Photo Credit:Reuters
Over a period of two years, the Chinese-operated retail chain China Square has rapidly expanded in Kenya, inaugurating its sixth and seventh stores at Nairobi Two Rivers Mall and Greenspan Mall, respectively. The chain’s success is largely attributed to its strategy of offering a wide variety of products at competitive prices, appealing to cost- conscious consumers.
But this explosive growth has led to worry among local retailers who feel at a disadvantage by the business model of China Square. There is debate that because the chain can bring in goods from China directly and sell them cheaply, it results in an unfair playing field that causes a loss of customer base and the possible loss of jobs. Jacob Musili, a hardware appliance seller in Nairobi, expressed his frustration, stating, “They’re selling everything, and their prices are very different from ours. They’re hurtingus.”
The tension between China Square and local traders reached a peak in early 2023 when protests erupted, leading to a temporary closure of the retailer. This situation was made worse by pronouncements of Kenya’s former Trade Minister, Moses Kuria, that Chinese investors should abandon retail and enter manufacturing. China Square resumed activity following the agreement between the government of Kenya and the Chinese business organizations, with China Square emphasizing fair competition.
This scenario is not unique to Kenya. In South Africa, the arrival of Chinese e- commerce companies (such as Shein and Temu) has similarly unsettled local businesses. Local shopkeepers have voiced their concern over unequal competition, in turn causing revisions of the regulatory framework including the introduction of supplemental 15% value-added tax on imported low-value parcels to overcome this competitive disadvantage.
China Square’s managing director for East Africa, Lei Cheng, defends the company’s approach, stating, “Competition makes business healthy and that’s a good thing for the consumers.”. He attributes the chain’s success to significant sales discounts, a vast
product variety, and maintaining low but reasonable profit margins. A balance between the influx of foreign capital and that of domestic enterprises.
