South African investors are now wondering on the opportunity of investing in Nigeria, when the telecommunication group MTN, headquartered in Johannesburg, is under a USD 5.2 billion sanction imposed on its Nigerian subsidiary since mid-October.

Attracted by a very large market and the growth potential offered by the first economy of Africa, most South African managing directors have always considered that, if it is agreed that the expansion of their activities is necessary to only reduce their dependency on the South African market, none of these expansions is really coherent without a Nigerian presence.

For some, the adventure is positive, despite some challenges. This is the case of Stanbic IBTC, the financial group, locale subsidiary of the South African group Standard Bank which has pride of place on the Nigerian banking market. At the end of the third quarter 2015, the group posted for the first 9 months of the year ending 30 September 2015, a net positive benefit in increase of 13.5 billion nairas.

For many others however, it went sour. Siphiso Dabengwa, still recently Managing Director of MTN, will remember his Nigerian adventure for years to come. His inability to get an agreement with the Nigerian telecommunication regulatory authority pushed him to the exit, according to many market observers.

Another managing director succumbed to the same fate, but for different reasons. This is Peter Matlare, who led the food industry group Tiger Brands. The group had to revise downwards the value of its Nigerian assets by approximately ZAR 1 billion, due to the disappointing performances of Dangote Flour Mills, bought two years ago for ZAR 1.6 billion (63% shareholding) and which is taking long in becoming profitable. Investors in Johannesburg are wondering about the quality of the pre-sale analysis.

Telkom, the third telecommunication operator in South Africa, also packed up, after losing close to ZAR 10 billion, following an investment of ZAR 2.8 billion in the company Multilink. In 2004, Vodacom also left Nigeria after signing a 5-year contract for the management of Econet Wireless. Governance issues were mentioned.

Some analysts in Johannesburg reckon that it would be good for South African groups who want to venture on the Nigerian market to join forces with local partners who have a better understanding of the laws, constraints and specific difficulties linked to Nigeria.

Siphiso Dabengwa learned it the hard way: Sometimes in Nigeria, a handshake is only friendly depending on the circumstances. While the regulatory authority was sanctioning its subsidiary with a fine representing almost two years of net income, the same subsidiary was being granted an extension of five years on its licence. Contradictions which are sometimes difficult to grasp for South Africans.