Government silence on MTN’s woes sad but not surprising

Why investors in New York and London care so much about our land expropriation talks or the Mining Charter is quite simple: they are investors in South African assets. If the government woke up tomorrow and decided to fine Google, Facebook, Netflix or any other US social media platform, only one outcome would be likely from that decision, apart from a tweet from America’s number one citizen. There would be talk of tariffs and, in the worst-case scenario, sanctions. It’s the natural response of any functioning government to protect its interests, even outside its borders. It says much about the state of President Cyril Ramaphosa’s cabinet or to be fair, his inherited one, that not one mention was made of the travails of MTN in Nigeria. These are travails that have returned once again to threaten the very future of the mobile operator.

Since MTN’s problems came to the fore in Africa’s biggest economy with threats of fines almost as large as its market capitalisation towards the end of October 2015, the stock has been haemorrhaging more than 55%. From its all-time highs a year earlier, the mobile operator’s shares are now more than 70% lower and are trading at levels last seen in 2006.

MTN’s expansion into the rest of the continent alongside Shoprite has been held up as an example of the “Africa Rising” narrative, a story based on the premise that trade among African nations would form the backbone of its growth story. It was not only the mobile operator’s or Shoprite’s flag that was being planted across the continent, but that of SA Inc as well.

Sadly, it was no surprise that there was no cabinet statement on the threat of a $2bn (R30bn) fine from Nigeria’s tax authorities. Instead, on the international relations front there was yet another statement regarding China. I’m not dismissing the importance of deepening relations with our biggest trade partner, but MTN, a South African proxy, is in a dire position in its largest market.

This week’s threat follows demands made by the Nigerian Central

Bank that dividends amounting to $8.1bn be returned. Just a couple of years ago, MTN had to call back its founding CEO, Phuthuma Nhleko, to help negotiate a potential $5bn fine into one of $1.5bn.

The events of the past few years tell you that there may be a bigger problem than just a misbehaving corporate in Africa, and something largely based on the politics of Nigeria, regardless of what the head of that country’s communications authority says.

Nigeria, much like SA, has an economy that’s not in the greatest shape and its president, who came in on a ticket of rooting out corruption, has largely failed to deliver despite a headline-grabbing clean-up campaign when he started. With polls set for February, there certainly is no bigger target for the government to flex its muscles against than one of its biggest and most visible foreign investors,

MTN. It isn’t a European firm such as Unilever or Diageo. Political pressure from the EU bears much greater significance for Nigerian policymakers and in their heads at least, the economy.

Gone are the days of the bromance of former presidents Thabo Mbeki and Olusegun Obasanjo. Central to the idea of an African Renaissance was fostering deeper economic ties between the leading nations. I consider MTN and, to a lesser extent, Shoprite, as test cases. Some have commented that Nigerian executives haven’t been warmly embraced in the local market, but the fact that Africa’s richest man, Aliko Dangote, owns one of our largest cement producers, Sephaku Cement, belies that theory.

Sad as it is that the cabinet and various government departments such as the department of trade & industry and international relations & co-operation weren’t bothered by MTN’s Nigerian woes, it is more depressing that none of the many business bodies dotted across Johannesburg made any statement.

There certainly is something of a default position for some South African corporates when they are pressed by their more vociferous shareholders to seek out the security (and lower growth) of Europe and firm favourite, Australia, through geographic expansion. In the main, the report cards on these excursions haven’t made for pleasant reading and I’ve always been rather critical of local corporates seeking parking space in markets in which they aren’t well versed and not understanding that their competitive advantage is their know-how in emerging markets.

But in cases such as that of MTN, my bubble gets pricked. Cases that accentuate the risks, starting with bad politics. Australia has had six prime ministers in 11 years and as destabilising as that sounds, that fact hasn’t dented Woolworths’ prospects — that was just, for now anyway, a bad investment.

Not only its flag was being planted, but that of SA Inc as well