Chungking: Africa's handset hub

Nathan Road trade corners market in mobiles for half a continent

Under the harsh glare of Chungking Mansions' fluorescent lights, Nigerian handset trader Kingsley Igbom is having a cash-flow problem.

"Look, that cheque, I keep telling you - it's still no good," he shouts down a mobile phone as he stalks down one of Chungking's warren-like galleries. When the floor outside the dealership that has just sold you hundreds of handsets is your place of business, finding a quiet spot to scream at a debtor comes at a premium.

His team of packers and traders, meanwhile, are driving a hard bargain with the Post photographer, trying to get him to pay for his pictures.

"You make money from your newspaper, so why shouldn't we make money from you?" says one of the packers, grinning as he lays down ribbons of packing tape on a box of handsets trussed up in red-white-blue. "Come on, it's the financial crisis after all."

There's no denying the force of his argument and, at Chungking Mansions at least, African handset traders are making money where they can.

The building has gone through many incarnations in its 48-year history - from a one-time middle-class apartment block, to a honeycomb of sub-lets, to a chic if down-at-heel staging post for travellers. But its latest role puts it in the unlikely position of being at the centre of the trade in handsets between China and Africa.

It supplies 15 to 20 per cent of all the mobile-phone handsets in sub-Saharan Africa; in Kenya, as many as four in every five mobile phones may be sourced from the building. As such, it provides a fascinating glimpse into the workings of low-end globalisation.

At the moment, it is also exposing the sinews of the financial crisis in the way no corporate balance sheet ever could.

"The naira [the Nigerian currency], it's gone from 118 to 153 to the dollar in a few months," says Mr Igbom, his mobile still pressed to his ear. "And availability? You can't get dollars in Lagos."

The US dollar's safe-haven status - and the fact it is the preferred trading currency among the building's more than 90 dealers - is placing an unprecedented strain on the handset traders, who are having difficulty not just affording, but finding dollars in their home countries.

Mr Igbom puts it down to the Lunar New Year, but Chungking Mansions has fallen eerily quiet.

"Traders from Togo and Ghana are having trouble getting to Hong Kong, maybe because the dollar is too expensive there," says Mr Igbom, who ships as many phones as the market in Lagos demands. "Instead, they're buying handsets in Nigeria and selling them on. That's good for me, but right now, the margins in this business are terrible. I'm not making any money.

"But don't worry about those other traders, after the Chinese new year, they'll be back."

Given the current state of play in the African telecommunications sector, Mr Igbom has reason to be optimistic. Nigeria's telecommunications boom - which started only in 2001 when the state-run monopoly was broken up - could have the legs to ride out the slump.

Just eight years ago, there were 10 million people on the waiting list to get a land line from the state-run monopoly Nitel. Now there are more than 60 million mobile phone subscribers in Nigeria, with the number set to grow by 10 million a year over the next five years.

Mobile phone penetration has risen from 0.73 per cent in 2001 to 32.79 per cent in March 2008, according to figures from the Nigerian Communications Commission. Everyone - from traders, students and market stall owners to beggars - has a cheap, and most likely Chungking Mansions-sourced, mobile phone.

Gordon Mathews, professor of anthropology at the Chinese University of Hong Kong, has made the study of Chungking his major work. For almost three years, he's spent a day a week in the building, focusing on the intricate network of economic relationships set up through the trade of handsets.

"There are a dizzying variety of phones," he says. "There are new European and Japanese phones. There are 14-day phones, which are warehoused European models - last year's model with a 14-day guarantee. There are used phones, which are simply used. There are refab phones which have been redone by factories in China, often not as good because their motherboards have been replaced. There are A-grade fakes, B-grade fakes and C-grade fakes."

The prices of these refitted phones are based entirely on what the market can bear; a new trader who expresses any sort of surprise over a new model can expect to pay more. However, a seasoned trader will know the market in Chungking Mansions as well as the market back in Lagos.

"The traders speak in this interesting code," says Professor Mathews. "No one ever mentions the word `fake'."

There are no direct markers on the phones, often they come without serial numbers, and even the vendors themselves claim to have little idea how many they sell.

Professor Mathews says that by speaking to traders he can get a reliable average of the number of handsets sold. Even accounting for the fact that many people in Africa have more than one subscription, and carry multiple SIM cards, Chungking Mansions is still a heavy hitter in the African handset trade.

"A figure of 15 per cent [of handsets in Africa coming from Chungking Mansions] seems quite fair. We're looking at 10 million phones sold per year. Now that's very approximate, a good safe estimate, but I don't think anybody can come up with a better number."

Where they end up can varies from country to country. In Kenya, about 70 per cent of phones come from Chungking Mansions but in Egypt none at all. To corroborate his numbers, Professor Mathews leans across the table to ask a Kenyan trader in his mid-20s sitting down to a meal at the opposite table.

"It's more," says the trader, who gives his name as Nicholas. "In Kenya, it's more like 80 per cent of phones come through Chungking Mansions."

He says he has made eight trips to the building this year and likes it because it's "convenient and safe". Like businessmen everywhere, he prefers doing trade in a good regulatory system with the rule of law and, despite its often ill-deserved reputation, Chungking does at least offer that.

Perversely, it's air cargo that keeps the costs down when the cargo arrives back in Africa.

While much of it is air-freighted, a fair proportion of the phones are simply put on the planes as part of the passenger baggage allowance and even carried on in hand luggage. All over the building, traders can be seen ripping handsets out of boxes and stuffing them in bundles into sports bags until the zippers are practically bursting.

If you're prepared to arrive at Chungking Mansions with little more than the clothes you stand up in and cash in your pocket, a 20kg baggage allowance is a generous offer on the part of the airlines.

With most handsets weighing between 50 grams and 80 grams, some 250 mobile phones can go in the hold and about 120 in carry-on luggage. Add to that the extra baggage allowance permitted from frequent flyer points and the margins for transport are further decreased.

"One of the things I'm looking at is the extent to which frequent flyer points are part of the margins of these trips," Professor Mathews says.

The other advantage of air transport is speed, not simply in shifting the merchandise but in getting it through customs - a critical obstacle in African trade.

Professor Mathews says that container shipping for handsets is uncommon, not just because the cargo can be exposed to salt air but because having a consignment sitting around an African port for weeks makes it a target for every type of opportunist.

"I've only heard of one instance of sea shipping and eventually the trader had to employ security guards to protect the container," he said.

These risks are not lost on Mr Igbom who, apart from trussing the boxes up in red-white-blue, also wraps them in chicken wire to deter casual blades when the consignment goes through customs in Nigeria.

The risks on the mainland, where the handsets are manufactured, can be just as great.

That 90 identical businesses can survive in the same building is a tribute to the synergies that come with aggregating businesses in the same place, but it's still a cutthroat world.

"I tell you this," says Kingsley, offering a final word on doing business in Chungking Mansions, "people in Chungking Mansions are tricky.

"If you hear of a good price for handsets, you buy, you keep your mouth shut, and then you go."

Peter Shadbolt is an editor at the Financial Times Hong Kong