18 August 2012

Uganda: Flushing Chinese Out of Petty Business

The long-running acrimony between local and Chinese traders could easily have exploded into a full-scale riot on July 27, along Mutaasa Kafeero and William Streets in Kampala city centre, and soured the budding business and diplomatic ties between Uganda and China

But Police intervened quickly and calmed the tempers of enraged traders who said they were protesting against Chinese encroachment on their turf. Traders said instead of only doing wholesale as required by law, Chinese were retailing fast-moving goods like mobile phones, shoes, clothes and others, cutting local traders out of business.

"They sell to us in wholesale and then go ahead to also retail some goods to customers," says Ketra Namara, a mobile phone dealer along William Street. Namara said this exposed local retailers to unfair competition, undermining their businesses, as their customers flee to buy directly from the Chinese at what they consider to be give-away prices.

"Of course customers will always go to cheaper sources," Namara says.

She said a mobile phone that costs Shs 60,000 in a local retailer's shop will be sold at Shs 47,000 in the Chinese shop.

"Let them sell in wholesale and leave us to sell in retail," she said, echoing a sentiment expressed by most traders in Kampala.

Fear of riots

Many Chinese do not want to mention their names in the press or talk about the details of their businesses, saying they feared to be arrested or get targeted by traders. Other than this, they said they have no problem with local traders.

"Business is good. But I do not know English, proceed to another shop where you will find English- speaking Chinese," a young Chinese shoe dealer on William Street who mentioned her name only as Hancy said as she studiously focused her attention on a laptop computer. Since she appeared to be no older than 18 years and other older Chinese people were looking on, it is possible Hancy was not the owner of the well-stocked business, but was the only one who could speak English.

Most Chinese come to Uganda through connections with compatriots already in the country, and reports say their numbers are growing rapidly, partly encouraged by growing Chinese investments in the country. "I was brought here by a friend who told me there was a big market for different products," Hancy said.

On the same street, just opposite Hancy's shop is another Chinese business, also dealing in shoes. Two Chinese own and run this business with two Ugandan employees who serve both as shop assistants and interpreters for the two men who can barely speak any English.

Like Hancy, they said they sell wholesale and no retail. The 30 minutes or so I spent in their shop, it appeared business was brisk with several customers flocked in and paying for several dozens of shoes.

"Yeah, we do well," said a short, youthful, Chinese man who mentioned his name as only Ron. Ron said his business moved to Uganda in 2010 after a friend tipped him about a large market here.

"We were in Dubai, but now we are here," Ron said. "Uganda is okay, we only fear riots."

The recent traders' protest was stopped before any person hurt or property damaged, but many Chinese had quickly locked their shops as soon as they heard of it. One would rather lose sales for the day than their entire stock, or life, as has been demonstrated by previous demonstrations in Kampala that turned violent.

Hunting them out

Officials of Kampala City Traders Association (KACITA) say they were not party to the anti-Chinese protest, that it was the work of informal retailers' networks. However, they do not condemn it and argue that traders' grievances were genuine.

KACITA officials say when businesses closed late last year and early this year due to failure of traders to pay back commercial bank loans whose interest had unexpectedly gone up, many of the spaces they left behind were quickly occupied by Chinese, who had sufficient capital. This helped to further feed the anti-Chinese sentiments.

"This [foreigners conducting petty business] is against the provisions in the Trade Licensing Act that was amended in 2000," KACITA Spokesperson Issa Sekito said.

Sekitto said KACITA has less than 10 Chinese members, "yet there are thousands doing petty trading here". Sekito during a meeting with the President, he told them to find out the Chinese doing petty business and force them out.

"As I talk now we have deported over 120 Chinese over the last three months and we are continuing to hunt others," he said.

Sekitto said Chinese have sometimes used dirty tactics, seducing landlords to chase away Ugandan tenants by offering higher rent.

He added that Chinese were lucky because they can obtain cheaper goods and loans from China and survive even when economic conditions are harsh.

Business analysts say if local businesses are to compete, they must not stir conflict, but adopt the same strategies the Chinese have used to succeed: increase capital investments, improve customer relationships and look for cheaper product sources.

Call for partnership

Top business leaders are preaching a similar message.

Former chairman of the Uganda Manufacturers Association, James Mulwana, says Chinese investors and Ugandans should look at each other as partners instead of rivals.

"There is a lot to learn from each other," Mulwana, Honorary Consul for Hungary and chairman of various enterprises in Uganda, told journalists at a press conference in Kampala on August 1.

Mulwana, who is also the chairman of Standard Chartered Bank Uganda, said when they went for the group's Africa Chairmen's Conference in Beijing, China, in June, Chinese delegates urged them to ensure that Chinese who wished to conduct business in any country formalised their operations. Recent estimates put the number of Chinese doing business on the African continent at more than a million, most having arrived within the last 10 years. According to the Uganda Investment Authority, over 265 Chinese companies opened their business worth US$ 596 million (about Shs 1.5 trillion) in Uganda by end of 2011, creating over 28,000 jobs in sectors including petroleum, agriculture, infrastructure development and others. Among these is the oil company CNOOC, which early this year acquired one third of the business interest in Uganda's oil in the Albertine region and will be involved in the construction of an oil refinery.

In an interview with The Independent on August 9, Zou Xiaoming, Economic and Commercial Consul at the Chinese Embassy in Uganda urged Chinese investors in Uganda to invest in huge projects say infrastructure, construction, manufacturing, farming, among others, instead of petty businesses.

"We don't want to compete with local business people because we know they don't have enough capital," Xiaoming said. "Those in trade should only be wholesalers and not retailers."

Xiaoming urged government to ensure there is a favorable investment climate, and put in place good infrastructure. "Once these are in place, other activities like trade and others can go on very well," he said.

Xiaoming said China granted a loan of US$5billion to African countries between 2006 and 2009 and US$10 billion loan between 2009 and 2012. These investments have contributed to tax revenue growth and employment. He said the country plans another loan totaling to US$20billion between 2013 and 2015 to the continent.

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