Nigerian LEX Africa member comments on Nigerian investment in South Africa – June 2014

Nigerian companies have a “huge appetite” for investing outside the country, says the Nigeria-South Africa Chamber of Commerce.

But regulatory restrictions on equity ownership and moving money in South Africa were limiting the number of Nigerian companies setting up shop locally, chamber director Osayaba Giwa-Osagie said last week.

Recorded trade traffic by the chamber showed that there were more South African companies considering and setting up shop in Nigeria than Nigerian companies doing similarly in South Africa.

This could also be attributed to Nigeria having more untapped industries, such as agriculture and mining, making it a “virgin market“, Mr Giwa-Osagie said in an interview in Lagos.

But the restrictions of black economic empowerment (BEE) laws on the percentage of equity that should be in South African hands were limiting Nigerian investments in South Africa.

The difficulty of moving money in and out of South Africa was also a hindrance for investors.

According to exchange control law, companies are required to seek approval from the Reserve Bank to move money in and out of South Africa.

Last year, Nigerian billionaire businessman Aliko Dangote criticised South Africa’s BEE laws, calling them an obstacle to investment from other African states and discouraging of intra-continental trade.

In an interview with Business Day on the sidelines of the South Africa-Nigeria Business Forum, Mr Dangote said South Africa needed to review its BEE laws and policies to attract more investment from other African states and to encourage them to take part in South Africa’s economy.

At least 100 South African companies were operating in Nigeria last year, said the chamber.

These included MTN, MultiChoice, Sasol, Unilever, Mr Price and Old Mutual.

The chamber believed it was just a matter of time before more Nigerian companies invested and did business in South Africa.

“We believe that with the rebasing of the economy’s gross domestic product, Nigerian companies have a huge appetite for investing outside of Nigeria. South Africa being a very large market, I believe sooner or later you will see more Nigerian companies coming to South Africa.”

Nigeria had “liberal” laws to attract investment from companies around the world, said Mr Giwa-Osagie

Apart from restrictions such as having a local partner in the oil and gas industry in Nigeria, the country’s policies on ownership were liberal, which made it an attractive investment destination for South African companies, he said.

In most industries, foreign shareholders were allowed to hold 100% of the equity of the company and there was no legal requirement to have Nigerian directors and shareholders, he said.

However, the chamber advised companies starting business in the country to have local partners for better understanding of the market and access to government officials.

Companies could be incorporated within 48 hours in Nigeria, according to the chamber.

*This article first appeared on BDLive.