South African Business in China

Navigating Institutions

Kelly Meng

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9780367761301
• eBook ISBN: 9781000553604
• Topic: Business
• Subtopic: Business General
• Index: Business

Sino-African relations have evoked a great deal of geo-strategic interest in recent years. Most attention has focused on China's assistance to and growing involvement in the economic development of several African nations. Far less emphasis has been placed on Africans in China, and on African actors' involvement in the Chinese economy, despite the importance of both to genuinely bilateral economic relations.

This is one of the first studies to focus on South African foreign direct investment (FDI) in Mainland China. The research aims to identify and specify the key institutional factors that have contributed to the effectiveness or otherwise of South African firms entering and operating within the Chinese market. The research also investigates the characteristics and processes that have effectively shaped South African firms' business strategies to negotiate the current Chinese institutional environment. The study's primary empirical contribution is ten real-life case studies drawn from a cross-section of South African business actors who have sought to penetrate the Chinese market. These case studies are interrogated conceptually by means of a three-dimensional institutional model which explores the role of formal and informal business processes and practices in influencing business success and failure in the Sino-South African context.

It will be of value to researchers, academics, policymakers, Sino-African business practitioners, and advanced students in the fields of international business, political economy, strategy, and Asian and African studies.

1 An Introduction

DOI: 10.4324/9781003165668-1

1.1 The Early History of Relations Between China and Africa

For many Chinese, the fifth of the Seven Voyages of Admiral Zheng He¹ would popularly be understood as the first formal connection between China and the continent of Africa (Dreyer, 2006), which is the official narrative that many of us learn at school. But in fact Zheng He’s epic voyages, which eventually reached the Horn of Africa and the Swahili Coast, followed established routes and were based on sea-faring, cartographic and first-hand geographic knowledge gained from maritime trade and tributary missions that preceded Zheng He’s journeys by centuries (Chang, 1974). What follows is a brief sketch of early historical connections between China and Africa.

There is documentary and archaeological evidence that the first indirect connections between China and Africa can be traced to the Chinese Han Dynasty (202 BC–220 AD), or even earlier, based on archaeological finds of silk and other commodity objects discovered in Egypt and Ethiopia (Li, 2015a, 36–37) and Somalia and Zanzibar (Chang, 1974, 352). Early travellers, such as King Mu (975–922 BC) of the Zhou Dynasty (1046–256 BC), who is believed to have travelled the Silk Road around 959 BC, and the imperial envoy, Zhang Qian (164–114 BC), who undertook official missions on behalf of the Han Emperor Wu Di to the western regions between 138 and 115 BC, were important early Chinese sources of official information about the lands, peoples, cultures and trading networks beyond Central Asia, including the Red Sea (Yang, 2009, 19). Zhang Qian mentions reaching a place named Likan, which some analysts have claimed was Alexandria in Egypt (Gao, 1984, 241). In 97 BC Gan Ying was sent on an official mission to the Roman Empire (Daqin) and, although unable to reach Rome, he arrived at the ‘western sea’, which is believed to be the Persian Gulf (Lin, 2004, 327) and just possibly the Eritrean coast (Smidt, 2001), where he observed the importance of trade between the Mediterranean, the Red Sea, the Persian Gulf and India along a burgeoning southern sea route, which was beginning to supersede the land-based caravan trade (Young, 2001). Whilst these early official travellers are unlikely to have reached the coastal states of Africa, Professor Anshan Li, in his seminal book The Overseas Chinese in Africa (2000, 2012a) contends, based on archival and archaeo-logical evidence, both explicit and implicit, that initial contacts between China and Africa had already taken place among private actors. Furthermore, trade routes between Africa and China were beginning to consolidate: Indian merchants were trading with the Aksumite Kingdom in present-day Ethiopia and Eritrea, as evidenced by finds of ancient Indian coins in the Adulis coast (Eritrea), and merchants from the Red Sea were also present in India and Ceylon, where they came into contact with traders and travellers from China (Smidt, 2001).

By and large Indian and Middle Eastern traders were the principal conduits of information to China about the western seas and territories until the middle of the Eighth Century when Du Huan is believed to have been the first Chinese to have visited Africa via the Abbasid Caliphate, which was centred on Baghdad but included most of the Middle East and the northern Red Sea and southern Mediterranean coasts. Du Huan was captured during the Battle of Talas² in 751 AD and taken west where he had the opportunity to travel extensively throughout the caliphate. His Jingxingji (or travel tales) provided a great deal of information on the lives and cultures of the peoples of the region, and whilst he may not have directly visited all of the areas to which he refers in his travel record, he mentions travelling to Molin which appears to have been located somewhere in the region of present-day Sudan or Eritrea (Smidt, 2001), or perhaps as far south as Kenya (Gao, 1984, 243). Already by the late Eighth Century detailed maps of the ‘western regions’ had been produced, along with the principal land and sea routes (Chang, 1974, 155).

After Du Huan’s visit, direct connections between China and Africa had steadily increased during the later Tang Dynasty (618–907) and as international commerce grew, merchants gained in status and the government relied increasingly on customs revenue (Finlay, 2008, 331), even though only a limited number of Chinese actually travelled to Africa, and Chinese merchant boats had not yet landed on the African continent (Li, 2000). Persian and Arab merchants were the principal intermediary agents for Sino-African trade (Schottenhammer, 2016, 137), with a large Persian community developing in Guangzhou during the Ninth Century (Chaffee, 2018). Chinese porcelain was the principal commodity being traded with the African Red Sea states and eastern Africa (Chang, 1974, 147; Li, 2000, 2012a). Maritime trade, diplomatic and independent connections between China and Africa intensified and became more formalised during the four hundred years of the Song (960–1279) and Yuan (1279–1368) dynasties (Li, 2000), most particularly after 1127 when China’s access to Central Asia was severed in the northwest by Jin Dynasty conquerors, which shifted the focus significantly towards maritime routes (Finlay, 2008, 331). By the time of Zheng He’s fifth voyage in 1417, the first to reach Africa, China’s cartographic knowledge of the near continent was already quite detailed: Fourteenth Century maps reflected the shape of the continent quite accurately, showing the location of the Sahara Desert (Gao, 1984, 244), the correct position and orientation of the Nile and Congo Rivers, as well as the Orange River in today’s South Africa (Chang, 1974, 352; see also Chang, 1970).

Zheng He was tasked by Emperor Yong-le to utilise China’s technological skills in boat-building and navigation to venture into and beyond the known worlds of South-East Asia, the Indian Ocean and the Middle East with the dual aims of engaging tributary allies and spreading Chinese prestige in these areas (Sen, 2016, 632). Zheng He’s voyages are variously described as “the expansion of the Middle Kingdom by [means of] friendly trade and alliance” (Peterson, 1994, 43) or a form of proto-colonialism intended to establish a ‘pax Ming’ (Wade, 2005). A further objective was to bring maritime trade under government control and to establish direct (and perhaps coercive) lines of connection with tributary states (Finlay, 2008, 336). Certainly, the scale of Zeng He’s fleet–some 300 vessels, many larger than had ever previously sailed the Indian Ocean, and 28,000 men, many of whom were soldiers–was spectacular and unprecedented (Finlay, 2008, 330). Zheng He’s fleet is believed to have visited eastern Africa (principally Somalia and Kenya) on two or three occasions (Alden and Alves, 2008, 46). From the fourth voyage onwards, envoys from eastern Africa were among many who were taken back to China to pay tribute to Emperor Yong-le, thereby establishing their vassal status to the Middle Kingdom. Zheng He’s fleet also carried commodities to exchange for local products, which helps to explain how porcelain of the Ming Dynasty has been found in African locations as diverse as Egypt, the Sudan, Somalia, Ethiopia, Kenya, Tanganyika, Madagascar, Zimbabwe and the Transvaal of South Africa (Gao, 1984, 245).

Following Zheng He’s seventh and last voyage, China’s pre-eminent position as a powerful and dominant maritime force quickly went into decline, in parallel to the declivity of the Ming Dynasty itself. A return to traditional Confucian values, which proscribed trade for profit, led to the prohibition of private overseas trade (something that had been proposed by the Hongwu emperor in 1390 before Yong-le’s period of adventurism and militarism), which was only partially lifted in 1567 (Finlay, 2008, 338–339), by which time the Europeans had already started making inroads into the trade and territories of the South China Sea. China’s self-imposed isolationism during the late-Ming significantly curtailed not only its involvement in foreign affairs but also its control of maritime trade, much of which returned to private hands, albeit illicitly. By the time of the Qing Dynasty (1644–1912), Sino-African relations had almost turned full circle: formal diplomatic relations between the two regions were severed, although private interactions continued; direct trade was replaced by indirect commercial ties (Li, 2015b).

An important dimension to the growing connectivity of China and Africa from the Tang Dynasty onwards was the arrival of African people on Chinese soil, and much later the movement of large numbers of Chinese people to, in particular, South Africa. Many Africans were brought to China by Arab merchant ships, mainly as slaves and servants (Gao, 1984, 243), including to the large Arab community living in Guangzhou, but some also “served as soldiers or military leaders, royal guards, government officials, traders, artists, animal trainers and labourers in ancient China” (Li, 2015b, 19). Finlay (2008, 332) refers to ‘African stewards’ manning the junks of Chinese entrepreneurs that plied the Indian Ocean during the Yuan Dynasty, as Chinese merchants took over seaborne commerce from the Indians and Persians. Zheng He brought non-slave emissaries to China from the East African coast during his fifth voyage in 1417–1419, and one of the reasons for the delayed seventh voyage was to return these emissaries to their home countries. There was a significant increase in the number of black slaves brought to China from Africa after the Portuguese established a trade connection with China in 1535 and a settlement in Macau from 1563 (Wyatt, 2010). Most of these slaves were brought from the western coasts of Africa and were victims of the then-burgeoning Atlantic slave trade. By the mid-Seventeenth Century, Wyatt (2010) claims there were some 5,000 mostly African slaves in Macau, compared to only 2,000 Portuguese settlers.

In the opposite direction, the first major flow of Chinese to South Africa occurred in 1904, when some 63,695 indentured labourers were recruited to work in the gold fields of the Witwatersrand Basin in the Transvaal (formerly Zuid-Afrikaansche Republiek) (Richardson, 1977). Severe labour shortages followed the conclusion of the second Anglo-Boer War of 1899–1902, as African workers drawn from neighbouring Portuguese East Africa (Moçambique) started to desert the mines and return home because of low wages and poor working conditions (Richardson, 1977, 91–92; Meyer and Steyn, 2016), and yet the gold-mining industry was crucial to economic recovery following the disruption and deprivations of the war. A fixed international price for gold, set against the generally poor quality of the Witwatersrand gold ore and capital flight from South Africa during the Boer War, determined that increased production through mechanisation was not a realistic option (Richardson, 1977, 88), and thus a source of labourers to work in the deep mines was urgently needed to return the gold fields to profitability. By the early Twentieth Century, organised international labour migration had become an established means of easing labour shortages in colonial territories, not least by the British who had taken Indians to East Africa in the 1890s and whose liberal immigration policies in Southeast Asia had seen millions of mostly southern Chinese emigrate to the region (Niew, 1969). Before the 1860s, the Chinese Imperial Government had largely prohibited emigration, but in 1860 it signed a convention with the British and French permitting Chinese citizens to emigrate to work in their respective colonies. In 1904 the British and Chinese signed the Emigration Convention Between the United Kingdom and China Respecting the Employment of Chinese Labour in the British Colonies and Protectorates (Niew, 1969, 47), and this agreement allowed the movement of large numbers of indentured labourers to South Africa.

The arrangement was mutually beneficial: South Africa was able significantly to ease labour constraints in the mining sector by importing cheap and hard-working labourers, first from southern China and later from the north and northeast; Chinese people, on the other hand, were able to escape poverty, un- and under-employment, floods, droughts, famine and the effects of the Boxer Rebellion in 1900 to obtain gainful employment abroad (Niew, 1969, 43). The labour movements were organised and formalised with a high degree of state participation (Richardson, 1977, 85) involving the Chamber of Mines Labour Importation Agency, as well as the Chamber of Commerce and the Legislative Council of South Africa. Chinese workers were indentured, under the Labour Importation Ordinance, for a period of three years, extendable to five, to be followed by compulsory repatriation to China. They had to work for ten hours a day, six days a week, typically in the deep mines, for a remuneration of a shilling a day for the first six months, and thereafter 50 shillings per month (Kynoch, 2003, 319). The cost of bringing each labourer to South Africa from China averaged £17 5s 2d (Richardson, 1977, 93). Conditions for Chinese workers were harsh, leading to frequent conflicts and riots, but an indentured labourer could only terminate their contract by reimbursing the full cost of transportation–effectively a full 9–10 months of earnings.

Subsequent waves of Chinese migration to South Africa occurred in the mid-1980s when the Republic was under strict economic sanctions by the international community as a result of its Apartheid policy. These Chinese people were referred to as ‘Taiwanese’, as Taiwan was one of few countries/regions to maintain diplomatic relations with South Africa during this time. The white South African government attracted a large number of Taiwanese entrepreneurs to set up factories in South Africa (mainly in the textile industry) with generous government subsidies. It is estimated that the total number of Taiwanese in South Africa once reached more than 30,000, but currently there are only about 6,000. A third wave of mainland Chinese immigration started in the early 1990s. At present, it is estimated that between 400,000 and 500,000 Chinese live in South Africa, of which Fujianese make up the highest percentage.

Each occasion of mass Chinese emigration to South Africa evokes significant political, economic as well as social impacts on business relations between the two nations and this will be the focus of our discussion in the following section.

1.2 The Modern Development of Sino-African Relations

In the previous section, we stated that diplomatic relations between China and some African countries ground to a halt during the late Ming Dynasty and there was only little change in that throughout the Qing Dynasty (1644–1912). Although interpersonal connections continued between people from the two regions, bilateral ties between China and Africa largely stagnated during the period of European colonial dominance. It was not until 1949 when the Communist Party of China (CPC) came to power that the People’s Republic of China, as an independent and sovereign nation, engaged directly with Africa for the first time in the Twentieth Century. In the following paragraphs we will divide modern Sino-African relations into three periods to highlight the key events and developments in the interactions between China and Africa during the last 70 years: a chronology that many scholars of Sino-African studies tend to follow (Konings, 2007; Stahl, 2016).

The Early Cold War Era (1950s to the Mid-1970s)

The milestone that signified China’s re-connection with Africa after decades of formal institutional distance was the Bandung Conference in April 1955, which was the first major meeting of African and Asian states to take place during the post-colonial era. The PRC’s (People’s Republic of China’s) participation in the Conference also marked a significant shift in foreign policy focus, beyond its original preoccupation with the neighbouring states of Asia towards the so-called ‘Third World’ (Tomlinson, 2003, 309).³ There were clear and overt strategic objectives behind China’s subsequent intensified engagement with Africa (Yu, 1988, 850–851; Hutchinson, 1975): the collective struggle of the world’s poorer countries to ...

Table of contents

• Cover Page
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Contents Page
• Preface Page
• 1 An Introduction
• 1.3 China and South African Political and Economic Relations: An Institutional Transition View
• 2 Institutional Environments and an Institutional Model
• 3 Case Studies and 3D Institutional Model Analysis
• 4 Conclusion
• References
• Index