Sun International’s Pullout ,The Nigeria Gaming Industry And The Rest Of The Economy –
On the 25TH of
August of 2106 we woke up to splashing headlines by several local papers
announcing Sun International’s (SI) pullout from Nigeria. Some noted that it
was the 4th South African company to pullout from the Nigerian market citing
the hostile economic environment as the reason. As expected I was inundated
with inquires from several quarters especially from those eying the Nigeria
gaming market
August of 2106 we woke up to splashing headlines by several local papers
announcing Sun International’s (SI) pullout from Nigeria. Some noted that it
was the 4th South African company to pullout from the Nigerian market citing
the hostile economic environment as the reason. As expected I was inundated
with inquires from several quarters especially from those eying the Nigeria
gaming market
– they were eager to know whether the announcement signaled
a negative outlook on the industry’s prospects. The report was bound to raise
concerns internationally given Sun internationals revered position in both the
gaming and hospitality sector. Truthfully the pullout had nothing to do with
the gaming industry, SI runs one casino in the whole of Nigeria; it is
pertinent to mention that casinos occupy the lowest rung in Nigeria’s budding
gaming industry.
While the reasons
for the pullout were widely reported, SI gave several reasons necessitating the
pullout, …. “The Federal Palace Hotel continues to operate in a difficult
environment with the Nigerian economy facing a number of crises including the
low oil price, Boko Haram and a weakening naira and it has still not recovered
from the significant impact that the Ebola epidemic had on the business’.
for the pullout were widely reported, SI gave several reasons necessitating the
pullout, …. “The Federal Palace Hotel continues to operate in a difficult
environment with the Nigerian economy facing a number of crises including the
low oil price, Boko Haram and a weakening naira and it has still not recovered
from the significant impact that the Ebola epidemic had on the business’.
While Nigeria’s
infrastructural challenges are not new, some of the reasons proffered may sound
reasonable on the face of it but on close inspection are far from compelling;
sensationalising the pullout as part of a South African exodus without any form
of juxtaposition with relevant data portends unjustifiable harm to Nigeria
which desperately requires foreign direct investments to shore up its reserves
as well as jumpstart its economy , my conclusion is that some of our journalist
in a bid to reinforce the current disenchantment with government’s perceived
failure in managing the economy inadvertently acted as economic saboteurs .
infrastructural challenges are not new, some of the reasons proffered may sound
reasonable on the face of it but on close inspection are far from compelling;
sensationalising the pullout as part of a South African exodus without any form
of juxtaposition with relevant data portends unjustifiable harm to Nigeria
which desperately requires foreign direct investments to shore up its reserves
as well as jumpstart its economy , my conclusion is that some of our journalist
in a bid to reinforce the current disenchantment with government’s perceived
failure in managing the economy inadvertently acted as economic saboteurs .
So lets take the
issues one by one.
issues one by one.
While it is
official that Nigeria is in recession, several South African companies are
thriving depending on the industry and several more are investing in our
economy inspite of the perceived hostile economy. As at today there are well
over 100 South Africa companies operating in Nigeria and only a handful are
commercial failures. The list of well-known failures includes Telkom,
Woolworths and Tiger Brands. But they aren’t representative of the wider
experiences of South African companies.
official that Nigeria is in recession, several South African companies are
thriving depending on the industry and several more are investing in our
economy inspite of the perceived hostile economy. As at today there are well
over 100 South Africa companies operating in Nigeria and only a handful are
commercial failures. The list of well-known failures includes Telkom,
Woolworths and Tiger Brands. But they aren’t representative of the wider
experiences of South African companies.
It is in the
nature of doing business that some companies succeed and others fail. There are
many reasons why some have not done as well in Nigeria. These include not
conducting proper due diligence before entering the market, selecting the wrong
acquisition target, inappropriate market strategies, choosing the wrong partner
and mismanaging stakeholder relations or outright competition. For example
Woolworths was competing in the same space with Chinese imported textiles and
it wouldn’t have taken a genius to know that they were bound to fail miserably.
nature of doing business that some companies succeed and others fail. There are
many reasons why some have not done as well in Nigeria. These include not
conducting proper due diligence before entering the market, selecting the wrong
acquisition target, inappropriate market strategies, choosing the wrong partner
and mismanaging stakeholder relations or outright competition. For example
Woolworths was competing in the same space with Chinese imported textiles and
it wouldn’t have taken a genius to know that they were bound to fail miserably.
Ebola for one lasted
only 90 days, in one of Nigeria’s daring showcase of effective governance
,ebola was eradicated with a casualty figure of only 7 people. So that alone
couldn’t have been a big factor in the poor room occupancy rate for the hotel
group,even 2 years after Nigeria was declared free of the disease . For one
Federal Palace Hotel (FHP) had out priced its self from the market; Furthermore
intense competition from guesthouses, boutique hotels, bread and breakfasts and
the incursion of market disrupters like air bnb left the group vulnerable and
unattractive.
only 90 days, in one of Nigeria’s daring showcase of effective governance
,ebola was eradicated with a casualty figure of only 7 people. So that alone
couldn’t have been a big factor in the poor room occupancy rate for the hotel
group,even 2 years after Nigeria was declared free of the disease . For one
Federal Palace Hotel (FHP) had out priced its self from the market; Furthermore
intense competition from guesthouses, boutique hotels, bread and breakfasts and
the incursion of market disrupters like air bnb left the group vulnerable and
unattractive.
Another reason
given for the pull out was the menace of Boko Haram (BH). This leaves one
wandering how that directly affected FHP given that there was never a BH attack
in Lagos or any part of the Southern Nigeria, BH attacks have largely remained
in the north eastern region of Nigeria with some isolated attacks in Kano
and Kaduna and this attacks ceased since the new government came into power
early last year.
given for the pull out was the menace of Boko Haram (BH). This leaves one
wandering how that directly affected FHP given that there was never a BH attack
in Lagos or any part of the Southern Nigeria, BH attacks have largely remained
in the north eastern region of Nigeria with some isolated attacks in Kano
and Kaduna and this attacks ceased since the new government came into power
early last year.
Another reason
given elsewhere was the continued retention of the passports of some of SI
staff who are under investigation by EFCC; while I am not privy to the facts
prompting the investigation it is not news that several foreigners operate
locally as if they are above the laws of their host cities (the MTN matter
readily comes to mind) – in a recent chat with a senior management staff of SI,
he readily confessed that multinationals were prone to abusing the laws of
their host countries and SI was not exempted .
given elsewhere was the continued retention of the passports of some of SI
staff who are under investigation by EFCC; while I am not privy to the facts
prompting the investigation it is not news that several foreigners operate
locally as if they are above the laws of their host cities (the MTN matter
readily comes to mind) – in a recent chat with a senior management staff of SI,
he readily confessed that multinationals were prone to abusing the laws of
their host countries and SI was not exempted .
So while
Nigeria’s tough operating environment includes deficient infrastructure,
erratic power supply, foreign exchange shortages, high inflation, currency
volatility, corruption, high capital cost, red tape, high rentals, as
well as excessive and unpredictable regulations we still have lots of South
African companies like MTN, Multi choice still doing good business in Nigeria.
Nigeria’s tough operating environment includes deficient infrastructure,
erratic power supply, foreign exchange shortages, high inflation, currency
volatility, corruption, high capital cost, red tape, high rentals, as
well as excessive and unpredictable regulations we still have lots of South
African companies like MTN, Multi choice still doing good business in Nigeria.
So what could
have prompted this level of sensationalism? My hunch is that SI needed the
media stunts in order to cover for its inability to turn profits for its
shareholders. It is not a new trick, last year me and a few other Nigerians
were aghast when we stumbled on a report by a listed South Africa company who
blamed the whole group’s misfortune on it’s $700,000 investment in a loss
making company in Nigeria in which were all shareholders in and thus familiar
with the facts.
have prompted this level of sensationalism? My hunch is that SI needed the
media stunts in order to cover for its inability to turn profits for its
shareholders. It is not a new trick, last year me and a few other Nigerians
were aghast when we stumbled on a report by a listed South Africa company who
blamed the whole group’s misfortune on it’s $700,000 investment in a loss
making company in Nigeria in which were all shareholders in and thus familiar
with the facts.
Because of our
poor investigative reporting culture, our media houses failed to balance out
the fact that SI ‘s pullout is part of its overall strategy for Africa – it has
all along been divesting from Africa with a focus on Latin America. In 2015
alone it divested by selling majority stake to in the Gaborone Sun in Botswana,
the Kalahari Sands in Namibia, the Lesotho Sun and Maseru Sun as well as the
Royal Swazi and Ezulwini Sun in Swaziland to MNG group. Sun International also
reduced its 100 percent stake in the Royal Livingstone and Zambezi Sun in
Zambia to 50 percent, with MHG holding the balance.
poor investigative reporting culture, our media houses failed to balance out
the fact that SI ‘s pullout is part of its overall strategy for Africa – it has
all along been divesting from Africa with a focus on Latin America. In 2015
alone it divested by selling majority stake to in the Gaborone Sun in Botswana,
the Kalahari Sands in Namibia, the Lesotho Sun and Maseru Sun as well as the
Royal Swazi and Ezulwini Sun in Swaziland to MNG group. Sun International also
reduced its 100 percent stake in the Royal Livingstone and Zambezi Sun in
Zambia to 50 percent, with MHG holding the balance.
The latest
announcement by SI has more to do with its focus on Latin America arising from
its general depressed growth from the African continent than Nigeria’s hostile
economic environment. Graeme Stephens,the group CEO said
announcement by SI has more to do with its focus on Latin America arising from
its general depressed growth from the African continent than Nigeria’s hostile
economic environment. Graeme Stephens,the group CEO said
“In South
Africa, the economic environment remains a serious concern. We do not
anticipate any meaningful growth in gaming revenue until there is a recovery in
the economy and renewed consumer confidence,” .
Africa, the economic environment remains a serious concern. We do not
anticipate any meaningful growth in gaming revenue until there is a recovery in
the economy and renewed consumer confidence,” .
Yahaya
Maikori
Maikori
Solicitor,
Gaming and Gaminfication Consultant, Enterpreneur & Global shaper
Gaming and Gaminfication Consultant, Enterpreneur & Global shaper
Ed’s Note – this article was first published here.