South Africa ripping Nigeria off

By: Christian Maurice

I had the misfortune of walking through a South African owned shop in Lagos recently. Mr. Price to be precise. I had just returned from a trip to Johannesburg and looking for cheap gifts i had forgotten to pick up for my hangers on when i returned. There was a piece of sweat shirt I had made a mental note to purchase at Mr. Price and decided to get it at the Nigerian store.

This was a piece of item placed at their “priced to go” racks at N1,800 (R114.74) per piece. I have a long, retentive memory and i could still recall that this same piece of sweatshirt sells for N784.24 (R49.99) in South Africa. And if you factored in my 14% tax rebates, that sweat shirt did in fact come to me at N669.34 (R42.99). That’s some 269% increase over and above the marked prices inside South Africa. 

This huge price differential is typical across board on most south african owned consumer products in Nigeria. From Shoprite to Chicken Republic to Massmart (Game), Mr. Price, Woolworth and Truworths. It is a tale of undue exploitation of Nigerians by South African Businesses.

Before i am crucified for being xenophobic, it is important to understand that the criticism of South African companies have persisted as a consequence of their approach to business in Nigeria, which has often been characterised as predatory and mercantilist. South Africa’s foreign policy towards Nigeria and indeed, towards all of Africa is not based on any Pan-Africanism or anti-imperialism; it is rather based on promoting South Africa’s expanding business interests on the continent. 

It is an expansionist agenda that South African corporations and parastatals have successfully implemented in a one-sided hegemonic relationship. As echoed by Foluso Phillips, the chairman of Lagos-based Phillips Consulting, a business consultancy of branding advisors, “There is much that South Africa can offer Nigeria, but there has been a problem of attitude and lack of trust as well as divergent objectives by both parties,… however, there must be a strong spirit of win-win, as the track record and perception makes it all look one-sided in South Africa’s favour.”

Believe me, I am a fan of South African business in Nigeria. Rightly or wrongly, the economic boosts our country has experienced in various sectors of the economy, in particular, retail and telecommunication, through the interventions of South African businesses have helped to redefine the consumer experience here. They have brought healthy competitions and quality alternatives to other product offerings. They have been open about their desire to conquer the consumer market and have in turn created employment opportunities for thousands of Nigerians. They saw the potential of the middle income groups in Nigeria and positioned themselves to tap into it.

My grouse however, is that this competitive positioning cannot and should not be exploitative in nature, which is exactly what is happening today. It shouldn’t happen in a market of 170 million people in which, 40% of the population describe themselves as middle income earners. 

This target group alone represent a market that’s still larger than the entire population of South Africa! Worse still, this should not be happening in a country that allows businesses to repatriate 100% of entire profits back to home. And it definitely shouldn’t be happening in a country that has massive disparities in incomes with it. Some comparative economic data will suffice here:

                                         Nigeria                  South Africa
Population                         170 million              52 million
Gross Domestic Product    $268.7 billion          $375.9 billion
GDP per Capita                 $1,657                    $7,257
Exports (1st Quarter, 2012) $750 million           $150 million

How does it happen that the earning power of the average south african is more than 4 times that of his Nigerian counterpart and yet, Nigerians are made to pay almost 3 times for the same quality of goods. The reality is, South African companies are making a dangerous killing in Nigeria and we are helpless to do anything about it. There is evidence that South African companies have been involved in blatant profiteering and looting in Nigeria. 

For a very long time, MTN charges in Nigeria were the highest rates in the world for cellular phone calls. And despite its massive profits, MTN has really only created about 500 permanent jobs. Most of its employees are casual or temporary workers, and just like other South African corporations, denies all of its workers the right to join a trade union. Something that would be most unheard of in their own country.

And do not be deceived by the trade surplus in Nigeria’s favour. Of the 750 million dollars worth of Nigerian exports to South Africa reported in the first three months of 2012 by The South African Revenue Service, 740 million dollars worth are made up of mineral products, mainly oil. That means, other than oil, Nigeria have absolutely no stake in South Africa’s economy. 

Compare that with MTN owning 52% of Nigeria’s mobile telecommunications market; franchises like Nandos, Chicken Republic and St. Elmos, etc owning 50% of the international fast food market worth US$2.5 million per annum; DSTV accounting for 90% of the viewers that watch satellite TV in Nigeria; SASOL playing major roles in Escravos with Chevron; and Entech and Broll managing prime estates and properties including the development of the Bar Beach (Eko Atlantic) and management of over 600 fuel stations and malls across Nigeria respectively. This can’t healthy.

There is a reason why such unequal trade relations exist between Nigeria and South Africa. The bilateral agreements signed by both governments since 1999 allows this to happen without hinderance to operations. South African companies’ investments in Nigeria are heavily protected from any interference at any level by the Nigerian government. It is a license to grow as they please without consequence. Added to this, there are substantial tax rebates for companies operating here through agreements on eradicating double taxation. 

South African companies that paid tax in Nigeria are protected from paying taxes back home and can repatriate the entire profits. Now, imagine the US$5.3 billion MTN had earned after tax in the 10 years of operation from 2001 – 2011 finding its way back to the South African economy tax free! Why wouldn’t the Rand be stronger than the Naira at any level?

When the foundations of this country was laid in the fight against imperialism, it was not envisioned to have it substituted with another form of neo-colonialism. The activities of South African businesses in Nigeria have been abrasive to Nigerians and the Nigerian economy. 

There is a siege mentality they have on this country that needs to be addressed. They have created opportunities not to develop the Nigerian economy but to exploit its resources. We experienced that with the British, endured it with the Chinese and now, it’s the South Africans that are our new colonialists. This is not the sort of relationship we should be aspiring to at this time. The sooner our government addresses these imbalances the better.

NVS