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The industrious Chinese retailers

 

China flag, chineseChinese immigration to South Africa began in 1660, but large numbers started arriving in the 1870s to make their money on the gold and diamond mines. These were mostly Cantonese immigrants. Immigration continued with indentured Chinese miners arriving in the early 1900s. Today there are officially 10,000 Chinese in South Africa.

In the last five years, however, between 6000 and 12,000 Chinese shops have popped up in South Africa selling cheap Chinese merchandise. This puts the unofficial arrivals at over 20,000 in the past five years – double the population resulting from the first 400 years.

This is largely due to endemic corruption in the South African immigration department. While the 20,000 Chinese sounds significant, it compares to 10 million illegal immigrants of African descent, including the much hated Somalians who are also excellent retail traders.

In 2005 imports of clothing in South Africa were about ZAR4 billion. A year later the figure was ZAR8.5 billion, and in 2010 this had grown to ZAR11.3 billion. These figures are according to Chinese exports.

From the South African side the number comparable to the ZAR11.3 billion is a mere ZAR6.7 billion. The difference is attributable to illegal imports – mainly clothing – smuggled past customs (or due to customs officials being bribed or Nigerians bringing in merchandise by road) avoiding the 45 er cent duty which provides the Chinese shopkeepers with a huge competitive advantage. That’s aside from the 30 per cent discount enjoyed due to the Chinese deliberately undervaluing their currency to boost exports. Then there are the fakes – billions in perfume, cigarettes, branded clothing, toys – you name it.

It is estimated that 40 per cent to 50 per cent of traders are not registered, so they pay no income tax or VAT. The police are paid off to turn a blind eye to traders who visit the big cities to replenish their goods before returning to the small towns.

While much of what is described above is clearly illegal and third world, one cannot but take ones hat off to many of the young poor Chinese couples who leave their country behind and set up a retail business in a dangerous and foreign country with zero knowledge of the languages spoken. The illegality is not commendable, but nor is the flagrant corruption that allows the illegality to flourish.

John Lennon wrote “Imagine there’s no countries, it isn’t hard to do… you may say I’m a dreamer, but I’m not the only one”.

But was he a dreamer? With all the vagaries – artificial exchange rates, protective duties, taxes left, right, and centre, is it any wonder that poor people reach a point where they are prepared to take risks in order to survive? Isn’t this why the playing fields between countries are having to get ‘leveller’?

Perhaps what John Lennon could imagine, is the effect that this kind of behaviour has on legitimate retailers in South Africa.

Ten thousand kilometres away you say. Not my problem.

Fifteen of the 17 discount sellers fined for selling dangerous toys in NSW this year have been fined previously for selling dangerous toys. Six have been previously prosecuted.

Although this falls into a far more serious category, it illustrates that we in Australia are far from immune from errant retailers. As the world of retail becomes more and more global, protectionism will become harder and harder to enforce.

Maybe this is a wake up call for all of us in retail. The days of a hilly playing field are over. The LVT is but one example. Better get used to it.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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