Survival of the fittest? Kenya's jua kali and Chinese businesses

Abstract

China's engagement with African countries is growing rapidly, spanning trade, aid and investment. While speculation remains over the opportunities and challenges China brings to the continent, some observers have suggested that capital inflows from the Chinese may foster sustainable economic development in the region. The majority of such claims, however, remain rooted in assessments of “globalization from above,” with little regard for the rapid rise of Chinese small and medium enterprises (SMEs) among many of Africa's informal economies. Drawing on case study data from Kenya, this paper argues that rather than large scale investment and aid projects, it is this proliferation of Chinese entrepreneurship that carries the greatest ramifications for Africa's economic development, with mixed results. The analysis first explores the social and economic organization of overseas Chinese enterprises, and the centrality of Kenya's informal sector – the jua kali – for the country's economy. It proceeds to examine China's engagements with Kenya, both in terms of trade and investment, and the emergence of Chinese SMEs in the informal sector. The article argues that the distinct nature of Chinese business networks endows them with significant competitive advantages over their Kenyan counterparts. Unlike the structural integrity maintained by Chinese networks, ethnic cleavages preclude effective coordination among Kenyan SMEs, in turn rendering them unable to parry market competition brought by the Chinese. The general picture is thus one of Kenyan entrepreneurs struggling to sustain both their enterprises and livelihoods. Such factors have thus far failed to enter studies on the implications of “China-in-Africa.” Yet it is precisely the rise of Chinese SMEs in Kenya and elsewhere that presents the most significant challenges for economic development in the region.

Keywords:

• Chinese business networks
• Kenya
• informal economy
• economic development
• entreprenearship

Notes

1. African Business (July 2006): 16 and 18.

2. Chidaushe, “China's Grand Re-Entrance.”

3. Economic development refers to improvements in a variety of indicators, foremost among them poverty and unemployment rates. This differs from “economic growth,” which refers to increases of certain measures, such as GDP or per capita. Such growth is not factored into this study.

4. Chidaushe, “China's Grand Re-Entrance,” 107.

5. Davies, China and the End of Poverty.

6. Mohan and Kale, “Invisible Hand.”

7. French and Polgreen, “Chinese Flocking in Numbers.”

8. Fackler “Why Nairobi.”

9. Portes, “Globalization from Below.”

10. In the late 1990s Yugoslavia became the key entry point from which Chinese migrants crossed the border to Hungary, as it was relatively easy to obtain a Yugoslav visa in Beijing. According to the head of the Yugoslav statistics office, 50,000 Chinese arrived in Yugoslavia in 2000 alone. See Nyiri, “Chinese Migration.”

11. Sponsored by Standard Chartered Bank, the “China–Africa Trade Corridor” brought together 40 Kenyan SMEs and their Chinese counterparts to learn more about each other's export and import opportunities, develop business contacts and find markets for their goods and services.

12. Riley and Steel, “Voucher Program.”

13. African Development Bank, Enhancing Development in Africa, 2.

14. See Dobler, “South–South Business Relations”; Haugen and Carling, “On the Edge of the Chinese Diaspora”; Mohan and Kale, “Invisible Hand.”

15. The term “jua kali” literally means “hot sun” in Kiswahili, referring to enterprises that carry out their businesses under the hot sun without adequate shelter or workshop space.

16. Mulama, “Textile Workers.”

17. Pieke, “Community and Identity,” 29.

18. See Aldrich et al., “Ethnic Advantage”; Basu and Altinay, “The Interaction between Culture and Entrepreneurship”; Greene and Chaganti, “Levels of Resources”; Light, “The Ethnic Ownership Economy”; Doen et al., “Ethnic Entrepreneurship and Migration”; Putz, “Culture and Entrepreneurship”; Rettab, “The Emergence of Migrant Entrepreneurship”; Salaff, “Ethnic Entrepreneurship”; Volery, “Ethnic Entrepreneurship.”

19. Alston, “Wa, Guanxi, and Inhwa.”

20. Zamet and Bovarnick, “Employee Relations.”

21. Kirkbride, Tany and Westwood, “Chinese Conflict Preferences.”

22. Weber, The Religion of China, 244.

23. Redding, The Spirit of Chinese Capitalism.

24. Granovetter, “Economic Action”, 483.

25. Kidd and Richter, “Building Trust”, 14.

26. Putnam, Bowling Alone, 23.

27. Broadman, Africa's Silk Road.

28. Wong, Chinatown.

29. Haugen and Carling, “On the Edge of the Chinese Diaspora.”

30. See Bandopadhyay, “Foreign Enclaves”; Boissevain, “Ethnic Entrepreneurs and Ethnic Strategies”; Salaff, “Ethnic Entrepreneurship”; Sequeira and Rasheed, “The Role of Social and Human Capital”; Zhou, Chinatown.

31. The ethnic protected economy is oriented toward ethnic-specific goods and services that are not easily accessible outside the enclave. It is protected from structural changes in the larger economy because it is secured by its own exclusive capital market, labor market, and consumer market (see Zhou, Chinatown, 110–11). The idea that Chinese ethnic businesses form a separate sector of the economy is based on an examination of the degree to which they employ their own people, how much they trade with their own, how much is directed towards trade with China and how much they rely on services (i.e. finance, maintenance, furnishing) from their own people.

32. Bonacich, “A Theory of Middleman Minorities.”

33. Bonacich, “A Theory of Middleman Minorities.”

34. Zhou, Chinatown.

35. Light, Ethnic Enterprise.

36. Clusters are agglomerates made up by firms concentrated in a geographical area, operating in the same sector or sub-sector, linked by strong relations of interdependence in the value added chain, and which set up relations of inter-firm cooperation, sharing costs and risks, as well as by research institutions, universities and local governments. See Organisation for Economic Co-operation and Development, “Innovative Clusters.”

37. Bongardt and Neves, “The Role of Overseas Chinese,” 7.

38. Doen et al., “Ethnic Entrepreneurship and Migration.”

39. Rural Poverty Portal, “Rural Poverty in Kenya.”

40. “Kenyan Economy Grew by 6.1 Percent in 2006, Says Government Report.” The Associated Press, May 28, 2007.

41. Wafula, “IMF Projects.”

42. Wafula, “IMF Projects.”

43. Rapuro and Luesby, “How US Financial Crisis Might Affect Kenya.”

44. Jopso, “Kenya Hit.”

45. Roodman, “History Says.”

46. Njeru, “The Impact of Foreign Aid.”

47. Hull “Chinese Build New Highway.”

48. Riley and Steel, “Voucher Program.”

49. Orwa, “Jua Kali Associations.”

50. Mitullah, W.V. “Street Trade in Kenya.”

51. Republic of Kenya, “The 1998/99 Integrated Labour Force Survey Report.”

52. Bigsten, Kimuyu and Lundvall, “What to Do with the Informal Sector?”

53. Atieno, “Female Participation.”

54. Chen, Sebstad, and O'Connell, “Counting the Invisible Workforce.”

55. Chen, Sebstad, and O'Connell, “Counting the Invisible Workforce.”

56. Gray, Cooley, and Lutabingwa, “Small-Scale Manufacturing in Kenya.”

57. Mini-manufacturers specialize in low-priced garments and employ a combination of skilled and unskilled workers. The additional enterprise types identified by McCormick are contract workshop workers (9.6%) and mass producers (2.1%).

58. McCormick, “Industrial District or Garment Ghetto?”

59. Chen, “Women in the Informal Sector.”

60. Mitullah, “Street Vending in African Cities.”

61. Charmes, “Micro-Enterprises.”

62. Mitullah, “Street Vending in African Cities.”

63. “Over 50 Chinese Firms Move to Kenya as Investments Rise above $54 Million.” The East African, October 12, 2005.

64. Omungo, “Creating Designs.”

65. Hull, “Chinese Build New Highway.”

66. Mwakio, “China Donates Vehicles.”

67. Mwathane, “Oil.”

68. Mathenge, “Chinese Takeover.”

69. Hull, “Chinese Build New Highway.”

70. Hull, “Chinese Build New Highway.”

71. Patton, “Chinese Tourists.”

72. Fackler, “The Chinese Make a Home.”

73. King'Etich, “Kenya.”

74. Irungu, “Telecoms Giant.”

75. “Firm Opens Sh115m Electronics Factory.” The Nation, July 29, 2005.

76. Kaplinksy and Morris, “The Asian Drivers.”

77. Chang, “Community as Catalyst.”

78. Teixeira, “Entrepreneurs of the Chinese Community.”

79. Fackler, “The Chinese Make a Home.”

80. Fackler, “The Chinese Make a Home.”

81. Teixeira, “Entrepreneurs of the Chinese Community.”

82. Haugen and Carling, “On the Edge of the Chinese Diaspora.”

83. Brautigam, “Flying Geese.”

84. Christiansen, Chinatown, Europe.

85. Haugen and Carling, “On the Edge of the Chinese Diaspora.”

86. Omungo, “Creating Designs.”

87. Wahome, “Chinese Investment.”

88. Beech, “The Ends of the Admiral's Universe”.

89. Beech, “The Ends of the Admiral's Universe”.

90. McCormick, “Industrial District.”

91. See Akoten and Otsuka., “From Tailors to Mini-Manufacturers”; Biggs and Shah, “African SMEs”; Macharia, “Social Networks”; Ngau and Keino, “Women's Social Background.”

92. Akoten and Otsuka, “From Tailors to Mini-Manufacturers.”

93. Macharia, “Social Networks.”

94. Biggs and Shah, “African SMEs”; Biggs, Shah and Srivastava, “Technological Capabilities.”

95. Brautigam “Close Encounters.”

96. McCormick, “Industrial District.”

97. Fan, “Chinese Americans.”

98. In their study of entrepreneurship and development in Kenya, Marris and Somerset identified pilfering, absenteeism, slacking, and drunkenness as among the key complaints enterprise managers leveraged against their employees. See Marris and Somerset, African Businessmen.

99. Mburu, “China in Deal.”

100. Putnam, Bowling Alone.

101. Where long-term settlement occurs it is usually preceded by the establishment of strong, protected ethnic economies.