SA's red tape restricts Nigerian investments

Osayaba Giwa-Osagie says that government restrictions in SA are limiting investment from Nigerians who are keen to put money into the economy. Image: Osayaba Giwa-Osagie

"Regulatory restrictions on equity ownership and moving money in SA were limiting the number of Nigerian companies setting up shop locally," Chamber Director Osayaba Giwa-Osagie said.

Recorded trade traffic by the chamber showed that there were more South African companies considering and opening businesses in Nigeria than Nigerian companies doing the same in SA.

"This could be attributed to Nigeria having more untapped industries, such as agriculture and mining, making it a virgin market," 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 SA.

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

Reserve Bank approval

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

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

A new business can be registered in cities such as Lagos within just 48 hours and there are no restrictions on shareholdings or moving money in or out of the country. Image: Wikipedia

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

According to the chamber, at least 100 South African companies were operating in Nigeria last year.

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

Liberal trade laws in Nigeria

The chamber believed it was just a matter of time before more Nigerian companies invested and did business in SA."We believe that with the re-basing of the economy's gross domestic product, Nigerian companies have a huge appetite for investing outside of Nigeria. SA being a very large market, I believe sooner or later you will see more Nigerian companies coming to SA," Dangote said.

"Nigeria has liberal laws to attract investment from companies around the world," said 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 added.

"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 businesses in the country to have local partners so they get a better understanding of the market and access to government officials.

According to the chamber companies could be incorporated within 48 hours in Nigeria.

Source: Business Day via I-Net Bridge