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How Nigeria Can Attract And Keep The Right Kind Of Foreign Direct Investment

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Two of the largest banking and financial services institutions in the world, HSBC and UBS, have recently closed their local representative offices in Nigeria.

There’s also trouble brewing elsewhere in Nigeria’s business world that’s prompted fears about the climate for foreign direct investment in the country. Foreign direct investment is an investment made by a firm or individual in one country into business interests located in another country.

For instance, Nigeria’s government in September accused HSBC of money laundering after an analyst working for the lender said a second term for President Muhammadu Buhari may stall economic recovery  in Africa’s biggest oil producer.

There are also tensions between Nigeria’s central bank and the South African telecom company MTN. In 2015, MTN was fined about $5bn for failing to cut off unregistered SIM cards. This was later reduced to $1.7 billion after a long legal dispute and the intervention of South Africa’s then President Jacob Zuma.


Recently, the central bank has ordered MTN to repatriate $8 billion it said has been taken out of the country illegally.

Analysts are concerned that the Nigerian government’s attitude towards MTN and the two banks may erode the confidence of foreign direct investors. Their fears seem to be well founded: foreign direct investment in Nigeria fell to $1 billion in the first half of 2018, from $1.48 billion in the first half of 2017.

Foreign direct investment is crucial for any economy. So how can Nigeria attract and keep the right kind of investment from global companies? Compromise will be key, both for the government and foreign firms.

Why foreign direct investment?

Foreign direct investment is often preferred to exporting. That’s because while exports merely involve moving goods from one country to another, foreign direct investment actually involves an investor establishing foreign business operations or acquiring foreign business assets.

This often includes establishing ownership or controlling interest in a foreign country (for instance an American business establishing a physical business presence in Nigeria). Many emerging economies like China, Brazil, Vietnam and India have built their growth on FDI flows.

The trick is to attract “quality foreign direct investment” that links foreign investors into the local host country economy. The International Growth Centre, a British-funded research centre that aims to promote sustainable growth in developing countries, characterises “quality” here as contributing to:

  • decent and value-adding jobs and enhancing the skill base of host economies;
  • transfer of technology, knowledge and know-how;
  • boosting competitiveness of domestic firms and enabling their access to markets.

What Nigeria can do

There are a few things Nigeria can do to boost foreign direct investment. For starters, it must play fair. Foreign and domestic businesses should be treated equally. They should be open, transparent and dependable conditions for all kinds of firms.

Another area that needs attention is infrastructure. Businesses need easy access to ports, an adequate and reliable supply of energy and relative certainty that the country will be good to invest in.


Good institutions also promote FDI.

The government should encourage partnerships between foreign and local businesses. Foreign firms might be familiar with global good business practices, but local firms will be more familiar with the indigenous context. This synergy could be very beneficial.

It’s also critical that Nigeria gets its regional governments involved: there are many regions in Nigeria, and these regions all have unique opportunities and challenges. 

Our latest research shows that when the central government of Nigeria ran out of ideas and foreigners wanted to exit the agricultural sector, the regional government of Kwara state stepped in to create a positive business climate based on the cooperation of local banks, community members, and the foreigners themselves culminating in the Shonga farms public-private venture.

This has kept the firm in Nigeria. It’s also brought private investors to the table, bolstering the firm and the local economy.

Nigeria should also tap into its huge diaspora. There are many Nigerians living outside the country who understand its challenges. They should be encouraged to help, or asked to work with their networks to invest in the country.

What foreign firms can do

Foreign firms also have a role to play. They can enhance their success in Nigeria (and elsewhere on the African continent) in several ways.

First, they need a long term strategic plan. This means thinking carefully about what sectors or activities to target. Many foreign firms come to developing countries when things are rosy but leave when conditions change. They don’t properly consider that solving such problems will gain them a competitive advantage in the long run.

If they stay and follow a learning curve, foreign firms will better understand the local business context. They’ll also gain credibility among ordinary people and possibly get more customers and support that way.

In the same vein, foreign businesses should create local solutions that meet ordinary people’s needs. The banks leaving Nigeria have been accused of only catering to the needs of wealthy Nigerians, who are perceived as corrupt. A more diverse portfolio that catered to the needs of ordinary Nigerians would have nullified this claim.

Foreign firms must also work closely with credible and strategic local firms, and be willing to enter into dialogue with the Nigerian government where necessary. This is crucial especially as administrations may change or government policy may evolve. Dialogue could ensure that all parties are on the same page.

Act local, think global

It’s unfortunate that these banking institutions have decided to leave Nigeria. Hopefully both the Nigerian government and other foreign investors can learn from this.

The main takeaway for both foreign investors and governments involved in foreign direct investment is that it would be prudent for all parties to act locally but think globally.

READ MORE | Nigeria: To Invest Or Not To Invest? That Is The Question

READ MORE | Investment Marketplace Coming To Africa

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A Tale Of Two Presidents And One Phone Call To Freedom

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A month before South Africa’s elections, one of the country’s leading political figures exposed a number of his former comrades for corruption with evidence to the Zondo Commission on State Capture. It was box office material, yet just another eventful period in the turbulent life of Robert McBride – guerrilla fighter, policeman and death row prisoner.


Robert McBride has one of those faces full of character that looks like it has endured life as much as lived it. A glance through his tough years of struggle yields a list of reasons why: five years on death row to screams and tears of the condemned; scores of beatings over decades; shooting his way out of hospital; years of the shadowy and violent life of an underground guerrilla fighter.

McBride was born in Wentworth, just outside Durban, in 1963, and grew up amid racist insults and violence. It swiftly politicised him and he was taken into the military wing of the African National Congress where he carried out sabotage with explosives.

Even by the standards of the desperate days of the gun in South Africa, McBride’s political activity is remarkable. In 1986, McBride fought his way out of an intensive care ward in a bizarre rescue of his childhood friend and fellow fighter Gordon Webster. It happened at Edendale Hospital in Durban where Webster lay, with tubes in his body, under police guard.

McBride posed as a doctor, with an AK47 hidden in his white coat; his father, Derrick, was dressed as a priest with a Makarov pistol under his cassock. The Truth and Reconciliation Commission heard, in 1999, that hospital staff cheered them on and held back an armed policeman as the McBrides shot their way out, pushing the wounded Webster to freedom on a trolley.        

Thirty-three-years on, McBride went into battle again for his beliefs, this time with words and documents, against a more insidious and formidable foe than armed police – corruption. He gave evidence before the Zondo Commission, in Johannesburg, springing from his days as head of IPID, the independent police investigators.

He spent more than four days on the stand – longer than most cricket matches last these days. He told of missing police evidence, claims of sinister moves to remove corruption busters and the misappropriation of money, under a cloak of secrecy, by the crime intelligence agencies.    

“People don’t like me because of my anti-corruption stance, their dislike of me I wear as a badge of honour. Those who dislike me for other reasons, it is a free country and you are entitled to your likes and dislikes. I have no problem with you. But wherever I am, I will do my work and will always be against corruption. I understand how corruption affects the ordinary man and means there is so much less to go around,” he says.   

To give a little more context, McBride’s erstwhile job went with unpopularity. The head of IPID is a post that politicians, plus probably more than a few disgruntled policemen, wanted him out of. They ended his contract and he assures me he is going to court to get his job back. His stance may give clues as to why some wanted to see the back of him.

“I have spoken loudly every time I have seen something wrong and raised unpopular issues. Some of the issues we picked up early on was police involvement in cash-in-transit robberies… The looting of police funds, the corruption, the wastage and the leverage, we then began to understand it; the leverage that some policeman have over politicians… Any criminal syndicate that is operating requires police to help them otherwise they will be found out in the normal course of events,” says McBride, the month before the hearing.

“Rogue activity by certain elements in the prosecuting authority, the willingness to prosecute people for non-criminal acts and unwillingness to prosecute when there is a pile of evidence…We will also speak about the abuse of state funds, the abuse of power by the police by negating investigations. Most of our evidence is backed up by court papers, evidence and affidavits,” he says.

Many activists who saw the nasty, ugly, side of the struggle often are the first to come down, hard, when they feel freedoms they fought for are being abused. You could argue McBride, an intelligent thinker, is very much one of them.

You could also argue that McBride has been cut adrift by many former comrades and demonized as the Magoo’s Bar bomber – the 1986 car bomb on the Durban beachfront that killed three and wounded scores. Others, on both sides of the South African struggle, who issued orders, or did worse, are undisturbed and anonymous by their swimming pools. Any regrets? I ask.

“It’s like asking me ‘do I regret living in a free and democratic country’, the answer can’t be yes… We would have preferred that things went differently. If you are in an armed struggle, you are the cause of hurt to other people and as a political activist, as a revolutionary you can defend that and justify it.

“But as a human being, you know that when it concerns other people, it is not the right thing to do to cause the hurt of other people. I have expressed myself as a human being on this, not because I was trying to elicit any sympathy or anything; I have never asked for redemption, I have never asked for forgiveness. Those who know me know what I am about and those who understand the circumstances in the early 1980s when we became active; those who are old enough to remember that was what the circumstances were.”

Those circumstances recede further into the darkness of memory of democratic South Africa every year, yet, in the minds of those who suffered, it stays pin sharp. McBride spent five years on death row, in Pretoria, after being sentenced to the gallows for the Durban bombings.

He reckons the prison hanged more than 300 prisoners in this time. Through the cell door, he heard the condemned screaming and crying as warders dragged the condemned along the passages to their fate. The hanging warders used to bring back the bloody hoods from the gallows and force the next batch of condemned men to wash them.

In May 1990, the sun shone as hope visited death row in Pretoria. The prison management summoned McBride and a group of fellow condemned activists, to the main office at the maximum security prison. Each were given green prison jackets – the garb of special occasions. Warders drove them, in a van, to a distant part of the prison and all feared they were either going to be executed or allowed to escape and shot in the back.

“We were told not to talk and then we were put in this big room with a steel of security around the room and after about 45 minutes the former president (Mandela) walked in and it was the most beautiful sight on earth; the greatest feeling ever and when he walks in, he says: ‘Ah, Robert! How are you!’ As if he knew me forever. It was the most important meeting I had in my life. It was like a God-like environment. He gave us a rundown of negotiations and what can be expected and that we must not worry, we must be patient and sit tight, he knows all of our backgrounds and will do his utmost to get us released and we will never be forgotten.”

It took more than two more years, in the shadow of the noose… until a fateful Friday. September 25, 1992. McBride will never forget the date.

“Round about half past four in the afternoon, I got a call to come to the office, I didn’t know what it was about, and when I came there, the head of the prison said: ‘You have a phone call’. It was my first phone call in prison. On the other end of the line was comrade Cyril Ramaphosa and he says: ‘Hi chief’. I keep quiet and then he says: ‘Monday’. I say: ‘What’s happening Monday chief?’ He keeps quiet, then he says: ‘You are going home!’ There was a bit of a smile you could feel in his voice,” says McBride with a huge smile on his face.

Long after Mandela had completed his long walk to freedom for his country, McBride was to yet again hear the click of a prison key and feel the pain from a warder’s boot.

It was the summer of 1998 and in Maputo, the sea was warm and the prawns were hot. The police in Mozambique picked up McBride, then a high-ranking official in foreign affairs, on alleged gun running charges that appeared to be trumped up to us journalists. We scoured the streets of the capital, for weeks, in search of witnesses.

McBride argued that he was on an undercover operation for the National Intelligence Agency trying to uncover gun runners who were flooding neighbouring South Africa with illegal weapons and fuelling crime; a counter that eventually set him free.

Despite this, McBride spent six months in the capital’s notorious, grim, Machava maximum security prison, where he told me violence was meted out.

I covered that story for many months and came within a split ace of interviewing McBride in his cell. We spent hours plying the Portuguese-speaking warders with beer and the story, through an interpreter, that we were friends visiting from South Africa and we just wanted to say hello. We told them our friend was a big man in South Africa.

“He is a small man now,” smiled back one of the warders icily.

We convinced the guards and as they moved towards the prison doors, keys in hand, our cover was blown. One of the not too bright colleagues from our TV station strolled into the prison waving his press card.

“Hello Chris!” says he. The none-too-pleased prison guards threw us out.

I had to wait more than 20 years for my interview with McBride.

A phrase I always remembered from those many hot, crazy, days in Maputo was a quote we got from the late presidential spokesperson Ronnie Mamoepa when McBride went behind bars yet again.

“He is a tough guy who can look after himself,” said Mamoepa.

The Zondo Commission and scores of corrupt policemen last month found out how tough.  

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‘Difficult To Bring Wholesale Change’

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Ahead of the May elections in South Africa, the country’s Minister of Public Service & Administration, Ayanda Dlodlo, gives her take on simplifying government processes and ensuring public services are available for all on digital platforms.


What do you have on the cards for this year?

It’s a very short year because we are going to elections, but the major plan for me now is finalizing the Public Administration Management Act regulations; so that we can fully implement on that piece of legislation. The second one that is important for me is a fully functional government employee housing scheme. If I can do that by the time we go to elections, I will be very happy. It is not an election thing, it’s just that we all do not know where we are going to be after the elections, so I am pushing hard to ensure that even when I do leave, that is what I would have done and completed as a minister in my time.

What are some of the opportunities that lie within a digitized government?

We have many processes in government that if digitized could be much simpler. The dissemination of information, for instance. If we vigorously work towards fully implementing on our vision of a government portal where citizens can access any information on government that they need on a single portal — that is a digitized government that would have been able to provide people easy access to information. For instance, we launched the Z83 Application Form, the e-recruitment strategy and it’s much cheaper if they use the internet to apply for jobs online. There are quite a few things we are looking at as government to ensure services are brought to our people on digital platforms so that they can access them even easier.

What are some of the developments with the enrolment scheme and how is it affecting employment rates in South Africa?

We have a large youth contingent that is unemployed but, more so, those that have graduated return home to the rural areas with a university qualification but can’t access any employment opportunities… You could be the only one in your family who has ever gone to university… What does that say to people around you?… So we are doing away with the two years’ experience for certain categories of jobs. But also… we will put in place training programs, mentorship and clear programs to monitor and evaluate the growth of that individual and the job they will be occupying.

What are some of the developments regarding the public sector wage bill?

We are seeing an increase in the wage bill because of the agreement that is in place. But we are trying to ensure that we do not go beyond what we had agreed upon with labor. But, what we have done in the process is that we have introduced regulation six of the Public Service Act where we are allowing people, between the ages of 55 and 59, from April 1 to the end of September, to exit the system without incurring any penalties. The reason we are doing this is because we want to bring young people into government but, over and above that, we are trying to deal with the runaway wage bill.

With the upcoming elections, where do you see the public sentiment laying?

I see the African National Congress (ANC) at the very least getting 62%. Because if you go by what your polling says, it changes from week to week and that is dependent on what is topical in that week or on that day.

How important will these elections be in shaping the country’s future?

To me, they will be very important because it is the 25th year of democracy… With all its (the ANC) flaws, with all its inadequacies, we have to change the face of our country.

It is difficult to bring wholesale change, in a 25-year period, to a system that has been in existence for more than 400 years. It will take much longer than that. And as society progresses and goal posts change, it will become difficult. But for any government that is going to come, they will never be able to do what we have done in the last 25 years. 

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Southern African Countries Won’t Manage Disasters Unless They Work Together

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Cyclone Idai, which recently devastated Mozambique, Zimbabwe and Malawi, was one of the worst natural disasters to hit the southern African region. It killed at least a thousand people and caused damages estimated at US$2 billion.

The response from the Southern African Development Community (SADC) member states, civil society, the private sector and individuals in the region points to the need for a collective, regional approach to addressing natural disasters – rather than individual countries working alone.

Idai also showed, once again, just how unprepared SADC is to respond to major natural disasters. It doesn’t seem to have learnt much from earlier ones.

In 2015, floods and torrential rains associated with the tropical storm Chedza, and Cyclone Bansai left about 260 people dead and 360,000 homeless in Madagascar, Malawi, Mozambique and Zimbabwe.

About a year earlier, flash floods killed, displaced and left thousands homeless in Zimbabwe. However, the storm that remains most vivid in many people’s minds is the one that hit Mozambique 19 years ago in 2000, killing 700 people and leaving two million homeless.

Disasters of this kind know no boundaries. That’s why they require thinking beyond the narrow view that individual governments should respond to crises alone.

Responses to Idai

The first regional response to Idai came from the South African National Defence Force and South African disaster relief NGO, Gift of the Givers. These responses followed a request by the Mozambican government.

The United Nations responded with aid operations in the affected countries a few days later. Other SADC countries, NGOs, the private sector and ordinary citizens also donated to the relief efforts.

For its part, however, SADC’s voice was conspicuously absent for at least a week after the devastation. Ordinarily, it should have led relief operations.

It was disconcerting to see UN Secretary General António Guterres appeal for help and outline a plan to respond to the disaster at a Security Council stakeout, while SADC remained missing in action.

SADC has a dedicated Disaster Risk Reduction Unit. It coordinates regional preparedness and responses to trans-boundary disasters and hazards. But, as South Africa’s Foreign Affairs Minister Lindiwe Sisulu said, the regional body was completely unprepared for the disaster.

Pooling resources

Of SADC’s 16-member states only Angola, Botswana, Tanzania, Zambia and South Africa contributed to the relief efforts. This reflects the prevailing preference for a bilateral approach to regional challenges within the SADC.

At the heart of this are narrow nationalistic interests and a preoccupation with sovereignty. The member states are unwilling to surrender control over policies to be administered by the regional body for the collective good.

But, natural disasters like Idai doesn’t respect national boundaries. Their very regional scope requires solutions that integrate domestic actions into a regional governance framework to address them effectively.

When SADC eventually responded, it pledged US$500,000 for relief efforts towards a disaster that cost over US$2 billion in damages to infrastructure alone.

Instead of acting individually, SADC countries need to work together to pool resources and mobilise disaster relief efforts and resources to be more effective. This could be done through the SADC Secretariat.

Funds for immediate humanitarian assistance and the rebuilding of infrastructure should be held in a preexisting, dedicated facility, like a regional disaster risk fund.

This would provide southern Africa with risk financing for climate-related and other disasters. Funds that are often donated by SADC member states, private sector, NGOs, and ordinary citizens for relief efforts can also be pooled and placed in the permanent regional mechanism.

But, there are challenges.

The major challenge to establishing a sub-regional disaster fund probably lies outside SADC, and even Africa. The idea might not sit well with some governments. For example, an attempt to create an Asian Monetary Fund after the 1997/98 Asian financial crisis failed because the US strongly opposed it, and China didn’t support it.

But, SADC could work with global financial institutions to surmount this challenge. The World Bank, for example, already runs disaster risk programmes. SADC could approach it for support and partnership in making the facility a reality.

Cushion against harm

Cyclone Idai has once again shown that natural disasters are capable of wreaking havoc across southern Africa. It’s also shown that affected countries are too poor to respond to the devastation of their infrastructure and the accompanying humanitarian disaster.

It is thus necessary for countries in the region to work together to devise sound contingency plans, including a permanent regional disaster fund, to help cushion them against the effects of natural disasters.

-Chris Changwe Nshimbi; Director & Research Fellow, University of Pretoria

-The Conversation

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