BUSINESS

Nigerian Television Authority (NTA) is struggling to cope with the dominance of Multichoice Nigeria in the area of entertainment

South African businesses are flying high in Nigeria but at a huge cost to local counterparts.

Business has never been so good for South Africa's pay-per-view television station Multichoice Nigeria. The company controls about 90 percent of the cable business in the west African nation and in its years of operation in the country have seen huge earnings. It has also paid a hefty amount - more than N3 billon from 1999 to date - in tax to the Nigerian government. Its growing profits have been as a result of the huge demand for some of its programmes, including the English Premiership League (EPL), arguably the world's most exciting football league, which it has exclusive African rights to broadcast. But that exclusivity, at least for Nigeria, is about to end.

No matter. Multichoice is one of the many South African companies that have made tremendous in-road into the Nigerian economy, a country with immense market potential for diverse companies and products. The broadcast company had bought exclusive rights to some choice programmes for Africa, Nigeria inclusive, to the detriment of others, especially Nigerian broadcasting companies in the pay-per-view business. Nigeria, the second biggest economy in sub-Saharan Africa after South Africa, is the largest emerging economy in Africa. It is also South Africa's third largest trading partner on the continent after Zimbabwe and Angola.

Other South African companies that have made good include South African hospitality firm, Protea, which runs the Obudu Ranch in Cross River state. The ranch is Nigeria's first serious attempt at tapping into the global tourism business estimated to be more than $7 billion this year alone. Energy provider, Eskom has an existing agreement with Power Holding Company of Nigeria (PHCN) in which it has 51 percent stake. Also in the energy sector, over 10 South African firms are contracted to collect revenue for PHCN. Many South African firms had battled to take over certain core Nigerian businesses including aviation and telecommunication. South African Airways, however, lost its bid to acquire the defunct Nigeria Airways, the national carrier, while the partnership of Vodacom/Telkom to acquire Nigerian Telecommunications Plc (NITEL) fell through at the last moment.

However, MTN's drive in the telecommunications sector has been particularly profound. With current subscriber base of nine million, the company earned $568 million (N71 billion) in its first full year of trading in Nigeria, declaring a profit after tax of $89.7 million (N11.2 billion). In 2005, MTN Nigeria contributed about 30 percent to the group's total posting.

Trade figures show that only in 1994 did South Africa export into Nigeria more than what Nigeria exported into South Africa. Nigeria exported goods worth $3.1 million while South Africa exported goods worth $8.1 million into Nigeria. Between 1999 and 2005, trade volume between both countries increased exponentially from $283 million to $1 billion. South Africa's export to Nigeria grew $516 million to $2.9 billion, while Nigeria's export to South Africa rose from $1.2 billion to $5.1 billion, with oil taking the lead.

English Premiership football is one of the leading programmes that Multichoice Nigeria offers its legion of subscribers

On the surface, these numbers do not portend great danger to the Nigerian economy, but when juxtaposed with the increasing rate at which South African businesses/investors are moving into the country, the present imbalance creates the underlying fear that the local economy may end up in the hands of foreign investors. Already many South African companies have taken leading positions in the prominent sectors of the economy. They include engineering/construction, aviation, media, including publishing and advertising, hospitality, and petroleum/gas exploration. Even the food industry is not spared the South African invasion. In contrast, very few notable Nigerian companies operate in South Africa, although some small, insignificant Nigerian firms operate there.

More than 60 South African companies have offices in the country since Nigeria established itself as a good investment haven. And the government is still calling for more direct investments from South Africa. Nigeria accounts for 56 percent of total west African trade with South Africa. Says Nigeria's Solid Minerals Development Minister Leslie Obiora, at the recently concluded South Africa/Nigeria Business Investment Forum in Johannesburg: "These are exciting times for investments in Nigeria. There is no time like the present for investment in Nigeria."

Mindful of the growing imbalance in investment between the two countries, the South African government is intensifying efforts to attract more investment from Nigeria prior to the 2010 FIFA world cup, which it is hosting. Mandisi Mpahlwa, trade and industry minister made this known at the forum. However, it is very unlikely that this would materialise. According to Olusola Obajimi, executive secretary, Nigerian-South African Chamber of Commerce (N-SACC), Nigerian companies' products do not serve a need in South Africa: "You don't sell where there is no need."

"For example, Nigerian banks operating in South Africa are in the country, not because there is any banking need, but are there to make a presence; because they want to be continental or global players in the banking world. They are there, not because there are some South Africans who don't have access to banking services. You just can't ship loads to someplace where there is no need." Obajimi's summation is apt when viewed against South African companies who service Nigerian needs in telecommunications, marketing, banking, media and other sectors. With Nigeria's huge appetite, more South African investors/businesses may still berth in the country.

South Africa leading edge in Nigeria is a result of the country's advancement in skills, technology and management, a development that has placed Nigerian companies at a disadvantage. Multichoice is one of such companies with an edge over its Nigerian counterpart. But with the recent strong stance of the Nigerian Broadcasting Commission (NBC) on the Multichoice-Africa rights problem, Nigerians are generally stirring up the entrepreneurial spirit.

Nigeria's main export to South Africa is petroleum. But there is some activity in the export of natural rubber and metal ore. On the other hand South Africa's exports are more diverse and are concentrated in products and services in the areas of telecommunications, broadcasting, energy, banking, hospitality, industrial chemicals, paper/newsprint products, flat sheets and raw/processed fruits.

Some South African companies in Nigeria
MTN
Eskom
Stanbic
Nu Metro
Game
Steers
South Africa Airways
Shoprite
Checkers
Multichoice
Woolworths
Umgeni Water
Johnnic Business Day
Aberdare
Protea
Critical Rescue International

Nigerian companies in SA

FS African Standard,
Union Bank,
First Bank,
Philips Consulting

Source: Nigerian-South Africa Chamber of Commerce.