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Just over 20 years ago, MTN completed one of its most ambitious projects in Nigeria when it installed a high-capacity digital microwave transmission backbone in January 2003.
The infrastructure project – a first in Nigeria and spanning over 3 400km – reflected the extraordinary commitment that MTN had made to the continent as part of its push to be the leading telecommunications provider in sub-Saharan Africa.
As a company that originated in Africa’s most industrialised nation, MTN’s investments across Africa injected much-needed momentum in the modernisation of the continent’s telecommunications infrastructure.
While Africa was regarded as a red flag for multinational expansion – the World Bank estimated that of the 35 least business-friendly countries in the world, 27 were in sub-Saharan Africa – the potential for success in a growing continent was regarded as a risk worth taking.
Companies like SABMiller, Tiger Brands, Shoprite and MultiChoice went into continental expeditions that promised much in the way of success but also carried significant risks.
The problem for such companies is that the risks were not limited to operational and strategic risks. Instead, a combination of political chaos occasioned by the occasional regime change introduced a new risk of operating in Africa – exploitation through fines and taxes.
MTN Nigeria fine
In 2015, MTN announced that it was facing a fine of US$5,2 billion (close to R95 billion at the current rate of exchange) from the Nigerian Communications Commission as a penalty for failing to disconnect over five million unregistered SIM cards from its network.
The genesis of the problem seems to have been the historically lax enforcement of rules in Nigeria, which may have led MTN to assuming that it could get away with not implementing the directive.
When the fine was announced, it represented an instance of the regulator showing its muscle and seeking punitive damages against the multinational company.
The quantum of the fine was later reduced to just over $1,6 billion (just over R29 billion in today’s terms) on the back of spirited negotiations by Phuthuma Nhleko who had been forced to replace Sifiso Dabengwa as CEO.
Less than three years later, the Nigerian Attorney-General hit MTN with a claim for $2 billion (R36,5 billion) in unpaid taxes. This was eventually dropped after 16 months of confrontations.
For most companies, these incidents of conflict would be enough to justify an exit from the country.
Cost of doing business in Africa
Given the significant investments made in the country and the lucrative nature of its customer base, MTN’s call to negotiate and remain in the country reflected the delicate balance between risk and pragmatism that many South African companies have concluded is the cost of doing business in the continent.
Unfortunately for MTN, these events seem to have created the impression that once it is invested in a country, it is an easy target for windfall taxes and fines. – Moneyweb
Online Reporter