How to extract a financial bailout when you get a chance
THE UNPRECEDENTED and record fine imposed on MTN by Nigerian authorities could be a ploy by Nigeria to extract a financial bailout from South Africa, due to Abuja’s sluggish economy, because of depressed oil prices.
Azwimpheleli Langalanga, a research associate at the SA Institute of International Relations, said yesterday that a diplomatic solution should be found to the issue, especially considering the fine was not imposed by a court of law.
He said the hefty fine had its basis on the not-so-cosy diplomatic relations between Pretoria and Abuja due to rivalry.
Langalanga said the South African multinational MTN had indeed violated some of the rules and regulations in Nigeria, relating to the registration of cellphone subscribers. However, he said, it was quite difficult to imagine the fine imposed could be totally read outside the diplomatic relations between the two countries.
Importance
“The regulator would not have imposed a hefty fine of $5.2 billion (R71.62bn) without consulting the highest authorities in Nigeria, considering the strategic importance of MTN to both the Nigerian and South African economies.”
Langalanga said it could be assumed that when the Nigerian authorities condoned the fine, they were informed by political and diplomatic imperatives. He said to put it bluntly, Nigeria had pulled rank on South Africa.
The reasons for doing that could be varied.
“Firstly, Nigeria could just be wanting to show that it is the ‘big brother’ now. Secondly, it could be a ploy to get the South Africans to a negotiation table and, if possible, extract a bailout from the the South African government in lieu of a hefty fine against one of the country’s (South Africa) national champions.”
Victor Kgomoeswana, author of Africa is open for Business, said the hefty fine imposed on MTN was not good for bilateral relations between the two countries.
“South Africa, as the most sophisticated economy on the continent, and Nigeria – the largest – need to work together better than they have been so far.”
Responsibility
He said the two countries had the diplomatic responsibility to set the tone for the rest of the continent. They needed each other far too much to let anything cause a spat of this nature.
“Safety is paramount in Nigeria as is playing by the rules for MTN. But the reason I am an advocate of multi- national corporations doing business on our continent is exactly that there is more to running a business than just knowing your industry and its technicalities.”
Kgomoeswana added: “There should be a more functional relationship between a company the size of MTN and the Nigerian Communications Commission. Such a relationship would have made sure that any failure by MTN to adhere to deadlines was handled more effectively, behind the scenes.”
Langalanga said before South Africa came to the global stage, Nigeria had more sway in Africa and to a degree in the international community, articulating on behalf of the continent. However, with South Africa being readmitted into the international community due to its economic size and diplomatic clout, characterised by liberal economic and democratic values, Nigeria had not taken kindly to that.
“The rebasing of Nigeria’s gross domestic product in early 2013 was used to muscle the country back into the continent’s radar, thereby putting the West African giant against its Southern African rival.
This was most defined during the Goodluck Jonathan era. Under the administration of (Olusegun) Obasanjo, the relations were warm due to the chemistry between the presidents (Obasanjo and Thabo Mbeki).”
“They would naturally have thought it prudent to use the fine to send a message that they are now the leading economy, and there was no firm that could come into their country and undermine their laws, especially one from South Africa.”
Langalanga said the fine imposed on MTN was a chance for South Africa to show its economic and diplomatic capabilities. “It is also an opportunity for MTN to learn that when you live in a glass house, you do not throw stones.”