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Verses From Edith






Wednesday, October 29, 2014

What will Dangote say if South Africa squeezes the business environment against Sephaku Cement?
It made very interesting news when it was announced that Nigeria’s Dangote Group was moving his sprawling investment machine into the South African market. For Nigerians, this was a huge announcement of how strong companies from this market can play in the global business environment. It presented the hope that in the near future, the very unfair trade and investment balance between Nigeria and South Africa would be addressed.

This is for very good reasons. In Nigeria, South African companies are doing great businesses, flying their country’s flag and boosting their economy from monies made from the Nigerian market. MTN, the telecom company that controls over 80 percent of the Nigerian market is South African. Last year alone, as earnings from other countries flagged, huge profits from Nigeria bolstered the books for the brand and enabled it stay atop as one of the most profitable companies on the continent. In fact, MTN joined the Forbes list of biggest companies in the world in the strength of its successes in the Nigerian market.

There are many other examples. Mulltichoice, the pay TV company is also South Africa  and has been a virtual monopoly in the Nigerian market, making frighteningly huge profits from its businesses here. Shoprite, South Africa’s budget supermarket chain is the biggest thing to happen in Nigeria’s shopping space. They are spreading everywhere and making more money in Nigeria in one year than they have ever made since their existence.

The list is endless and Nigerians have often worried that the economy would one day be totally at the mercy of South Africans. Hopes that Nigerian banks, which began massive continental expansion in the wake of the banking consolidation that Charles Soludo inspired in 2005, would also move into South Africa would not materialize. They were all intimidated by the sheers size of South African banks like Standard Bank, ABSA and so on.

It made very cheering news when on October 15, 2010, it was announced that a Nigerian company in the name of Dangote Cement was moving into the South African market. The investment, worth a staggering N11 billion ($71million) gave the Nigerian company 64 percent share of Sephaku and places them in pole position to compete fairly in the South African built industry.

Dangote’s Sephaku Cement range was tested and approved by the South African National Regulator for Compulsory Specifications, enabling the company to begin producing for the market. To-date it has secured significant sales volumes and its cement brand has been available at retail outlets in key South African cities like Gauteng, Limpopo and Mpumalanga since January 2014.

 It is interesting to note here that the regulatory authorities in South Africa did not ask Dangote to make the 42.5mpa grade for the South African market. Matter of fact, Dangote got approval for a “range” of cement grade, meaning that builders have their choices to make, depending on the type of construction they are undertaking. Those who are building homes would have the option of going for the regular 32.5mpa or the 42.5mpa. Those involved in construction of bridges face the same option.

What options would Dangote have faced if in the middle of their investment in 32.5mpa production line, South African regulators come out to tell him that the country have reviewed their grading system and have made the 32.5 grade unacceptable.

South Africa will not do that because they understand the values of each cement grade and builders in the country would also understand what cement to use in what kinds of buildings at what mix quantity.

It is therefore against any known civilized standards for the same company that is benefiting from the fair business codes and practices in other countries to come act in ways that suggest it wants to unfairly squeeze competition in its country of origin. Today, Dangote plays in a number of African countries and expects level playing fields as a business and as a foreign investor. If the governments of those countries in dubious connivance with the biggest indigenous player change the rules of the business game in the middle of huge investments, would Dangote be able to play?

Sephaku is a great export by Nigeria and should represent a landmark in the quest of Nigeria to fly its flag in the continent’s cross-border business and investments ecosystem. But if Sephaku becomes a reminder of double standards and unfair business practices, Nigeria as a nation will be the ultimate loser.

The Standards Organisation of Nigeria (SON) must wake up in this regard. They must be compelled to tell Nigerians the true reasons they are insisting on banning the 32.5mpa grade of cement. The mischievous narrative about building collapse being directly connected to the 32.5mpa cement grade is unintelligent and smacks of ignorance on the part of an agency mandated to institute, preach and enforce standards in cement as in other products manufactured, sold and marketed in Nigeria.


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