By slapping MTN, a South African domiciled company, with a $5.2bn, a South African domiciled company, Nigeria might have demonstrated its zero tolerance to the violation of its laws, but there is more at stake than the government sees,. For a country recently crowned as the continent’s biggest economy, Nigeria might have given would-be investors a reason to remove the country from their list of potential destinations for their capital.
As former US ambassador to Botswana, Joseph Huggins, put it during a conference on foreign investment in the diamond-dependent country, close to a decade ago: “You see…what people forget is that capital is a coward. It does not go where it feels threatened.” He was stressing a point about the correlation between high foreign investment and predictable pro-investment policies and rule of law.
Huggins’ observation is still valid even in this smart technology age, save for a few exceptions to the rule – it is not by default that countries with pro-investment policies like Mauritius continue attracting investment in the financial services sector, while populous countries can’t. Mauritius specifically, has excelled thanks to its tax holiday and the speed at which it helps investors acquire valid documents to start operations.
Capital is spoilt for choice with destinations where it can go. One investor was very lucid in his assessment, during the coffee break of an investment summit in Sandton, Johannesburg: “It’s easy to chase investors than convince them to pour capital in your country.” To foreign investors, perception is reality.
That’s why the resource-rich and populous Nigeria might be undoing the great endeavour it has made to attract foreign investment, if it does not address MTN’s predicament. But that is not to say that MTN should get away with a slap on the wrist or scot-free.