In Summary
  • Kenya does not have a clear classification of foreign traders, creating confusion about who should and should not do business within its borders.
  • Chinese manipulate or imitate existing shoe designs (usually the creative work of traders and their partners) which they then get manufacturers back in China to mass-produce.

Before their arrest last week, Wang Yalan and Wang Haijian, both Chinese nationals, had been operating an illegal distillery at Green Park estate in Athi River, Machakos County, for weeks.

From this elaborate processing plant tucked away in the posh estate, the Chinese duo was manufacturing and packaging Nan Wang Te – a Chinese equivalent of chang’aa or busaa – and minting profits.

Detectives from the Directorate of Criminal Investigations pounced on them, bringing the curtain down on the illegal business they had operated without detection.

The two were arraigned on Monday even as the police sought more time to verify if they were licensed to run a distillery in Kenya.

This latest incident has stirred once again the touchy debate of foreigners manipulating systems to work and run businesses in the country.

To trade in Kenya, the Investment Promotion Act (2004) requires foreigners to invest “at least $100,000 (Sh10 million).”

The Act also says that the investment should be “lawful and beneficial” to the country through job creation, skills upgrade and transfer of technology.

WEAK ENFORCEMENT

When they engage in such small-scale manufacturing, retailing and even hawking goods in local markets, some foreigners, notably the Chinese, are clearly operating illegally.

Lax trade laws and failure to enforce investment regulations are largely to blame for the rising number of foreigners doing ‘illegal’ business in Kenya in the past few years.

Corruption among government officials does not make things any better.

Kenya, for instance, does not have a clear classification of foreign traders, creating confusion about who should and should not do business within its borders.

The result has been a steadily swelling trade imbalance between local and foreign traders – with Kenyans getting the short end of the stick.

Although traders have consistently decried unfair competition from foreign investors, the State has dragged its feet in enacting stronger legislation and reinforcing existing laws for their protection.

As of 2017, the trade deficit between Kenya and China stood at Sh390 billion, according to figures from the Kenya National Bureau of Statistics (KNBS).

COMPETITION

This enormous trade gap may not be closed in the foreseeable future, but this is far from what Kenyan businesspeople, especially small-scale traders, are worried about.

“They are not just aggressive; they are literally driving us out of business.” These are the words of Virginia Maina, a trader in the sprawling Kamukunji market in Nairobi.

She is referring to the growing influence of Chinese nationals in small-scale trade.

At first, Maina isn’t keen to talk about the trade threat that has sent waves of panic across the local business community.

She cuts the figure of a disoriented and angry, but mostly helpless, person.

We are at her shoe store on the first floor of Safiri Trade Centre in Kamukunji. This store looks crammed. Shoes in all designs and fits fill the racks that extend to the roof.

Others are in sacks and boxes and others against the wall. More shoe boxes occupy the small balcony she shares with the neighbouring shop.

A cursory glance tells you that this sea of footwear would fetch a good profit once sold.

COUNTERFEIT

With the government’s heightened crackdown on contraband that has had the ripple effect of imported goods being delayed at all entry points, stocking up one’s shop is any trader’s delight.

But Maina makes a rather terrifying revelation: Half of these shoes are dead stock, and the Chinese are to blame.

According to her, the Chinese manipulate or imitate existing shoe designs (usually the creative work of traders and their partners) which they then get manufacturers back in China to mass-produce.

When the imitations arrive in the local market, they sell at lower prices, knocking traders with genuine designs off the market.

Another shoe trader, Anastacia Kamiru, claims that the Chinese sometimes “create propaganda” around a brand, dismissing it as a fake “even when it has been selling as a genuine brand for long. You (have to) withdraw the said design from your shelves as soon as possible to avoid losing customers,” Kamiru says.

This is how retailers end up with loads of dead stock in their stores, she adds.

Women’s shoes and other fast moving goods are the main targets of this cut-throat trade technique.

MTUMBA BUSINESS

As local traders abandon the said design, Chinese wholesalers then ferry in the same brand with minor alterations, or sometimes none at all.

“If the Chinese can manufacture goods back in their country, import, distribute and retail them to Kenyans, what then is the role of the Kenyan trader?” poses Kamiru.

She goes on: “When you retail shoes at the price of the point of manufacture, how am I expected to sell the same shoe after paying import duty, taxes and the transport cost?”

Her frustrations mirror those of thousands of other traders who feel short-changed in the trade equation.

Using their strong financial muscle and networks in China, the Chinese pull the strings of the supply chains of various goods, including mitumba clothes, from importation, wholesale, down to retail.

For months, traders in Kamukunji and Gikomba market, Dubois Road and Luthuli Avenue have raised the red flag over the aggressive Chinese traders whose entry has caused their businesses a fair amount of turbulence.

They say the Chinese’s infiltration of the second-hand clothes business, for instance, has not only hurt their profit margins but also massively undercut them from the only business they have done for years.

DEPORTATIONS

The Kenya Worldwide Importers and Traders Association (KWITA) estimates that since last year, 5,000 businesses have folded due to unhealthy competition from foreign traders.

“What business do foreigners have repairing phones on our streets? Let them manufacture the phones but leave the repairs to our youth,’’ says Ben Mutahi, the KWITA chairman.

In June, frustrated traders protested, setting off an uproar among Kenyans.

The din reached the authorities and the government was jolted into action. A couple of deportations later, the Chinese hastily disappeared from the scene.

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