Friday, October 24, 2014

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Joburg's China Malls Phenomenon

In most of Africa, independent Chinese businesses lie dispersed across various markets and centres. In Johannesburg, they often group together under single roofs.
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Entering China Mart, one of the Chinese malls located in Crown Mines. Photograph by Romain Dittgen.

Alongside its wealthy suburbs with high-walled neighbourhoods, its underserviced townships and the bustle of its downtown street vendors, Johannesburg’s landscape also features numerous malls. The spectrum of these is vast. They range from wholesalers to retailers, from those selling upmarket products to those offering goods at discount prices, and from local franchises to – since the turn of the century − entirely Chinese-run developments.

Like so many African countries, South Africa is host to large numbers of Chinese businesses and migrants, but there are some elements of the country's experience that set it apart. Firstly, South Africa is understood to hold the largest population of Chinese on the continent, estimated to be somewhere between 300,000-500,000 who came over in successive distinct waves. And secondly, while Chinese commercial activities elsewhere on the continent tend to be made up of distinct shops, markets and bazaars, in the likes of Johannesburg, they are mostly gathered within preconceived spaces built by Chinese investors and run by (mainly) Chinese management boards. Shopkeepers, mostly wholesalers, remain at the heart of this layered economy with the fortunes of the mall depending on the success of each individual unit and vice versa.

The story of how these malls arose starts in the late-1980s and early-1990s as the first wholesalers from mainland China began running their businesses directly from warehouses located in industrial zones such as Isando, Kempton Park (near the international airport) and Selby as well as scattered around the inner city. Although lucrative, this way of operating came with high risks and, as security declined in the 90s, the frequency of armed robberies and the troubling rate of crime persuaded these economic operators to regroup inside secured facilities and familiar business environments.

The first one of these − China City − opened its doors in 1995 and was located close to downtown (directly opposite Ellis Park stadium). It was started by a Hong Kong businessman who purchased an old partly abandoned shopping centre as well as a nearby office tower. Once refurbished, he began renting out the retail space to Chinese merchants and, after slow beginnings, the mall recorded a healthy rise in customers and profits. This persuaded the enterprising owner to build an extension, which was inaugurated in 2004, and its success led to similar developments from the early 2000s.

Owing to the negative perception of the inner city and lack of space, most of these subsequent malls were either located in Fordsburg (west of downtown) or on the immediate southern outskirts of the city centre in Crown Mines. The former mine dump of Crown Mines is in fact nowadays largely dedicated to wholesale trading, and its convenient location between the two low-income consumer basins of Soweto and downtown Johannesburg − as well as its visibility and proximity to several motorways − has attracted both local and Chinese distribution centres. The majority of the latter launched around 2010 when the South African currency was particularly strong, enabling low cost importing from China.

Vans

Traders load up their vans outside Dragon City.

The extent of South Africa's ‘China mall’ boom has, to a large extent, been made possible by the country's specific economic configuration. Compared to the rest of the continent, the commercial possibilities – especially in Johannesburg – are particularly rich and diverse. Nonetheless, South Africa is also one of the world’s most unequal societies and consumption splits across various lines. In Johannesburg, for example, the upper- and middle-classes tend to do most of their shopping in the richer suburbs, while people with more limited means turn to shops in the city centre and in some surrounding neighbourhoods. Those on low incomes may well oscillate between the formal and informal markets and are often attracted by second-hand garments as well as, increasingly, low-cost Chinese goods.

As providers of a wide range of products at affordable prices, Johannesburg's Chinese malls have quickly turned into significant hubs to purchase cheap products. Most of the stores sell clothes and, to a lesser extent, daily consumer products, but the range of goods has also gradually widened and now includes electronic devices, furniture and more. Furthermore, since most of these Chinese businesses operate both as wholesalers and retailers, these centres of commercial activity are not just attractive to end consumers, but also – and in fact mainly – to those in search of supplies.

According to many of the Chinese shopkeepers I interviewed between 2009 and 2012, Dragon City, located in Fordsburg, is a particularly popular place to source goods in bulk. On weekdays, there is an intense flow of people and merchandise through this centre, which opened its doors in 2000. Several of the shops display just a few samples (mainly clothes) while the rest of the retail space is used for storage. Due to the lack of a large integrated warehouse and the limited size of the shops, products often spill over into the alleys. There is constant movement, reflected by the un-loading and re-loading of vans and the coming and going of workers carrying boxes and bundles or pushing trolleys while trying to press their way past customers.

End consumers are less visible here. Instead, the core of the clientele is made up of intermediate wholesalers, such as Ethiopian traders, reselling their purchases downtown along Jeppe Street, or even Chinese sellers who do not import directly from China themselves. There are also hawkers, either locals or migrants from neighbouring countries, trying to make a living by selling various objects to motorists at traffic lights, as well as brokers and retailers. Besides the large selection of number plates on cars, ‘bakkies’ and vans parked outside, the variety of tongues one can hear inside the mall illustrates the extent of the costumer catchment area, ranging from local to regional to international.

Boxes

Storing and moving goods inside Dragon City. 

The rise of Chinese malls across the city may suggest a degree of homogeneity or coordination, but the reality is quite the opposite. Firstly, each mall is independent and autonomous, and the rivalries between them refute any notion of there being a unified ‘China Inc.’ in operation. Furthermore, beyond variations in size and available retail space, there are large discrepancies in economic output. Indeed, for all the variety and large number of malls, three or four of them − Dragon City, China Mall, China Mart and, to a lesser extent, China City – make up the majority of the market. The others have thus far had more limited successes, whether because they launched more recently, specialise more narrowly, or simply operate at a lower scale.

Nonetheless, the same market realities seem to affect all Chinese malls. For example, in a survey I conducted at the end of 2010 involving about 70 Chinese shopkeepers from various Chinese-run centres, most claimed to have experienced a significant decline in their profit margins in recent years. One of the more established traders, selling women’s underwear at China Mart, reflected on why that was the case, explaining: “Customers have gradually become more selective. During the early-90s, I used to sell various types of jeans, ranging from good quality to second choice. Clients would only buy the cheap stuff, which led me to sell ‘reject jeans’ for a while. Today, this is not possible anymore as they are increasingly looking for branded products and quality.”

Another reason for the decline in profits is likely to be the fact that over the years, the availability of cheap goods in South Africa has gradually expanded. The severe lack of supply that initially helped Chinese malls flourish has since reduced as growing numbers of local retail and wholesale establishments have entered the market. When other sellers offer goods at similar prices, Chinese shopkeepers suffer from the reputation of Chinese products being low quality, and many sellers feel that they are not equipped to compete with larger franchises. According to one trader, for example, “retail chains do not only rely on significant capital, have multiple outlets, and a large trading platform. [They] also benefit from various forms of expertise. We, on the other hand, have to do everything by ourselves, without necessarily being experts in all of those fields.”

In response to these forces, some Chinese malls are nowadays trying to be more modern and provide a customer-friendly environment with food courts, a wider range of products and shops as well as occasional events. This may be related to the fact that end consumers, rather than intermediary traders, are making up a growing share of the malls’ overall clientele, though some malls have gone in the other direction of focusing predominantly on the wholesale market.

However, the biggest source of competition is still between Chinese traders themselves. The success of the first malls and the substantial profits made by their tenants persuaded more and more Chinese migrants to come to Johannesburg and try their luck, and the market has become increasingly saturated. “My neighbour is my biggest competitor,” was a sentiment heard frequently in interviews.

In this way, the China mall phenomenon appears to have become a victim of its own success. Unlike the hustle and bustle at Dragon City, some of the lesser-known Chinese malls are sparsely attended. The listlessness of the shopkeepers, playing on their phones while sitting behind counters or on bundles of goods, suggests that business is not going as well as initially expected.

At this stage, it is difficult to say what the future entails for most of these Chinese malls and the migrant-entrepreneurs operating inside. The circumstances that facilitated their establishment are not necessarily the same ones that would guarantee the continuation of business. In effect, against the backdrop of rapidly evolving market realities in post-apartheid South Africa, each component of the Chinese mall – from developer to shopkeeper – needs to constantly adapt and respond, each in their own way, to these changes. How they do so will largely determine their success (or lack thereof) going forwards.

Hats

An intense flow of people and merchandise within Dragon City.

Photographs by Romain Dittgen.

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Comments

So the Chinese - who were being attacked in the black townships, decided to reinvented apartheid but of course, exactly as did the British colonial invaders of South Africa, never gave it that name. The British were just as exclusively elitist with 'their own' neighbours, 'their own clubs', their own universities and schools in South Africa. And beware the Boer or Jew who dared to venture into those hallowed halls.Thanks for this excellent article and great pictures.  It's going to be an important historic document. An original eye-witness source.