A story of innovative Ethiopian businesspersons in South Africa
As the biggest economy in Africa, with a GDP of USD 419.92 billion in 2010 according to the Global Finance, and labelled by the World Bank as one of the four upper-middle income countries in Africa, South Africa is a preferred destination for refugees from poor nations in its backyard such as Mozambique, Zimbabwe, Malawi and other distant African countries like Nigeria and Ethiopia.
South Africa’s population is 51.77 million according to the 2011 census. Official evidence shows that the numbers of the immigrant population is growing fast and Ethiopians are among the dominant migrants. Though South Africa is the green pasture for African immigrants, paradoxically, flight of its own human capital in terms of skilled labour is very high. Statistics show that since 1994 about 1.6 million South Africans who are skilled professionals and occupy managerial positions have emigrated to the USA, UK, Australia, Canada and New Zealand.
Despite its economic strength, South Africa still has a huge potential for further growth. In this area, Ethiopians have contributed hugely, attracting around USD 1.7 billion in foreign direct investment in the first half of 2012 alone, according to a report by the United Nations. The country is considered a low-risk investment destination for investors looking for a foothold in Africa. These realities and prospects have become the main pulling factors for refugees.
The latest data from the country’s Home Affairs office, the institution responsible for the registration of immigrants, discloses that there are nearly 320,000 legal Ethiopian immigrants in South Africa, though the number is estimated to be over half a million when those immigrants without proper documentations are taken into account. The writer of this article has come across such Ethiopians in places such as Johannesburg, Rustenburg, Pretoria and Durban.
Ethiopians started flocking to South Africa after the downfall of Apartheid. And their numbers have increased exponentially in the last decade. The 29th Orange African Cup of Nations was a unique incidence that highlighted the size of the Ethiopian population residing in South Africa.
High rates of brutal crime seem to be the Achilles heel for an otherwise amazing country; and this situation casts its shadow on the hopes of Ethiopians living in the country whom some consider as their second home.
The friendly, peaceful and accommodating behaviour of the people, the abundant natural resources, the amazing world class resorts and recreational areas, the flawless infrastructure and transport facilities plus the generous public recreational facilities make South Africa an ideal place for living. Like other immigrants, these resources have given Ethiopians the opportunity to prosper.
Ethiopians and their ways of doing business
Johannesburg is the economic nerve centre of South Africa, while Pretoria is the administrative capital. The city, fondly referred to as Joberg by its residents, has a market centre which resembles Addis Ababa’s Mercato. Most Ethiopians call this market place the “town”. In this area one can find everything that is Ethiopian, including traditional coffee houses, Ethiopian restaurants, khat and shisha corners, butcheries, and others. Yet, it is believed that the majority of Ethiopians make their living from textile retailing and related businesses. These businesses, which are categorized by the government as small businesses or the informal sector (Magendo Economy), enjoy tax exemptions and employment privileges, though it is common for these shops to deal in tens of thousands of South African Rand (SARs) daily. A section of Jeppe Street in downtown Joburg, referred to as ‘Little Ethiopia’, has also fast become known for its exotic sounds, bright colours and bargain-basement prices and the area is largely dominated by Ethiopians.
Commerce is one of the service sectors which accounts for close to 66 percent of the GDP, followed by the industry sector with 31.6 percent and agriculture with 2.5 percent, according to the CIA world fact book, and it is one of the main sectors that Ethiopians excel at. In almost all regions of South Africa, Ethiopians are known for their textile trading business, which includes the sale of all forms of cloths, garments, bed sheets and covers and household items. Before Ethiopians made this business their specialty, the Indians used to have the monopoly. Now the story has completely changed.
Ethiopians have been contributing a lot to the culture of doing business in South Africa. A creative way of Ethiopian business doing has become a model for other immigrants as well as the native black South Africans. The earlier batches of Ethiopian immigrants take the credit for their innovative ideas, risk-taking and their special skills in taking advantage of opportunities. The late-comers have capitalized on this business culture. Especially those Ethiopians having large family members have been able to boost their business and acquire wealth within a short period of time, owning big shops and expanding their operational areas and diversifying their business. There are three business areas that Ethiopians have become known for in South Africa in particular, and they are the following;
Belt vending (Kebeto Mazor)
The earlier immigrants were the first to start this business of belt retailing on the streets in their quest for survival and self-employment. This business is the absolute creation of Ethiopian immigrants. Most of the current Ethiopian business tycoons and multimillionaires in the country used to be belt vendors, according to urban legends. Customers were satisfied because they can access simple items without any inconvenience and waste of time. After graduating from this business, the natural transition was to rent or buy shops and become settled, trading in textile and related businesses. Of course some of the pioneers have become owners of buildings and hotels in South Africa and lots of assets back home. Currently, belt vending has almost been taken over by the South Africans themselves and the Ethiopians are proud of their innovative business approach that paved the way for the natives and other immigrants. South Africa is a country with one of the highest income inequalities in the world. Therefore, there is growing interest from poor South Africans to venture into businesses commonly conducted by immigrants.
Door-to-door retailing and credit sales
Trading sites outside of the metropolitan area are commonly called ‘location’. Small cities, urban and suburban areas are all destinations for Ethiopian businesspeople. Ethiopians commonly carry such items like bed sheets, bed covers and household appliances moving around villages, knocking on every door in search of buyers, either in cash or by credit, with very attractive profit margins. When the transaction is on credit they take note as to when to collect their money.
Though the profit margin of this business is good, it is said to be the riskiest. Chances of being robbed or even killed are always present. Sometimes vendors die without informing anyone where they have saved or hid their money; there would be no trace left to follow up and take whatever they have saved back to their families. They fear saving their money in a bank has certain risks, like having their accounts frozen by the government if found out for their income is not taxed, and they can’t send their money back home frequently due to many obstacles; therefore, most of them keep their hard-earned cash in a secret place where they think is safe. As a result, when they die their money remains untraceable and such tragic incidences are quite frequent.
There are thousands of Ethiopians still engaged in door-to-door retailing and making substantial money, taking all the risks that come with the job. Such adventurous ways of doing business is quite amazing for most of us who usually want to avoid even insignificant risks.
Crime is a widespread malady in South Africa. Even though the rate of investment is very high, crime is one of the major factors holding back further flow of foreign direct investment and one of the push factors for the significant amount of brain drain.
Partitioning buildings for rent (Shinshano)
The buildings in the place commonly known as the ‘town’ in Johannesburg resemble the type of buildings we find in Piazza or around the National Theatre in Addis Ababa. The ground floors are used for shops while offices or residences are located upstairs. After renting a shop on the ground floor, Ethiopians partition it into small shops and rent it to others. If the location of the building is in a prime business district, they also partition the rooms upstairs and rent it out too. In buildings found around the major centres of Johannesburg, it is common to find rooms partitioned on the second, third and even fourth floors and rented out for shops. These areas are busy and are packed with people the whole day. This innovative business venture is expanding and becoming a norm in the town. There are lots of buildings in the town abandoned by their previous owners and are auctioned off by the municipality at public auctions. Ethiopians acquire such buildings offering higher bidding prices. Building owners also sell their properties through agents and property dealers. Ethiopians also purchase these privately-owned buildings and the title transfer and tax issues will smoothly and quietly be handled by lawyers. Many Ethiopians who were once belt vendors therefore have become and still are becoming landlords generating substantial income from rent collection.
A growing number of Ethiopian building owners have made the business of partitioning buildings the new norm. It has contributed much to business expansion in shanty areas which were once hotspots of crime and violence.
Municipality officials and the natives are taking lessons from this. Many immigrants are being hired by these industrious Ethiopians, subsequently decreasing crimes and other social ills. The native population in these areas is getting involved in these kinds of businesses as well. They are opening their own shops and have started to catch up, though they are yet to be a real competition to their Ethiopian counterparts.
The black empowerment program of the government that provides them with the opportunity to take grants and loans from the government with tax incentive packages and related benefits as citizens may in the long run give them the edge though.
Unemployment rate in South Africa was estimated to be around 25.2 percent in 2012, according to official statistics. And this high level of unemployment is expected to push many South Africans into businesses that were normally dominated by immigrants like Ethiopians. The effect has already started to be visible. Many businesses are saturating and profit margins that Ethiopians used to get are diminishing fast. And Ethiopians have already started reminiscing about the good old times. These developments are forcing Ethiopians to be wary about the future. Some have actually started making plans to invest their fortunes or whatever they have accumulated in their homeland as a security measure.
Yet many in Ethiopia still continue to risk their lives by undertaking dangerous voyages to reach the promised land of South Africa; and the exodus seems set to continue into the foreseeable future.
Abebe Asamere is an Advocate & Consultant and can be reached at [email protected]