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While a large number of South Africa firms looked for growth and markets to offset their products outside of South Africa a large number of them made their way to Nigeria, one of Africa's biggest economies. But regulatory issues and under performing businesses in this country has seen many SA firms call it quits there. Is Nampak the latest SA firm to leave Nigeria?
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Regulators in Nigeria looking to milk foreign firms for fiscal gains?
While there is no doubt that a country such as Nigeria, located on the west coast of Africa is the ideal market for South African firms to grow their business and to get a bigger offset market for their products and services it does come with its challenges. Nigeria's economy is one of the three biggest economies in Africa (currently second biggest behind Egypt) and ahead of South Africa in 3rd place.
While Nigeria and Egypt's economies are bigger than that of South Africa (based on IMF 2018 estimates), their population sizes are also a lot bigger than that of South Africa, with Nigeria's population of close to 200 million people almost 3.5 times the size of South Africa's population and Egypt's population about 70% larger than that of South Africa. So on a per capita basis (economy per person living in the country), South Africa comes out on top of Egypt and Nigeria.
While Nigeria and Egypt's economies are bigger than that of South Africa (based on IMF 2018 estimates), their population sizes are also a lot bigger than that of South Africa, with Nigeria's population of close to 200 million people almost 3.5 times the size of South Africa's population and Egypt's population about 70% larger than that of South Africa. So on a per capita basis (economy per person living in the country), South Africa comes out on top of Egypt and Nigeria.
Big South African firms entering the Nigerian market is unfortunately seen by the Nigerian authorities as a potential cash cow and a means of making extra money for the state coffers. Foreign firms regularly run into trouble with Nigerian authorities who are quick to impose excessive fines on foreign companies. In South Africa the prime example would be MTN.
MTN is in regular disputes and conflict with the Nigerian authorities, with the authorities slapping a massive $5.2 billion fine on the group for not disablining a large number of sim cards for which there were no addresses (basically SIM cards that have not been through a process such as RICA in South Africa). After various court battles and the likes the fine was eventually reduced to $1.7billion.
In the latest dispute regarding MTN and the Nigerian authorities, the Nigerian Central Bank claims MTN illegally repatriated $8.13 billion and ordered the group to repatriate the money back to Nigeria. In addition to this $2 billion in "back taxes" are claimed by Nigerian authorities.
The following is a extract from an article on News24 regarding the latest between MTN and Nigerian authorities
Extract starts
Nigeria has ordered Africa's leading mobile operator MTN to pay back taxes of $2bn just days after the government ordered it to repatriate $8.13bn, the company said on Tuesday. MTN gave a brief statement to the market in which it confirmed that Nigeria's attorney general gave "notice of an intention to recover the $2bn from MTN Nigeria". "Based on the detailed review performed, MTN Nigeria believes it has fully settled all amounts owing under the taxes in question," said the company. Nigeria's central bank said on Wednesday that it had ordered South Africa-based MTN to refund $8.13bn that it allegedly illegally repatriated and fined four banks involved in the transfer.
News of the unexpected tax bill sent MTN shares tumbling by as much as 7.5% to an almost 10-year low. It was also the latest challenge to hit MTN since it began operations in Nigeria 17 years ago. MTN was fined $5.2bn in 2015 by Nigeria's telecoms regulator for failing to disconnect unregistered SIM cards on its network. The fine was later reduced to $1.7bn after a series of negotiations with the Nigerian government.
Extract Ends
MTN is in regular disputes and conflict with the Nigerian authorities, with the authorities slapping a massive $5.2 billion fine on the group for not disablining a large number of sim cards for which there were no addresses (basically SIM cards that have not been through a process such as RICA in South Africa). After various court battles and the likes the fine was eventually reduced to $1.7billion.
In the latest dispute regarding MTN and the Nigerian authorities, the Nigerian Central Bank claims MTN illegally repatriated $8.13 billion and ordered the group to repatriate the money back to Nigeria. In addition to this $2 billion in "back taxes" are claimed by Nigerian authorities.
The following is a extract from an article on News24 regarding the latest between MTN and Nigerian authorities
Extract starts
Nigeria has ordered Africa's leading mobile operator MTN to pay back taxes of $2bn just days after the government ordered it to repatriate $8.13bn, the company said on Tuesday. MTN gave a brief statement to the market in which it confirmed that Nigeria's attorney general gave "notice of an intention to recover the $2bn from MTN Nigeria". "Based on the detailed review performed, MTN Nigeria believes it has fully settled all amounts owing under the taxes in question," said the company. Nigeria's central bank said on Wednesday that it had ordered South Africa-based MTN to refund $8.13bn that it allegedly illegally repatriated and fined four banks involved in the transfer.
News of the unexpected tax bill sent MTN shares tumbling by as much as 7.5% to an almost 10-year low. It was also the latest challenge to hit MTN since it began operations in Nigeria 17 years ago. MTN was fined $5.2bn in 2015 by Nigeria's telecoms regulator for failing to disconnect unregistered SIM cards on its network. The fine was later reduced to $1.7bn after a series of negotiations with the Nigerian government.
Extract Ends
Nampak (NPK) packing it up in Nigeria?
An article on posted Sharenet's website on April 3, 2019 and reported by Reuters stated that Nampak has sold off its paper packaging unit in Nigeria for undisclosed amount. The content of the article is shown below
Article Starts
JOHANNESBURG (Reuters) -Africa's biggest packaging company Nampak has sold its Nigerian paper packaging unit, as part of plan to shrink its portfolio and boost returns, it said on Wednesday. Nampak said the business, which makes cartons for tobacco, food, and consumer goods industries, would be sold to privately-held Swedish cigarette pack maker AR Packaging for an undisclosed amount.
"We continue to rationalise the portfolio to improve returns on capital and reinforce our strategic intent. Proceeds from this disposal will further strengthen the company's financial position," Nampak Chief Executive André de Ruyter said. Nampak has retained its aluminum and tin canning products and services in Nigeria, Africa's biggest economy, but a country that has proven tough for some South African companies.
Telecoms group MTN has had a few clashes with regulators in Nigeria in recent years including over a disputed $2 billion tax bill and over missing the deadline to cut off unregistered SIM cards. Other South African companies have left the country over the last five years, citing regulatory issues and under performance. They include hotels group Sun International, and retailer Woolworths and consumer food maker Tiger Brands.
Nigeria's huge, expanding population of young people of working age, however, has made the west African country one of the top investment destinations on the continent.
Article Ends
Article Starts
JOHANNESBURG (Reuters) -Africa's biggest packaging company Nampak has sold its Nigerian paper packaging unit, as part of plan to shrink its portfolio and boost returns, it said on Wednesday. Nampak said the business, which makes cartons for tobacco, food, and consumer goods industries, would be sold to privately-held Swedish cigarette pack maker AR Packaging for an undisclosed amount.
"We continue to rationalise the portfolio to improve returns on capital and reinforce our strategic intent. Proceeds from this disposal will further strengthen the company's financial position," Nampak Chief Executive André de Ruyter said. Nampak has retained its aluminum and tin canning products and services in Nigeria, Africa's biggest economy, but a country that has proven tough for some South African companies.
Telecoms group MTN has had a few clashes with regulators in Nigeria in recent years including over a disputed $2 billion tax bill and over missing the deadline to cut off unregistered SIM cards. Other South African companies have left the country over the last five years, citing regulatory issues and under performance. They include hotels group Sun International, and retailer Woolworths and consumer food maker Tiger Brands.
Nigeria's huge, expanding population of young people of working age, however, has made the west African country one of the top investment destinations on the continent.
Article Ends
So while there are large and lucrative markets out there for South African firms to explore its not always easy for SA firms to make it in other countries. A few of the other examples we can think of is Famous Brands struggling with the Gourmet Burger Kitchen business in the UK, Woolworths struggling with David Jones in Australia
Word of advice for South African firms, just because you made it in South Africa doesn't mean you will make it in the rest of the world. Be very very sure about whether the market you are looking to head into is worth all the trouble and effort.
Word of advice for South African firms, just because you made it in South Africa doesn't mean you will make it in the rest of the world. Be very very sure about whether the market you are looking to head into is worth all the trouble and effort.