Africa’s mobile phone industry has great potential for economic growth across the continent. Supporting African mobile entrepreneurs is an important avenue to enable international trade to improve livelihoods and fill a void in development that international aid cannot fulfill on its own.
Ziyu Yvonne Yan, a senior at the Lawrenceville School, New Jersey, is an experienced writer and an enthusiast on international development. She conducted independent field research on aquafarming in Southeast Asia, and has written about the African community in Guangzhou since 2013. She published in New York Times, Yale’s China Hands magazine, the academic journal of China Fishery, and Huffington Post.
Zhan Guo is an associate professor at New York University. His research focuses on urban policy, urbanization process in China, and international development.