Standard Bank, which has operations in 20 African markets, has identified eight key areas of potential cooperation between South Africa and Nigeria, which the two countries could use to spur faster economic growth and improve the living standards of their citizens.
Africa’s two biggest economies should focus less on their traditional rivalry and instead commit themselves to learning from each other’s successes and failures, says Sola Adegbesan, Head of Global Markets Sales for Africa at Standard Bank Group in Johannesburg. During a trip to Nigeria in July last year South African President Cyril Ramaphosa expressed his desire for relations between the two countries to improve "exponentially".
“Relations at a professional level are generally positive and cordial but at a diplomatic level there are some underlying tensions, which stem from a variety of complex issues that have cropped up over the years,” says Mr Adegbesan. “A lot of it comes down to miscommunication, cultural misunderstanding and competitive rivalry between Sub-Saharan Africa’s two superpowers. However, we firmly believe that there are a number of identifiable areas where South Africa and Nigeria can learn from each other and cooperate for mutually beneficial outcomes.”
Standard Bank has a long-standing presence in Nigeria going back to the 1980s as well as decades of experience in helping South African corporates navigate the complex regulatory regime, cultural nuances and market realities of Africa’s biggest economy. The eight key areas of potential cooperation between South Africa and Nigeria are:
1.Oil and Gas: Nigeria has the largest natural gas reserves in Africa and with over 60 years’ experience in the sector is also the continent’s biggest oil exporter. This knowledge and experience could be of assistance to South Africa which will be looking to leverage its recent offshore natural gas discovered by Total South Africa. While Nigerian commentators often bemoan the apparent over-representation of South African commercial interests in Nigeria – think MTN and Shoprite – the fact of the matter is that Nigerian oil exports have the potential to more than compensate for that.
2.Mining: South Africa has over 100-years of mining industry experience and possesses a wealth of mining expertise and technology. By contrast, Nigeria has no significant mining industry to speak of despite its reserves of iron ore, bitumen, lead, zinc and coal. This could easily change with improved cooperation with South African mining firms.
3.Infrastructure: South Africa has one of the most extensive infrastructure endowments on the African continent and could certainly play a role in assisting Nigeria with remedying its own infrastructure deficit. Nigerians tend to look to the US or the UK for this sort of expertise instead of right here in Africa.
4.Power: Both South Africa and Nigeria are grappling with their own unique power generating challenges, which represent huge untapped economic growth potential for the two countries. Through greater cooperation they could not only attract greater foreign investor interest but also learn from each other’s past and present experiences. South Africa’s very successful renewable energy programme also holds great promise for replication in other African markets.
5.Agriculture: Globally, Nigeria is ranked ninth in available arable land, while South Africa has only half of that with a 19th spot in the rankings. But Nigeria has over 190m people to feed and with its population expected to more than double to 400m by 2050, a way to boost agricultural output is severely needed. Although the country has 79m hectares of arable land, only about 32m hectares are actually cultivated and around 90% of crops rely solely on rainfall. By contrast, South Africa has a sizeable commercial agriculture sector which earns US$10.6bn in export revenue alone. While South African agriculture has its own challenges, there could be collaboration opportunities for the commercial sector in Nigeria, which is very eager to boost its agricultural output.
6.Currency management: South Africa has a free-floating market determined currency while still having foreign exchange controls in place. One of the enduring difficulties of doing business in Nigeria is access to foreign currency. South Africa’s experience and expertise in currency management could help ease some of the Nigerian hesitancy to adopt a more market determined currency regime.
7.Tourism: South Africa has a thriving tourism sector that holds great potential for further growth. While Nigeria’s tourism industry is poorly developed in comparison, the sheer size of the market and the success of Nigeria’s music and movie industry, “Nollywood”, holds great potential for South African hospitality and leisure industries.
8.Cultural Understanding and Perception Management: South African businesses have not always appreciated the degree to which cultural nuances can affect business outcomes in Nigeria, while Nigerian businesses have struggled with the corporate governance requirements in South Africa. This is coupled with negative perceptions of both countries, on both sides, which are far from reality. Nevertheless, there remains great potential for cooperation between the two countries once the prevailing stereotypes, interpretations and assumptions are demystified.
“To quote President Ramaphosa, South Africa and Nigeria are `joined at the hip’ whether they like it or not,” says Mr Adegbesan. “As the two dominant economies in Africa, they’d be far better off learning how to work together rather than how to outdo each other.”Back to all news
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