Although 66 mines that operated on the reef have closed, today this area has become a gold mine for those venturing into Chinese retail. Signs on Main Reef Road direct you to no less than eight different Chinese malls all offering an authentic Chinese shopping experience.
China Cash and Carry, China Shopping Centre, China Mart and China Fujian City are all on the same block and right around the corner you can make your way to China Multiplex, China Mall or Dragon City.
To visitors who are not familiar with Chinese malls, they appear too similar. Beads, bedding, curtains, toys and other haberdashery stores leave one reeling from a sense a déjà vu.
In some malls, more attention is paid to clearly lit walkways which are designed to make the customer want to spend time there, while many others have poor lighting and narrow walkways. Whatever the lighting and flooring conditions may be, the lure of cheap goods and great deals cannot be ignored.
There is a high demand for Chinese supplies in South Africa with about R70-billion spent on Chinese imports from January to June 2013, according to The Department of Trade and Industry (DTI).
The DTI estimates 785 million units of retail goods – stocked in Chinese malls – such as footwear, headgear and artificial hair, were imported from China in July 2013. The number of goods imported is higher, however.
Some imported goods sold in these malls are included in different commodity categories. For this reason, the true figure is difficult to determine. The demand for these goods is high, but the number of malls has caused some market saturation and increased competition.
Steve Yeh, general manager and head of security at China Mart, believes the Chinese retail mall structure is effective as it offers “one single building where someone can get everything under one roof”. Although China Mart could be criticised for having too many shops trading in the same goods, Yeh says in the end this results in the customer benefitting. “If they [shop owners] are selling the same thing, then they have to knock [down] their prices, right? So the customer benefits.”
The Chinese way of property management
Robin Xu only had one container of Chinese imported goods when he arrived in South Africa. Xu was already a businessman in China before he moved here and his entrepreneurial spirit saw an opportunity to introduce Chinese trading to the Johannesburg community. When the old Makro discount centre in Amalgam burnt down, Xu acquired the vacant land and began building his first mall. Today, he owns three China Malls, each with about 500 shops and parking space for 3000 vehicles.
“The Chinese like to live close to where they work. We have 100 units with about 400 people living there. It’s convenient because this way our tenants just come, do their work during the day and then they just close up shop and go upstairs.”
In addition to the one in Amalgam, Xu’s Sino-African Property (Pty) Ltd has developed China Mall West in Roodepoort, west of Johannesburg, and China Mall Durban. Xu’s basic strategy has been to take old rundown buildings and transform them. The Roodepoort China Mall was formerly known as Highgate Mall, while the mall in Durban was called The Wheel.
According to Lisa Keyser, the manager of China Mall West, the China Mall group is the only family-owned Chinese retail node in South Africa. Keyser says the family-owned approach is in line with the Chinese belief in merging work and family.
As part of its diversified offering, Sino-African Property has constructed residential apartments situated behind the China Malls. “The Chinese like to live close to where they work. We have 100 units with about 400 people living there. It’s convenient because this way our tenants just come, do their work during the day and then they just close up shop and go upstairs,” she says.
Unlike traditional retail property groups, Keyser says the China Mall group offers sectional title ownership. The property is in such high demand that there is a three-year waiting list for space within China Mall. Keyser says one of the main challenges their tenants face is the fact that they do not have identity documents and cannot open bank accounts as “natural persons”.
South African law states that it takes five years to be recognised as a permanent resident. In order to help their tenants deal with their banking problem, the China Mall group contacted the South African Revenue Service (SARS). They were told that if their clients were registered as close corporations, they could get business bank accounts and official documents allowing them to trade easily.
Keyser says by selling sectional titles, they were able to share risk and also deal with fewer clients. The people who own sectional titles can sub-lease their property to small business owners, but other tenants do not have that privilege.
“We offer in-house bonds for our clients who want to own sectional titles as some of them are unable to secure bonds with the banks. Our interest rates are higher than the banks as the risk is high for us too,” Keyser says.
Yeh says China Mart offers sectional titles too. The owners of China Mart are sectional title holders of different nationalities and cultures. “We started building in 2002 and completed in 2004. Today this place is under about 120 sectional title holders. Basically there was an advertisement asking who was interested and a whole lot of people came together, chucked in some money and built the place.”
Erwin Pon, business development director at Rand Merchant Bank in the Shanghai representative office, explains that this opportunity to purchase a section of land within Chinese malls sets these nodes apart from the more common retail model.
“By doing this, they create a bigger demand for space within the malls for those people who want to own their own property.”
Pon believes that this was a smart decision by owners of Chinese nodes as they understand the desire people have to own property rather than rent forever. Shop owners then have something they can call their own and work harder to keep their assets afloat.
“One thing about the China Malls that you may have noticed is that they sell the same things and we cannot have the same kind of thing happen here. In order to maintain control over that we cannot sell retail space.”
Although this method of ownership works for Chinese retail nodes, Senzo Mncadi of Propertuity Ltd, the development company for the Maboneng Precinct in Johannesburg, says selling retail spaces is not an option for them.
“One thing about the China Malls that you may have noticed is that they sell the same things and we cannot have the same kind of thing happen here. In order to maintain control over that we cannot sell retail space,” he says.
Maboneng is an urban space in the Johannesburg inner city comprising arty boutiques, eateries, markets and residential buildings, all developed from abandoned buildings.
The need to diversify and differentiate
Keyser believes China Mall was the pioneer of Chinese retail. “When we started, we were the only ones in our area doing this kind of thing [Chinese retail and wholesale] so we did not compete with anyone else. Now, with so many other malls in the area, we need to find a way to be different. They call themselves China Mall but we own the trademark,” she says with a smile.