South African hotel and casino operator Sun International said Monday it is leaving Nigeria because of falling earnings, a longstanding dispute with local partners and an investigation by Nigeria’s Economic and Financial Crime Commission.
The Sun owns Sun City Resort, a luxury resort and casino developed by South African hotel magnate Sol Kerzner about a two hour drive northwest of Johannesburg.
Ten years ago, Sun International bought 49 percent of Nigerian Stock Exchange-listed Tourist Company of Nigeria. This gave Sun part ownership in the prestigious Federal Palace hotel in Victoria Island, Lagos — one of the main hotels used by businessmen traveling to the commercial capital, Africa Property News reported.
Nigeria’s financial crimes commission started an investigation in January into Sun International’s initial investment in Tourist Company of Nigeria.
Some Sun International staff including South African expatriates were detained without charges by Nigeria’s Economic and Financial Crime Commission, Naij.com reported. No charges were filed against employees or the company, but employees have not had their passports returned to them, Sun said in a statement.
Occupancy rates at the Victoria Island hotel fell to 42 percent, Bloomberg reported. Earnings in its Nigerian operations fell 58 percent in the 12 months through June, Sun said in a statement Monday. “The board has decided to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value.”
The company’s earnings in Nigeria are at an all-time low as the economy weakens and a dispute involving local partners goes unresolved, Naij.com reported.
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Exiting Nigeria is likely to be a drawn-out undertaking as Sun seeks to get fair value for its investment, the company said, according to Bloomberg. The hotelier said in May it plans to sell minority interests to reduce debt in properties in Zambia, Botswana and Namibia for $29 million.
Africa’s largest economy until recently, Nigeria is suffering its worst financial crisis in decades as low oil revenues hurt public finances and the value of the naira. A recession is likely, the central bank governor said.
This month, South Africa reclaimed from Nigeria the title of Africa’s biggest economy due to appreciation of the rand and devaluation of the naira.
Nigeria is already in recession and it’s going to last a long time, said Atedo Peterside, an economist and businessman who founded Anap Foundation. Business confidence is low and investors are holding back on investing in Nigeria, he said, according to Naij.com.
Sun International isn’t the first South African company to clash with Nigerian authorities. Telecoms group MTN received a record-breaking multi-billion dollar fine for failing to disconnect users with unregistered SIM cards. MTN settled for a $957 million regulatory fine in Nigeria earlier this year, leading to its first-ever half-year loss, Bloomberg reported.
Other companies that have exited Nigeria or plan to do so include food and clothing retailer Woolworths, Truworths International, and Tiger Brands, which sold its unprofitable Nigerian division to Dangote Industries.
Fourteen airlines have stopped serving Nigeria due to poor ticket sales and the economy, Naij.com reported. These include Spanish-owned Iberia airlines, United Airlines and Air Gambia.
Four major blue-chip Nigerian companies lost money in the first half of 2016 as the economy continues to slide — Nestlé Nigeria Plc, Nigerian Breweries Plc, Dangote Cement Plc and Lafarge Africa. Two months ago, three Nigerian banks fired employees including Skye Bank Plc (175 employees), Ecobank (1,040 employees) and Diamond Bank (200 employees).
Sun International is listed on the Johannesburg Stock Exchange.