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Invasion
from the South
South Africa’s
involvement in Nigeria’s new mobile phone services is only the most
high-profile example of one African giant’s inroads into the other’s
economy.
By MUYIWA
AKINTUNDE Dated: July 2001
In a high-income
Nigerian home, the fixtures are never complete without a satellite
TV system. And since Nigerian love soccer with a passion, the favourite
channel in such places is Supersport. Next in ranking, particularly
among the youth, is the all-music station, Channel O. And in the
evening when they relax in the living room with the electrical systems
powered by their own generating sets, Nigerians cherish supersoaps
such as Egoli. From South Africa, M-Net and Supersport beam programmes
reflecting their own cultural essence to Nigeria. What is Nigeria
airing in return? About four years ago, a Nigerian TV station, AIT,
followed the example of MBI to launch a satellite channel but the
experience instead launched that station into a financial mess that
almost led to its liquidation. Even while it lasted, the stations
beamed third-rate local programmes and outdated foreign shows to
some parts of the world where the signals come rather faintly.
This month,
South Africa – along with neighbouring Zimbabwe – will continue
its dominance of the Nigerian lifestyle and economy when GSM phone
services are finally rolled out in the country that thinks of itself
as the African giant. In the bidding conducted early this year in
Abuja, the Nigerian capital city, South Africa’s MTN and Econet
Wireless, owned largely by Zimbabweans, beat three other competitors
to the three licences on sale for $285 million each. MTN is targeting
an 18 million-subscriber base, three times more than its share of
the South African teledensity. Between MTN and Econet Wireless,
equipment worth well over $600 million has been shipped into Nigeria.
Both Southern
African companies are leading the drive to enlist Nigerians in the
worldwide league of 475 million GSM subscribers. MTN, which wholly
owns Cameroon’s Camtel-Mobile, hopes to provide jobs for 1,000 Nigerians
in its first year of operation. It is investing $1 billion in the
Nigerian project. With its expansion programme beyond its own base
kicked off in April 1998, MTN plans to set up shop all over the
continent. After only two months of commercial service, MTN Uganda
attracted about 15,000 subscribers. Recalled Dr Edmund Katiti, CEO
of Prime Telecentres, Kampala: “The demand for telephony in the
country was so huge that when they came into Uganda, they had underestimated
the market, almost immediately they had to increase their capacity.
” Today, the
ratio of phone usage in Uganda is one of the highest in the world.
MTN has successfully operated in South Africa, Uganda, Swaziland,
Rwanda and Cameroon to truly live up to its catchphrase: “The African
Connection.” CIL, owned by Dr Mike Adenuga Jr, and the only 100
per cent local firm in the GSM bidding, was edged out. It missed
the boat after winning the GSM ticket by failing to pay $285 million
fee on schedule. The National Communications Commission (NCC), which
conducted the bidding, concluded that CIL failed to meet its payment
obligations to Chase Manhattan Bank, New York, despite earlier advice
from CIL that the payment of the relevant fees had been effected.
CIL claimed it was denied a guarantee by NCC, which awarded it a
disputed frequency.
The public telecom
corporation, Nitel, is the only Nigerian company that will run GSM
services in Nigeria. It won the licence without lifting a finger,
having been offered one ahead of the public sale. Although CIL did
not help matters by its failure to live according to the rules,
some Nigerians are wondering how their government chose to leave
a key area like telecoms in the hands of foreigners – and, for that
matter, the country’s biggest challenger in the continent. Martins
Osigwe, a Nigerian lawyer, says the government has a responsibility
to encourage indigenous companies rather than frustrate them. South
Africa marches on. Thanks to the ‘Rainbow Nation,’ Nigeria Airways,
which at present has no aircraft in the air, rides on the wings
of South African Airlines on the money-spinning Lagos-New York route,
following a code-sharing agreement that enables the two national
airlines to operate three weekly Johannesburg-Lagos-New York flights.
The move is
strategic, aimed at giving SAA, which operates at lease 687 domestic
flights weekly, a footing in its bid to have a stake in a privatised
Nigeria Airways. It has also confirmed the position of SAA, which
beat off a number of airlines to seal the pact, as the continent’s
flagship airline. The airline contributed a great deal in getting
Nigeria removed from a list of countries the US government considered
unsafe for airlines to fly. SAA’s executive vice president Bonang
Mohale described the alliance as the first time South Africa would
get crude oil from Nigeria. And Nigeria Airways spokesman Chris
Aligbe said that was the first major indigenous business relationship
between two major African countries. Now South Africa is foraging
in the strategic defence sector in Nigeria.
Its Denel is
hoping to strike a deal with the Defence Industries Corporation
(Dicon) to manufacture, supply and install defence equipment. The
Nigerian company doesn’t seem to know that selling its major arms
factory to South Africa, its main rival in Africa, cannot be good
for Nigeria’s national interests. In the energy sector, there is
a $1.3 billion joint venture project between South Africa’s energy
titan Sasol Oil and Chevron Nigeria to build a gas-to-liquids plant
in Escravos, in the Niger Delta. And South Africa’s Eskom, the world’s
fourth largest utility, is offering a hand of friendship to the
National Electric Power Authority (Nepa), its Nigerian counterpart,
which generally supplies blackouts rather than electricity.
The two corporations
signed a two-year $8 billion MoU last year. A subsidiary of Eskom
is refurbishing the Egbin thermal power plant, near Lagos, while
the Nigerian government is studying a proposal to have a similar
arrangement at the Sapele power station, in the strategic Niger
Delta, and at Ajaokuta thermal plant, in central Nigeria. Eskom
plans to invest $1.016 billion in the African energy sector in the
next five years. Its interest is in generation, distribution and
transmission projects. South Africa’s investors are putting their
hands in every business pie in Nigeria. In banking, Standard Bank
of South Africa, through Stanbic Merchant Bank, has branches in
Abuja, Lagos, Kano and Port Harcourt, while the Nigerian transport
sub-sector is having to deal with Spoornet, a South African firm
that is exploring the possibility of building a railway corridor
from Lagos to Accra. Gilat Satellite Network is through with discussions
with the Nigerian government to build a satellite network in Nigeria.
It will be patterned
after the South African version, which enables access to rural telephony,
broadcasting and long distance educational programmes. In November
1999, about 282.99 million linked shares of Electronic Media Network
(M-Net) and Supersport International Holdings were listed on the
new sports and entertainment sub-sector of the Nigerian Stock Exchange.
But only a quarter of the stocks will be allowed to float on the
exchange, free to be bought and sold by Nigerian stockbrokers on
behalf of their clients. That marked the first cross-border listing
of shares on the Nigerian capital market. Recently, South Africa’s
National Black Caucus struck a business relationship with Nigerian
investors in tourism, mining, energy, telecommunications, information
technology and e-commerce. Its other areas of interest are food
production, banking and finance and office automation. At the end
of its Nigerian tour four months ago, Dupree Vilakazi, president
of the caucus, declared that a new era of cooperation between Nigerian
and South African businessmen had been born. He believes the African
continent will be the ultimate beneficiary of the new deal.
He predicts
that Nigeria and South Africa will evolve into strong economic powers
in Africa. The caucus visited Nigeria on the invitation of Nigeria’s
Institute of Directors, which made an earlier economic trip to South
Africa. Emmanuel Ijewere, the institute’s president, said it had
become imperative for African states to pool resources together
for intra-African cooperation to achieve desired goals, realising
that the disposition of the Western nations to Africa in terms of
support and investment is diminishing. The attraction in Nigeria
for the South African delegation is its huge population of 120 million.
As testified by Gloria Mcwama of the South African mission in Nigeria,
access is guaranteed to the West African sub-region once the Nigerian
market is in the bag. Bolaji Balogun, executive director of Econet
Wireless Nigeria, examines Nigeria’s travails:
“South African
companies have taken the view that they want to be the leading companies
on the African continent. You cannot be a leader on the African
continent if you have not made it in Nigeria. So while in the whole
process of apartheid, South African companies had gotten very, very
strong, very, very liquid, very, very profitable, they’ve only achieved
well in the SADC region. They now realised that to conquer Africa
you need to come and do it in Nigeria.” In response to South Africa’s
investment in Nigeria as part of its mission to capture the African
economy, Nigeria is doing very little. Although it ranks as South
Africa’s fourth largest trading partner, behind neighbours Zimbabwe,
Mozambique and Zambia, and the number one supplier of imports on
the continent to South Africa, Nigeria’s exports are 90 per cent
sales of crude oil. The crude oil trade between the two countries
has reached 55,000 barrels a day.
Between January
and November last year, total trade between the two states was valued
at R1.8 billion (about $235 million), compared to R730 million in
1998. This is thanks to the efforts of the Nigeria-South Africa
Bi-national Commission (BNC) launched in October 1999. BNC’s main
focus is to promote two-way trade between the two countries. Presidents
Olusegun Obasanjo and Thabo Mbeki are committed to their Millennium
Africa Renaissance Plan. Four months ago, South Africa’s deputy
president Dr Jacob Zuma led a high-level business delegation to
Abuja for the third session of the BNC. The three-day affair produced
six bilateral treaties, bringing to 12 the number of such deals
signed by both continental powers. Nigeria’s vice president Alhaji
Atiku Abubakar co-chairs the BNC along with Zuma. Says Abubakar:
“We have great confidence that our strategic partnership has taken
an irreversible foothold.” But will this engender the integration
of regional economies, with Nigeria leading the west and South Africa
the south of Africa? Zuma sees that prospect, but introduces a caveat.
“If we are to succeed in meeting Africa’s challenges, it is important
that we develop a culture among ourselves of respecting the commitments
that we make.”
There are fears,
however, that the deal may suffer reverses as the years roll by.
A working paper from the South African team to the third BNC forum
warned: “While South Africa’s geographical proximity to the Nigerian
market, appropriate technology and competitive pricing of high-quality
goods and services would seem to favour trade relations between
the two countries, fear of fraud, corruption and commercial scams
has so far been one of the major factors inhibiting increased trade.”
The big problem here is xenophobia in South Africa as a result of
the long isolation of South Africans under the apartheid regime
and the hurdles the black government has had to scale in redistributing
wealth. The contrasts between the two countries’ economies may also
work against the integration. Nigeria runs a cash-and-carry economy
that is import-dependent with virtually no exports to balance the
books. Nigerians have abandoned the productive sector and embraced
the service sector, with every citizen running his own portfolio
company. Nigeria’s manufacturing sector is in its death throes with
capacity utilisation at less than 20 per cent, and shrinking. Fruit
juices, pharmaceuticals and processed food from South Africa flood
the Nigerian market. Compare with South Africa: Manufacturing accounts
for 30 per cent of GDP with no less than 90 per cent capacity utilisation.
The government’s
strategy is to support the local industrial base with the aim of
reducing imports, providing jobs and promoting industrial growth.
With its policy of free enterprise, South Africa’s economy is the
most diverse and most sophisticated in the continent. Despite its
better-forgotten racist past, which stunted its socio-economic growth,
the country’s GDP remains unrivalled in Africa. This is helped by
its broad-based economy, once heavily dependent on its mining sector
but now diversified to include manufacturing. Nigeria remains an
oil-driven economy. South Africa is advanced in vehicle manufacturing.
Starting with Ford, which established its first assembly plant in
Pretoria in 1960, the home government pursued an aggressive policy
of using local parts in vehicle assembly. Now vehicle manufacturers
have switched their attention to low-cost import parts to increase
the percentage value represented by local content.
The ultimate
result is a drastic reduction in the cost of vehicles. To engender
a bilateral flow of investment, the Nigerian-South African Chamber
of Commerce was founded. Located in Lagos, it holds a monthly breakfast
forum where Nigerian entrepreneurs receive briefings on investment
opportunities in South Africa. Last month, Karel Pienaar and David
Black of MTN Nigeria made an update presentation on ‘The Global
Systems for Mobile Telecommunications (GSM) Industry in Nigeria
– Journey So Far.’ The relationship between Nigeria and South Africa
over the years made Nigeria shoulder the responsibility for ending
the apartheid nightmare. Nigeria served as the house of exile for
South African freedom fighters, including Thabo Mbeki, who resided
at the sky-hugging 1004 flats at Victoria Island, Lagos. President
Obasanjo, as co-chairman of the Commonwealth Eminent Persons Group,
visited Nelson Mandela in jail, and that relationship was nurtured
in the years that followed.
Both countries
recorded a low diplomatic moment in November 1995 when the dictatorship
of General Sani Abacha murdered Ken Saro-Wiwa, the world famous
environmental rights campaigner, and his eight Ogoni compatriots
over the crisis in that oil-bearing community. Mandela led the campaign
to excommunicate Nigeria from the Commonwealth fraternity. But when
Abacha suddenly died three years later and the succeeding military
regime committed itself to a return to democracy, the frosty relationship
thawed. The bond grew stronger with the coming of the Obasanjo civilian
government. Now Mbeki is developing on that warm liaison.
Apartheid is
dead in South Africa and military rule that was Nigeria’s albatross
is also dead. Both countries can now look ahead to an economic renaissance
for the continent championed by both regional powers.
First published
in Africa Today, UK-based monthly magazine, July 2001
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