Are South African Firms Being Punished In Nigeria For Xenophobia?

Written by Dana Sanchez

The $5.2 billion fine imposed on South African telcom giant MTN by the Nigerian government has raised the question: is it open season on South African firms doing business in Nigeria?

MTN’s regional office in Abuja shut down its operations in April after a crowd protested xenophobic attacks in South Africa, BizNews reported April 23. Nigeria recalled its high commissioner and his deputy over the attacks, “even though Nigerians had barely been affected,” IOL reported Nov. 9.

The South African government warned in April that South African nationals and companies in other countries could suffer a backlash as a result of the attacks on foreigners, IndependentOnline reported.

Operating in Nigeria has been challenging for South African retailers and manufacturers because of bureaucracy, corruption, infrastructure bottlenecks, and currency volatility, BusinessDayLive reports.

Congestion at Nigerian ports has been an ongoing issue for retailers. The global benchmark for container dwell time is about seven days. In major Nigerian ports, it’s 40 days.

Nigeria’s’s slowing economic growth from lower oil prices has been blamed for eroding consumer spending.

Like other retail groups, Mr Price expanded into Nigeria to tap the growing middle-class with four stores.

In June, Nigeria’s central bank imposed foreign exchange restrictions to stem the flow of dollars out of the country, resulting in delays of merchandise being imported into Nigeria.

Mr Price’s Nigerian stores report that sales have slowed.

“Trading in Nigeria was initially strong, but slowed appreciably in the last two months due to recently imposed restrictions on imported merchandise,” Mr Price this month when it reported its half-year earnings, BusinessDayLive reports. “Although these are expected to be temporary, the company’s interactions with regulators are focused on urgently re-enabling supply.”

Cape Town-based Woolworths, which has done business throughout Africa for more than a decade, shut its three Nigerian stores in Nigeria in 2013 citing high rental costs, high taxes and complex supply chain processes, despite being in a joint venture with Nigerian conglomerate Chellerams.

South African clothing firms Foschini and Truworths cite stock delays affecting sales. The Foschini Group has a Markham store in the Ikeja Mall, Lagos. Truworths has four Nigerian stores.

Relations between South Africa and Nigeria are not great, according to IOL.

One reason is Nigeria’s handling of the bodies of 84 South Africans when a building belonging to preacher TB Joshua collapsed in Lagos in 2014.

South Africa seized millions of dollars in cash from Nigerian arms dealers trying to enter South Africa to buy arms, IOL reported. The Nigerian government claimed they were conducting a legitimate government arms purchase.

“It is not implausible that there could be a political motivation to Nigeria’s huge fine on MTN – even though, it must be said, relations between Pretoria and Abuja seemed to have improved since Muhammadu Buhari succeeded Goodluck Jonathan in this year’s presidential elections,” IOL reported.

 

 

 

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