Sun International Hotels Ltd., a South African-based resort hotel and casino company has hinted on an imminent exit from Nigeria by selling off its shares in Federal Palace Hotel. The company’s final exit from Africa’s most populous nation is however hinged on the completion of an ‘investigation into a shareholder dispute’ which is been handled by the well-known auditing firm, Deloitte.
In 2006, Sun International Ltd., which is headquartered in South Africa bought a 49 percent stake in Federal Palace Hotel from the Tourist Company of Nigeria (TCN). This saw it become the largest shareholder in the company. However, ten years later it appears there may be some trouble in paradise following a fall in its half-year earnings amidst past cases of harassment from the Economic and Financial Crimes Commission (EFCC).
“Deloitte is expected to complete its investigation of the shareholder dispute shortly. Once the Deloitte investigation has been completed, it will pave the way for Sun International to exit its investment in Nigeria,” Sun International said in a statement.
The company’s operation in Nigeria, Federal Palace Hotel is strategically planted at the heart of Lagos Island and has been the venue of many international and local events in the country. However, the company revealed that continued setbacks in Nigeria, coupled with the ongoing shareholder dispute, have frustrated all attempts to develop and improve the property. This has undoubtedly made the company’s exit from Nigeria inevitable.
It would be recalled that in 2016, the company announced plans to exit Nigeria but claimed it would take two years. Top officials complained that dwindling oil prices, terrorist attacks, weakening of the Naira and a sagging economy culminated in losses for the company.
Troubles started brewing for the resort and casino giant when a shareholder dispute between it and the Ibru family in 2016 led to a probe by Nigeria’s anti-graft agency, EFCC. This year, the company has shut down some of its operations in South Africa and Panama, eyeing expansion in Latin America where casinos enjoy wider patronage.
But in spite of its recent travails, Sun International recorded an income growth of 4 percent, and an increase of 6 percent in EBITDA after the release of its financial report yesterday.
Nigeria is fast losing its grip on foreign investors owing to a regulatory crisis and other administrative issues that have enveloped the business ecosystem. Thus leading to a mass exodus of foreign ventures.
According to Anthony Leeming, CEO, Sun International, “…Nigeria has been volatile for a while. It starts becoming difficult for investors to have confidence.” The heated business environment also pushed Woolworths, a South African-owned retailer out of the country in 2013.
Woolworths complained about the high rental costs, duties and complex supply chain processes which led to its decision to close stores in the country barely two years after its entry. Some months later, Tiger Brands, followed suit in 2015 when it sold its loss-making Nigerian unit to Dangote Industries barely three years after it acquired a 65 percent stake in Dangote Flour Mills.
Sadly, many of the businesses that have been consumed by this seismic wave are South African businesses, raising concerns over the business climate in Nigeria. Although companies like Multichoice, Shoprite and MTN have had their fair share of similar troubles, they have come out strong to continue their operations in the Africa’s largest economy.
Investors are still mulling over doing business in the country amidst political instability, the lingering 2019 elections and rigid regulations. In the middle of all this uncertainty that has beclouded the business sphere, Sun International’s exit might be a pointer to what could happen in the coming days with MTN Group also inundated in a series of controversies in its largest market.