59. MTN’s Woes In Nigeria
Author: Prof. Adekeye Adebajo
Date: 17 September 2018
Publication: Business Day
Image supplied by: Jorge Salvador via Unsplash
When I first delivered a lecture on relations between South Africa and Nigeria in Lagos in 2005, I was particularly shocked by the venom of the attacks levelled against South African telecommunications giant, Mobile Telephone Networks (MTN), which was being derided as “Money Thieving Networks.” At the time, MTN had barely been in the Nigerian market for four years, but was already the target of much vitriol. Accusations that MTN’s white-dominated managers operated apartheid-style labour practices – including having separate staff amenities – did not help.
Nigerians have often accused South African companies of engaging in predatory, mercantilist behaviour in its 180 million-strong market, without opening up South Africa’s more saturated 57 million market. These perceptions have often become reality. While many Nigerians would be surprised to discover that the popular stout, Guinness, is Irish; MTN has never been able to develop a Nigerian identity.
After 1994, South Africa’s corporate community began to view Nigeria with great interest. It was ironically MTN that blazed the trail, spending $340 million launching its mobile telephone network in Nigeria in 2001. Within three years, MTN Nigeria’s post-tax profit of R2.36 billion had surpassed MTN South Africa’s R2.24 billion profit. By 2007, MTN had 16.5 million Nigerian subsrcibers, representing a staggering 29% of all its African subscribers, and more than its 14.8 million South African subscribers. It was MTN’s success that convinced companies like Shoprite, Protea, and Standard Bank to invest in Nigeria.
Relations between South Africa and Nigeria soured in 2016 following the fine of $3.9 billion (down from an initial $5.2 billion) imposed on MTN by Nigerian regulators for failing to disconnect 5.1 million irregularly registered cell-phone subscribers. The usually mild-mannered Nigerian president, Muhammadu Buhari, angrily and bluntly accused the South African company of having contributed to the deaths of thousands of Nigerian victims of terrorist group, Boko Haram, through its failure to disconnect irregular sim cards. The MTN fine was eventually negotiated down to $1.7 billion, half of which has since been paid. The company lost over $10 billion of its market value following the fine. Headlines in Nigeria screamed for an end to “MTN’s Impunity.”
Tensions erupted again between Tshwane and Abuja when South African vigilantes burned and looted scores of homes and businesses belonging to Nigerians in Gauteng in 2017, alleging that they were drug dens and brothels. Many Nigerians were appalled by these xenophobic acts which resulted in the retaliatory vandalism of MTN’s offices in Abuja. Despite MTN investing $13 billion in Nigeria and paying $5.5 billion in taxes; last month, Nigerian regulators demanded that it repay $8.1 billion in dividends which they claimed had been illegally repatriated from the country between 2007 and 2015. Shortly after, the Nigerian government also demanded that MTN repay what Abuja claimed were $2 billion in decade-old tax arrears. The company denied both accusations, but its share value fell 7.5% to a 10-year low. These spats are occurring at a time when a quarter of MTN’s 240 million subscribers are Nigerian.
Several South African analysts have argued that Abuja is extorting MTN to raise more government revenue, as if Nigeria were some small, cash-strapped banana republic and not Africa’s largest economy. With high oil prices at $77 per barrel, such arguments sound like sophistry. There is a widespread feeling that senior MTN officials regard Nigeria as a lawless country in which they can get away with actions they would never dare attempt in their home country. Nigerian authorities are clearly seeking to give a bloody nose to a company whose leadership has been seen for years as arrogant and aloof. It is clear that MTN has an image problem in Nigeria.
Calm heads must, however, prevail in order to salvage Africa’s most indispensable bilateral relationship. President Cyril Ramaphosa – as chair of MTN between 2002 and 2013 – interacted closely with the Nigerian leadership elite, and must play a more direct role in resolving this dispute. Nigerian regulators must also show more restraint, acknowledge MTN’s pioneering role in opening up its telecommunications sector, and recognise the serious dangers of scaring away foreign investors.
Professor Adekeye Adebajo is the Director of the Institute for Pan-African Thought and Conversation at the University of Johannesburg, and is the author of The Eagle and the Springbok: Essays on Nigeria and South Africa.
*The views expressed in this article are that of the author/s and do not necessarily reflect those of the University of Johannesburg. This article was first published in the Business Day (South Africa), 17 September 2018 and The Guardian (Nigeria), 18 September 2018.