Some few years back in Sierra Leone when the Director General of the UN Industrial Development Organization, UNIDO, Kandeh Yumkella visited the country, he was quoted to have said that “Africa is becoming the dumping ground” for every product that is bad and substandard”. He further stated that “Africa is becoming the dumping ground for every product that is bad. They sell fake medication here. They sell fake lubricants. They sell products. They sell products when they are one week to expire, they dump them here.”
This statement pertinently captures the way our continent has been turned into a dumping site for most companies around the world under the disguise of opening a shopping mall in our countries. They may not be selling fake and near-expiring goods like the UNIDO Chief said, but the sheer number of the shopping malls in Ghana calls for worry in those that are smart.
What is Dumping?
Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic country, or (b) the cost of making the product.
There are three main different types of dumping: persistent, predatory, and sporadic. Let me highlight the predatory kind of dumping which I suspect our shopping malls investors are using.
Manufacturers use predatory dumping as a means of eliminating competition in a foreign market. High domestic prices are used to supplement the reduced revenue of exporting cheaper goods.
By exporting goods at cheap prices exporters are able to drive off any competition in the area. Once competition has been eliminated, then the firm can raise the price of the goods and generate more revenue. This can be troubling to the importing country as one company can end up monopolising a specific sector or industry.
In international trade, the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market. Dumping usually involves substantial export volumes of the product; it often has the effect of endangering the financial viability of manufacturers or producers of the product and the economy of the importing nation. Dumping is also a colloquial term that refers to the act of offloading a stock with little regard for its price.
Dumping is legal under World Trade Organization (WTO) rules unless the foreign country can reliably show the negative effects of the exporting firm on the domestic producers. In order to counter dumping, most nations use tariffs and quotas to protect their domestic industry from the negative effects of predatory pricing.
In an increasingly global economy, consumers in a nation that has been the target of dumping activity may have few qualms about consuming products that have been dumped, as long as they are of comparable quality to local merchandise but are priced much lower. Over time, dumping may have a negative impact on the local economy by driving domestic producers out of business, which would result in job losses and a higher rate of unemployment.
When people talk about economy not doing well or things are not favorable with the country’s balance of payments, there is need to have a bit of understanding of the way things work in business world.
We have huge unemployment situation on our hands, high inflationary trend and low purchasing power by the people in an economy tagged as a medium income level country. What is responsible for this mismatch? The answer is not too far-fetched. If only we can sit down to think. The rich rule over the poor, and the borrower is slave to the lender. Prov. 22: 7
In our elementary economics, we were told that a country may put itself in an unpleasant economic position if it does not protect itself with anti-dumping measures from its foreign counterparts. As we are all aware, international economics have become a dog eat dog kind of game.
Hayley Peterson wrote in January 31, 2014 edition of business insider in what she titled ‘America’s Shopping Malls Are Dying a Slow, Ugly Death.’ We can see how malls are fading out in America and experts are even predicting that 15% of the country’s shopping malls may face extinction in the next 10 years.
About 15% of U.S. malls will fail or be converted into non-retail space within the next 10 years, according to Green Street Advisors, a real-estate and REIT analytics firm. That’s is a big increase from less than two years ago, when the firm predicted 10% of malls would fail or be converted.
“The risk of failure for a mall increases dramatically once you see anchor closures,” said Cedric Lachance, managing director of Green Street Advisors. “Their health is very important … and most of them are highly likely to continue closing stores.”
Within 15 to 20 years, retail consultant Howard Davidowitz expects as many as half of America’s shopping malls to fail. He predicts that only upscale shopping centers with anchors like Saks Fifth Avenue and Neiman Marcus will survive.
“Middle-level stores in middle-level malls are going to be extinct because they don’t make sense,” said Davidowitz, chairman of Davidowitz & Associates, Inc., a retail consulting and investment banking firm. “That’s why we haven’t built a major enclosed mall since 2006.”
But on the contrary, we are witnessing a surge in investment in retail outlets and multiplicity of shopping malls coming up in Ghana. We must be smart and economically intelligent to know that these shops that are facing closures in some part of the world for reasons of low patronage are spring up here in large numbers.
It is not by sheer coincidence that this is happening; studies have shown over the years the consumption pattern of an average African man, either in Europe or America, are high and they are heavy spenders too particularly when it comes to buying from the stores. We have insatiable penchant for imported things, no matter how expensive it may be.
They concluded that instead of waiting for us to come to their countries to do the usual shopping spree that we are well known for and spend those hard resources that could have been used to build companies and invest in our countries in Africa either as sole proprietorship or in form of partnership with other Africans, they saw the prodigality in us and conclude that why can’t they bring those stores close to our door steps. ‘Make it easier for them to buy, kind of slogan “so that they may continue to spend on these frivolities’ either for those who can afford to travel and those who may not have the means but wishes to buy.
Our policy makers on the other hand are not quite sensitive to know the extent of our foreign reserves that are being depleted on importing these ‘dumped goods ‘into the country by our collective unquenchable appetite for imported goods at the detriment of local manufacturing companies and high level of unemployment in our countries.
Foreign direct investment is good but it must be productive and not detrimental to the health of the economy. A foreign investor is willing to spend huge sums of money to reconstruct the entire traffic system in order to divert ‘spenders’ to its mall on Weija/ Kasoa road because of the expected return on investment they have seen ahead based on their payback period calculation. Payback period is the length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the project or not.
No matter how good a shopping mall investment may look to a country’s economic fortune, its benefits cannot be compared to what a manufacturing outfit can bring in terms of employment opportunity to the people, the additional value to the productivity calculation of the GDP of the country, Income tax generation both in terms of employees and corporate taxes, impact on the subsidiary industries and even the host communities. These are many advantages we are given up for a shopping mall instead of demanding for manufacturing plants.
I tried to surf the net to know how many shopping malls are currently in Ghana. The search returned 32 companies and I know that they are far more than that depending on when last the update was done on the search engine. The list is still growing. The economic benefit of these shops cannot be undermined, but we need to be circumspect when it comes to the number we want to have to prevent our little external reserves from drying up within a short period of time. On average, if each of these multiple shopping malls import goods worth $1million per annum this may be far in excesses of $32million using the numbers we have above but in actual fact if we look at their financial statements they may be doing close to $300million in aggregate terms or more.
There is no way we won’t have the kind of pressure we won’t have the kind of pressure we are having on our cedis today, because all these companies require foreign currency to transfer to their suppliers oversees in order to import goods to the country.
What is the way out?
We have to introduce some element of guided deregulation to our foreign investment drive unlike the current unrestricted system wherein any company that comes with a shopping mall proposal gets a free gateway to start operation without any restriction. This should be re-considered. No country grows without some element of economic restrictions to prevent young and local investment from being muscled-out by powerful and richer foreign competitors.
As part of the protection clauses in the WTO articles, member state may restrict imports of a product temporarily that is, take “safeguard” actions if its domestic industry is injured or threatened with injury caused by a surge in imports. This has become very necessary if we are to protect the future of our local manufacturing companies from foreign goods crowding them out of the market.
An import “surge” such as we have presently in our country justifies such safeguard action. Industries or companies can also request for safeguard actions from their government. Even if they, the local manufactures do not have the will power to claim their rights against those heavily ‘pampered’ foreign competitors, our policymakers must be more futuristic in their appreciation as to the economic dangers these approvals, concessions or rights to the shopping malls owners may pose to our national economic interest in the nearest future.
Secondly, I think we must grow in Africa and come of age after many years of independence. Many of our people still behave like prodigal son who took his share of his father’s wealth and spending it through wild living under the pretense that he is enjoying life. We are not too far away from the story Jesus Christ shared about the lost son in the book of Luke 15: 11 -32.
Nothing stops African man to developing a saving culture from the amount being wasted in the name of shopping, so that funds could be mobilized to start investment like other continents around the world are doing. We cannot continue to be dependent on other people who are using their brains to make life better for all. Two or more people can come together to start a business in form of partnership or company to create future for our children and leave a legacy to future generation.
We have examples of partnerships that worked around the world. Larry Page and Sergey Brin co-founded Google and they are super success story. Steve Jobs and Steve Wozniak Apple Inc. in 1976. William Procter and James Gamble both formed Procter and Gamble in 1837 they are all over the world now. Why is it difficult for us to come up with something that is trans-generational in this continent we Africans?
Let me end with these three instructive quotes from people who know the dangers in over dependence. President Paul Kagame said “There is bad aid and there is good aid. The bad aid is that one which creates dependencies, as we’ve known for a long time now. But good aid is that which is targeted to create capacities in people so that they are able to live on their own activities.… In the long-term they have to depend on themselves rather than depend on aid.”
Herman Chinery- Hesse said and I quote “I have never heard of a country that developed on aid… I know about countries that developed on trade and innovation and business. I don’t know of any country that got so much aid that it suddenly became a first world country. I’ve never heard of such a country. So, the track is wrong, that track ends to nowhere, it leads to nowhere”
Finally, Michael Fairbanks as he names suggest said “Every time you do aid to Africa, you create that parental relationship. I’m helping you. You should be guided by me because I have a bag of money. The responsibility for your future is actually on me, not on you because I have the resources to develop you. It’s patron-client; it’s master-slave; it’s donor-recipient.” Personally, I don’t think that is good for the level our development if we are desperately serious to be economically independent in this continent as a people.