By Rafiq Raji, PhD
President Jacob Zuma is visiting Nigeria this week. The trip would probably be welcome relief for the South African leader. Not that his troubles back home would not follow his trail. The visit is probably just as well for his Nigerian counterpart, who has been itinerant of late. See, they are coming; one could almost hear him say chidingly. There are also indications a long overdue economic summit is planned for this week by Nigerian authorities. President Buhari is facing increasing criticisms for his not so deft handling of the economy thus far. Apart from this commonality with the South African leader, the pair – ‘Zuhari’ – could not be any more different. Still, they would probably get along. Both men are old-fashioned. They probably also have mutual respect for one another. Corporate SA dearly hopes so, MTN above all. The South African telecommunications company is trying to reduce a fine imposed on it by Nigerian authorities for refusing to disconnect unregistered customers on its network. Based on its agreement with the Nigerian government, MTN is liable. However, it probably did not count on an administration so bold. The company’s attitude has not been helpful either. Most of the steps the South African company has taken hitherto suggest a belief it could get away with its infraction. Were Mr. Buhari not president, it probably could. Unfortunately, these are hard times for the Nigerian government. I have been asked – and have read commentary – about whether the MTN issue would not discourage potential investors. It never occurred to me that investors would be discouraged from investing in a country because its authorities might just enforce signed agreements. Oh, wait a minute. Most investors do not think those agreements matter. Well, I guess they know better now. By its actions, MTN trifled with Nigeria’s national security. And the company’s attitude since the fine by the Nigerian telecommunications regulator seems unremorseful to me. To think now MTN recognizes it should list on the Nigerian Stock Exchange. If it had done so much earlier, Nigerian authorities – and indeed Nigerians – would probably have been much more sympathetic.
As it would set a bad precedent, I would be surprised if President Buhari interferes in the MTN matter. Otherwise, the same arguments could be raised for similar flexibility on behalf of oil companies and former Nigerian officials being investigated for corruptly enriching themselves. President Zuma would be wise not to let the MTN issue dominate his discussions with the Nigerian president. They should instead focus on the broader Nigeria-South Africa relationship. ‘Zuhari’ should seek ways to ease the recurrent but unnecessary tensions and rivalry between the two African heavyweights. Sometimes onerous visa conditions for Nigerians travelling to South Africa and xenophobic attacks on Nigerian residents are examples. There have been worries that perhaps Nigerian authorities are targeting South African companies. I do not think so. The MTN issue is an unusual case. Some investors have also been wondering why a number of South African companies have decided to divest from their Nigerian operations. My view is that these companies did not seek or get the best advice before embarking on their Nigerian ventures. Also, I think these South African companies underestimated the taste and intelligence of the average Nigerian consumer. Woolworth and Truworth did not succeed in Nigeria because Nigerians simply did not like their clothes, in my view. The price tags for their clothes were not commensurate with their quality. Brand recognition was probably also a factor. The average Nigerian – even those with pennies – likes to show off. Even the bus conductor would not be caught dead wearing clothing labels that would not be appreciated by his peers. Nigerians buy clothes not just for the quality. They want respect. The South African clothing retailers would probably have succeeded if their goods were cheaper. The Nigerian consumer probably thought a much valuable brand could be had at the same prices on offer at either of Woolworth or Truworth. At least, I thought so. For instance, British clothier, TM Lewin has been doing quite well; albeit some Nigerians still prefer to go to their London stores just so they could say how much in British pounds they spent shopping.
Not all South African companies in Nigeria have had bad experiences, however. Food retailer, Shoprite, is doing well, albeit 2015 could have been a better year. And the company has made public its intention to brave the current challenging business environment. Like other businesses in the country, it has been hit hard by scarcity of foreign exchange. However, it is probably succeeding because it has adapted faster. It sells more Nigerian food brands, meaning it buys locally; and its prices are competitive. The South African food retailer began to gain increased custom when Nigerians began to realize its published prices were sometimes lower than what obtained in the open market. So Nigerians thought why go brave the scorching heat in sometimes stuffy markets when you could go to an air-conditioned store and still save money. What Shoprite did was to put a premium on the not so common goods to make up for the meager margins on the fast-moving items. In the case of South African milk producer, Clover, it probably did not know not many Nigerians drink fresh milk; not even those that can afford it. Apart from quick spoilage due to power cuts, most Nigerians have grown accustomed to certain evaporated or powdered milk brands. It probably befuddles foreigners (and some Nigerians) that northern Nigerians – even the humble ones – for instance would only take evaporated liquid (not powdered) milk with their tea. So a Clover needed to target that section of the country to succeed. But then it would still have faced stiff competition from more established milk brands with history and products that actually taste better. Proper research would probably have revealed the size of the Nigerian fresh milk market might not even be big enough to warrant their move in the first place. So, it is probably just as well that the foreign currency crisis has provided Clover with a good excuse to exit the country. In a nutshell, South African companies need to adapt to the tastes of the Nigerian consumer to succeed. If what you are selling are fast-moving consumer goods, price is everything. If your pitch is quality, you have your work cut out for you because Nigerians set a very high bar for that. Not knowing this is probably what caused the failure of the South African consumer goods companies that have left. Nonetheless, there has been some positive collaboration between businesses from both countries. Despite its recent troubles, MTN has done exceedingly well in Nigeria; when it took care to adapt to the environment, that is. Standard Bank has also had a good experience in Nigeria, never mind the recent accounting issue. The South African bank has probably succeeded because of its choice of Nigerian partners, who are well grounded and connected. Other South African companies should probably take lessons from them.
Also published in my back-page column at BusinessDay Nigeria newspaper. See link viz. http://businessdayonline.com/2016/03/zuhari-and-the-nigeria-south-africa-relationship/