Nigeria’s pan-African aspirations may change its dynamic with SA

The Nigerian Stock Exchange in Lagos is home to businesses whose managers need expertise in communication and human behaviour. Without these skills, workplaces can become unproductive and mired in in-fighting. Picture: REUTERS

A QUESTION Nigerians often raise in discussions about SA and its West African counterpart is why there are not more Nigerian companies investing here.

Where are the Nigerian banks, the food franchises, the supermarkets and IT companies? they ask. The diplomats are particularly exercised by the trade and investment imbalance. This, they say, reflects badly on the bilateral relationship.

It is true that there are few Nigerian investments here more than 20 years after SA opened its doors to the rest of the continent. Dangote Cement has acquired a cement operation, and oil and gas company Oando has a few, largely inactive, shares listed on the JSE. But there is little else if you don’t count the many small businesses owned by Nigerians resident in this country.

Compare this with the fact that the majority of SA’s top listed companies have a presence in Nigeria.

But such a comparison negates the reality that the two countries are at different stages of development. Its relative underdevelopment, large market size and reasonable growth rates mean the opportunities in Nigeria are just so much greater than they are in SA. That is why our companies are there.

Nigerians are also exploring these opportunities — often in conjunction with South African companies. The growth story in SA is just not that compelling right now. That is a market reality even if it doesn’t square with the politicians.

Besides its low growth, SA is also not an easy market to penetrate, because of high levels of competition. African banks have tended to avoid SA for this reason.

Nigeria’s banks, which have expanded aggressively into West and East Africa, only have representative offices here, although many Nigerians believe, erroneously, that the real reason for this situation is that their banks are actually prohibited from setting up retail operations in SA.

Exchange controls and SA’s regulatory environment including black economic empowerment requirements, make this a less than welcoming environment for other Africans.

So it was interesting, and heartening to see the recent announcement that Nigerian metal-can manufacturer GZ Industries is to invest in building a factory in SA, in partnership with a local company, Golden Era, to explore regional markets. The company’s move is not to tackle the investment imbalance but because it sees a good business case in this region.

The company is also investing in a factory in Kenya.

And there may be more such investments as Nigerian companies look beyond their domestic market in search of new opportunities elsewhere. Many have already set up shop in their West African hinterland, while others are looking further afield for opportunities.

For example, Computer Warehouse Group and integrated payment company Interswitch have bases in Uganda to explore East Africa, oil and gas services company Orlean Invest is exploiting opportunities in Mozambique’s gas industry, while fertiliser company Notore Chemical Industries is exporting products across Africa.

And there are many others that are thinking about becoming, or raising money to become, pan-African players. It takes time to build competitive industries, particularly in a challenging market such as Nigeria. South African firms have been able to build critical mass domestically over years and test their cross-border strategies with neighbouring markets before venturing further afield.

The same model is being used by growing companies in other regions. SA is not an exception in this regard, as it is often painted; it is just ahead of the game.

If GZ Industries succeeds in SA, it may be a catalyst for other Nigerian companies to put a toe in this market in the same way MTN’s success in Nigeria lured other South Africans to that market. It is early days, but hopefully this is a first small step towards changing the often negative SA-Nigeria narrative.

CREDITS: Diana Games is CEO of business advisory Africa @ Work

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