"Business is good here, and Nigeria is safer than South Africa. In South Africa armed robbers will take your money and kill you, but here in Nigeria, they will take your money and apologize."
South Africa goes shopping
These days South African businesses are everywhere in Nigeria, and trade between the two countries has jumped from $11 million to $11 billion in 11 years.
By Leonard Lawal, Fortune
September 27 2007: 9:51 AM EDT
(Fortune Magazine) -- The Palms shopping center in Lagos is the largest mall in sub-Saharan Africa. It's managed by a South African company, Broll, and most of its stores - Game, Shoprite, NuMetro, Nandos - are South African brands. The largest mobile-phone company in Nigeria? It, too, is South African: MTN, which has captured nearly 50% of the market.
Indeed, in Nigeria these days South African businesses are everywhere. Entech, a South African engineering firm, is leading a $3 billion redevelopment of Lagos's Bar Beach and Victoria Island waterfront. Another South African firm, Group Five, is building a power station in the Niger River delta.
A Shoprite store in Lagos. Trade between South Africa and Nigeria has jumped from $11 million to $11 billion in 11 years.
And the largest tourism project in the country, in Tinapa, is a joint venture between Standard Bank, Broll, and Southern Sun - all South African firms. (Standard Bank also just swallowed Nigeria's IBTC bank.)
A Khartoum boom, courtesy of China
South Africa's invasion of Nigeria, which began as a trickle after the end of apartheid in 1994, has turned into a flood over the past five years. Trade between the two nations has jumped from $11 million in 1994 to more than $11 billion in 2005, the last year for which reliable statistics are available. And the number of South African firms doing business in Nigeria has increased from just four in 1999 to hundreds today.
"They have chosen the sectors they intervened in very carefully," says Frank Aigbogun, publisher of Businessday, a leading financial daily in Lagos, which has Johnnic Communications, a South African media giant, as a partner. "They filled a void in the investment space in Nigeria. Remember that the Europeans and Americans, wearied by endless years of military rule, did not quite know how to respond to the evolving democratic environment."
Most Western companies that invested in Nigeria focused on the lucrative oil sector, leaving huge swaths of the economy open to South African entrepreneurs.
The pioneer, says Olusola Obadimu, executive secretary of the Nigerian-South African Chamber of Commerce, was South African cable company DSTV/Multichoice, which captured 95% of the satellite-TV subscription market in the 1990s.
"No Western company will take the kind of risks they took," Obadimu says. "But their teams came down, felt the pulse of the populace, and they succeeded." MTN followed in Multichoice's wake a few years later - "They rode on that kahuna," as Obadimu puts it - when the government auctioned off mobile-phone bandwidth.
"Western telcos were not interested for obvious reasons of lack of infrastructure," he says. "But South African firms knew of the success of DSTV/Multichoice, and they invested. It reflects the long-term vision of the government in Pretoria, which saw Africa as one trading bloc. It's a small country but highly industrialized, and they need new markets."
A Texas company in Sudan
South African leader Thabo Mbeki, whom former Nigerian President Olusegun Obasanjo had befriended during the struggle against apartheid, won concessions from the Nigerian government to facilitate trade. Among them were agreements to protect South African firms against future nationalizations and to eradicate double taxation, meaning South African firms that pay taxes in Nigeria are exempt from paying taxes on profits repatriated to South Africa.
Not all South Africans have been welcomed with open arms, and it's not uncommon to hear them described by Nigerians as "neocolonialists." There are complaints about price gouging and other unfair practices.
MTN is a particular target. It took a boycott some years back to get it to charge customers by the second instead of rounding up to the next minute. And the Nigerian Senate recently rebuked MTN and other carriers for their high dropped-call rates.
"These people are exploiting us," says Tokunbo, a Nigerian MTN engineer who asked to be identified by his first name, referring to South African businesses. "Western companies won't engage in some things these South African firms do in cahoots with our fellow Nigerian officials." MTN did not respond to requests for comment.
None of that has lessened South Africa's investment offensive. South Africa's Eskom collects debts and runs the prepaid-card operations for the local energy monopoly, Power Holding Corp. of Nigeria, a notoriously inefficient company scheduled for outright sale.
Ariva, another South African company, operates the national lottery, and Telkom is bidding for Multilink, a wireless-network provider. Even the ballots in this year's contentious elections were printed in South Africa.
As Warren Trokis, a manager at Shoprite, a South African grocery chain in Lagos, explains the attraction, "Business is good here, and Nigeria is safer than South Africa. In South Africa armed robbers will take your money and kill you, but here in Nigeria, they will take your money and apologize." |
