Boom times as SA does business with Nigeria

2014-06-01 15:00

The economic relationship between Africa’s two largest economies is rapidly evolving as companies set out both ways to exploit what are also the two largest markets on the continent.

Since 2006, the number of Nigerians travelling to South Africa monthly has more than doubled, outpacing traffic from Kenya. Almost all this traffic comes through Joburg’s OR Tambo International Airport?–?mostly on SAA planes.

Trade to Nigeria is doing the same, but there are underlying dynamics that need to be kept in mind.

Even though South Africa has an enormous and growing oil-based trade deficit with Nigeria, the trade in just about everything else keeps swinging South Africa’s way.

The SA-Nigeria Chamber of Commerce was set up in 2000 as a first port of call for local firms moving to Nigeria.

It has the support of the SA consulate general, in effect the business embassy, which is based in the commercial hub of Lagos instead of the capital, Abuja.

Its mission to foster trade is “going extremely well”, according to Osayaba Giwa-Osagie, the chamber’s Lagos-based legal representative. “It’s coming more from South Africa than from Nigeria,” he said.

That’s at least as far as “recorded” trade is concerned.

South African exports to Nigeria have been steadily growing, outpacing trade with Kenya which, with Angola and Nigeria, comprise the bulk of trade with the continent outside the Southern African Customs Union.

In the first quarter of this year, trade with Nigeria overtook Kenya, totalling $2.8?billion (R29.4?billion), while South Africa exported $2?billion in goods to Kenya.

With the exception of the massive oil bill, the trade in the other direction is pitiful for both countries.

To some extent, the unequal trade is inevitable, as Nigeria is a “virgin market” with underdeveloped sectors which has for years focused on refined petroleum exports, said Giwa-Osagie.

The South African market is also “more restrictive”, he said, citing the concentration of large companies, capital controls and BEE requirements.

“It’s not easy to move money in and out of South Africa. The South African government also has an aggressive policy to encourage South African companies to go abroad.”

He said “it’s only a matter of time” until there is a commensurate movement by Nigerian companies into South Africa.

Nigerian business presence in South Africa is also more difficult to spot because it involves many smaller companies that do not show up on its shores with enormous fanfare.

Although visas are required for travel between South Africa and Nigeria, business visas are generally expedited, according to Giwa-Osagie.

Most, but not all, South African companies belong to the chamber. They include MTN, Sasol and MultiChoice.

In SAA’s last financial year, it moved 120?000 people between Joburg and Nigeria, a 7% jump, according to Thobile Duma, the state-owned airline’s country manager for Nigeria.

A lot of that is corporate travel due to South African companies establishing themselves in Nigeria, but 20% to 30% consists of traders who buy stock in Joburg to resell in Nigeria.

In response, SAA has increased the baggage allowance on the route, allowing passengers three pieces of 23kg each in economy class. The norm for international routes is two bags of that weight.

Even with that allowance, the route gets a lot of income from carrying extra baggage. “In Nigeria, the people with platinum loyalty cards are not CEOs, they are the traders in the market,” said Duma.

SAA already uses the biggest Airbus it has for the Lagos-Joburg route, but its cargo division is considering bringing in a freighter plane, she added.

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