MTN’s woes need diplomacy
Nigeria is becoming a nightmare for SA companies. Very few have succeeded there thus far, other than one shining example of African modern entrepreneurship: MTN. When the mobile company entered Nigeria, intracountry communications were sporadic, and extracountry communication comparatively rare. Like many other African countries, communication both within the country and outside of it went from barely existent to ubiquitous in one huge 20-year leap. It has been one of the grandest and fastest elevations in history.
Yet MTN has now been victim to repeated shakedown efforts by local regulators and authorities on trumped-up charges transparently designed to fill shortfalls in the national coffers. It hadn’t yet finished paying a $1bn fine for not cancelling accounts with unregistered SIM cards when it was slapped this week with an $8.1bn fine for something that happened a decade ago, on top of a $2bn fine for alleged outstanding taxes.
Nigerian authorities claim that MTN is the author of its own problems, but few really believe this is entirely or even partially true. It’s comparable to the speed traps that SA dorpies set up on the main roads that run through their towns. Of course, speeding is illegal, but the traps are surreptitiously established with the express intention of fleecing uninitiated out-of-towners.
South Africans, imbued by what they consider to be the virtuous notion of expanding into the rest of Africa, feel they cannot really avoid the most populous country on the continent.
However, despite their best intentions, the record of SA companies in Nigeria is abysmal. Sun International once had grand plans for Nigeria, but the hotel company recently announced it was in the final stages of exiting. One of the biggest disasters was food maker Tiger Brands, and not far behind was Telkom’s foray. Woolworths also tried and failed. Shoprite, Massmart and others persevere, but their cautious expansion, much slower than elsewhere in Africa, is palpable.
In each case, the reasons for failure are complicated. Doubtless, in some cases, the new entrants were unfamiliar with the market and perhaps failed to execute successfully. Sun International, though, seems to have had no trouble expanding into Chile in South America, on the other side of the planet, so this argument only goes so far.
Ironically, one of the underlying problems for MTN has been its own success in Nigeria, where it owns about 40% of the market. In the same way that foreign-owned shops in SA’s townships can sometimes cause resentment because their very success constitutes an implicit critique to local entrepreneurship, MTN is somehow viewed as an outside interloper, fleecing ordinary people. The taxes MTN pays, the estimated 400,000 jobs it has generated, and all the other benefits are somehow forgotten in the kind of chest-thumping nationalism of which all countries, including SA, are at times guilty.
The irony is that MTN was intending to try and mitigate this sense of being an outsider by listing on the Nigerian Stock Exchange, but the fines make that impossible in the near future. Who will invest in a company that, if the fines stay as they are, will spend the next 88 years paying out all the profit it currently makes to the national authorities and not to shareholders?
The question now is whether the SA government or President Cyril Ramaphosa himself should try to intervene. Ramaphosa may be conflicted; he did chair the MTN board between 2001 and 2013. However, there is no doubt that SA’s relations with Nigeria are really in a terrible state. Part of the problem is a natural competitiveness on the international stage, where SA competes with Nigeria as sub-Saharan Africa’s predominant economic force.
This needs active diplomacy and careful management, but we see very little of that from either side.
Some visible co-operation between SA and Nigeria could help to ease this growing problem.
IRONICALLY, ONE OF THE UNDERLYING PROBLEMS FOR MTN HAS BEEN ITS OWN SUCCESS IN NIGERIA