The South-Africanization of Nigeria

Nigeria is likely to become Africa's largest economy in the near future. Home to world's 11th largest oil reserves and being Africa's biggest oil producer, the country has seen poor governance, lax state writ and extremist violence in recent years. Not just that, some analysts like Femi Aribisala are concerned about economic "invasion" of the country by South African businesses. Here is what he argues.

Posted on 03/19/14
By Femi Aribisala | Via Premium Times
South African telecomm giant MTN controls some 52% of Nigeria’s mobile telecoms market. (Photo by Wayan Vota, Creative Commons License)
South African telecomm giant MTN controls some 52% of Nigeria’s mobile telecoms market. (Photo by Wayan Vota, Creative Commons License)

Nigerians are so overwhelmed by the inadequacies of Nigeria; we easily ignore its strengths.  I am not talking here about Nigeria’s potentials; I am talking about Nigeria’s current actual status in the world economy.  I am talking about Nigeria as a country with the biggest consumer market in Africa.  Just think about it: the entire economy of Kenya is only equal in size to that of Lagos State in Nigeria.

 

Says Nigeria’s foremost industrialist, Aliko Dangote: “Nigeria is the best kept secret in the world. Anybody who doesn’t invest in Nigeria only has himself to blame, going forward, if he misses out.  I don’t really know of any place where you can make as much money as you make in Nigeria.”

 

South African invasion

I don’t know to what extent rank-and-file Nigerians are aware of this, but South Africa is already making a big onslaught on this lucrative Nigerian market.  If we don’t buck up and take charge, we might wake up sometime in the not-too-distant future and discover that, out of indolence; lack of imagination and dearth of enterprise, we have surrendered the commanding heights of our economy to our junior South African brothers.  I call them our junior brothers because we paid their “school-fees” in the form of assisting them in their liberation struggle against the apartheid system.

 

In a slow but steady manner, South Africans are beginning to entrench themselves into key facets of the Nigerian economy.  From aviation to banking to construction to entertainment to revenue collection to telecoms; South African companies are staking a very forceful claim to Nigeria.  With MTN, they now reign like a colossus over the tele-communications industry.  With Multichoice DSTV, they are now king of pay-TV.  Tiger Brands has signaled its determination to dominate Nigeria’s food business by taking over majority shares in UAC Foods and Dangote Flour mills; two of the country’s leading food manufacturing companies.

 

Take a look at the following firms which are quickly becoming Nigerian brand favorites; you might not be aware that they are all South African.  Chicken Republic; Critical Rescue; Defresh Products; Entech and Broll; Eskom; Global Outdoor Semces; Grinaker-LTA Construction; Massmart (Game); Oracle Airtime; Mr. Price; Nandos; Protea Hotels; SAB Miller; Sasol; Shoprite, South African Airways; Stanbic IBTC; Standard Chartered; St. Elmos; Truworths; Umgeni Water and Woolworths.

 

At the moment, Nigerian companies don’t seem to be able to compete with most of these companies, for the simple reason that we don’t have in Nigeria a culture of good planning, sound management and efficient services.  However, these are the major selling-points of the South African brands, making them increasingly the preferred choice of Nigerians.  Consider this: in 1994, South African companies made a paltry $11 million in Nigeria.  By 2005, they made a whopping $11 billion.

 

On the flip side, the Nigerian economic presence in South Africa is insignificant.  Nigerian companies cannot adequately serve the huge Nigerian market, therefore most have little incentive or capacity to explore the South African market.  Those that make forays abroad concentrate essentially on the ECOWAS sub-region.  Apart from companies like Dangote Group, Financial Standard, First Bank, News Media, Philips Consulting and ThisDay Newspapers, Nigerian companies are few and far between in South Africa.

 

MTN supremacy

There is really no good reason why a South African company like MTN should dominate the mobile telecom market in Nigeria, if it were not for the fact that Nigerian policy-makers don’t seem to appreciate that, wherever possible, Nigerians should be preferred over foreigners in Nigeria.  On the contrary, foreigners often get more special treatment.  You may not have realized this, but a foreigner is more likely to get a loan from a Nigerian bank before a Nigerian.

 

With regard to the mobile phone system, Nigeria had local people, like Mike Adenuga and Hakeem Belo-Osagie, who were not only interested but were also sufficiently enterprising and qualified to participate in the project.  However, some classical Nigerian blunders were made.  The scheme was made open to the highest bidder, a requirement which worked in favor of foreigners with access to larger capital.  By the time the bid reached $285 million, Belo-Osagie was constrained to drop out.  While Adenuga stayed in, there was some hiatus with his payment transfer and he was disqualified.

 

(Map by Yodod, Creative Commons License)
(Map by Yodod, Creative Commons License)

The road was then cleared for MTN, a South African firm, and ECONET wireless, a Zimbabwean firm, to pioneer the mobile-phone system in Nigeria.  Those two companies quickly ripped-off Nigerians by introducing an extortionate service of N50 per minute.  By the time we woke up to what had happened and finally allowed Adenuga back in with his Glocacom system to break up their market monopoly and subvert their high pricing, MTN had already cleaned up the market.  Belo-Osagie too has since come back in, partnering with the giant Etisalat, but there is no question that, short of a miracle, it will be impossible to overcome MTN’s head-start.

 

Thanks largely to that advantage; South Africa’s MTN now controls some 52% of Nigeria’s mobile telecoms market.  According to statistics provided by the Nigerian Communications Commission (NCC), MTN stands head-and-shoulder above the rest with as many as 55 million subscribers; Globacom comes a distant second with 25 million; Airtel comes third with 21 million; and Etisalat is fourth with 15 million.

 

I have no problem with MTN or other foreign firms being in Nigeria.  I personally have an MTN line, and I can say without being liable to accusations of bias that their services are lousy.  Nevertheless, my position is that non-Nigerians should not be given a head-start vis-à-vis Nigerians in the Nigerian economy, especially in those areas where Nigerians are more than able to make a useful contribution.  If Nigerians end up being discriminated against in Nigeria, it means we are effectively orphans in our own country.

 

With currently now over 115 million mobile-phone users in Nigeria, a figure more than double the entire population of South Africa which is 52 million, Nigeria has become MTN’s biggest cash cow.  The company now makes over $2.5 billion in profits annually from Nigeria alone.  That is virtually equal to the total annual budget of Lagos State, by far economically the largest state in Nigeria.  This is not an argument against foreign investment in Nigeria, but it means money that could have been earned in Nigeria and re-invested in Nigeria gets repatriated from Nigeria.  We need some people somewhere among our policy-makers to start thinking for Nigeria.

 

Multichoice monopoly

Another South African flagship in the Nigerian economy is Multichoice DSTV, which accounts for over 90% of the viewers of satellite TV.  Multichoice had the distinction of being the pioneer Pay-TV operator in Sub-Saharan Africa.  This early-bird advantage enabled it to acquire a number of exclusive content agreements which makes it virtually impossible for others to compete on a level-playing ground with it.  The critical one in this regard is the right to the English Premier League (EPL), the most popular TV program on the continent.

 

This has ensured that Multichoice has been more than a competitor for the local Nigerian Television Authority (NTA).  Supplementing its different Super-Sports channels with several Nollywood (Africa.Magic) and Hollywood (Movie Magic) channels, as well as local and foreign music stations and more, Multichoice is increasingly the preferred choice of Nigerian television viewers.  The near-monopoly of Multichoice has enabled it to rip off its subscribers by making Nigerians pay films that they don’t even watch.  By having fixed charges instead of pay-as-you-go, Multichoice has been laughing all the way to the bank.

 

The government attempted to break the Multichoice monopoly by insisting that the right to show the EPL in Nigeria could not be bundled with the right to show it in the rest of Africa.  Given the relatively large size of the Nigerian market, a separate bid had to be made for Nigeria alone.  This enabled a local rival, HITV, to bid for the right and receive it for three years.

 

However, HITV turned out to be one big disaster.  Its Nigerian CEO, Toyin Subair, got carried away by his vantage position in having exclusive rights to the EPL.  He went on a spending spree buying luxury cars, jet-setting all over the world and throwing lavish parties.  Within three years, HITV was bankrupt and Multichoice reclaimed its exclusive rights to the lucrative EPL.

 

No retreat, no surrender

This is not a call to discrimination against South African firms; our South African brothers are good for Nigeria.  It took South African Shoprite Supermarket for us to realise that there is a market for modern retail outlets in Nigeria.  Shoprite’s overnight success has prompted other international retail stores to join the fray, such as Spar, Massmart and Woolworths.  Shoprite CEO, Whitey Basson, said he saw the scope for 700 Shoprite stores in Nigeria alone, up from the current two, arguing that even if 60 percent of Nigerians live in poverty, the other 40 percent would still outnumber South Africans.

 

Where then are the Nigerian entrepreneurs?  It appears they are either asleep or looking for oil.  This is an attempt to embarrass us by challenging Nigerians to rise to the South African challenge.  Nigerians need to realise that there is already underway a South African play for Nigeria, and this challenge is not simply at the level of the Super Eagles and the Bafana Bafana where we have tended to reign supreme.  This is at the more cogent level of economic supremacy.  It is at the level of determining the preeminent and representative black African country in the world today.

 

The South Africans are here in Nigeria, and they are here with a plan.  They are here to take over the Nigerian economy.  At the moment, we seem to have been lulled into a widespread and deepening surrender.  This is a “call to arms.”  We must neither ban South Africans nor impede them.  But we must match them and best them.  We must also recognize that, wherever possible and necessary, Nigerian firms must be given priority over foreigners.  South Africans should not receive in Nigeria the concessions that Nigerians cannot receive in South Africa.

 

This article first appeared in Premium Times, a leading newspaper of Nigeria.

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