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Globalization and Small/Medium Enterprises:
Any mention of the subject of globalization immediately brings to mind huge multinational corporations like ChevronTexaco, Shell and Microsoft — companies with great amounts of capital capable of investing successfully in almost any viable market
. But it is not only the big multinationals who are into global business. Though the risks may be higher for them, entrepreneurs of small to medium business enterprises (SMEs) have always been part of the global business environment. Many multinationals today grew from such small operations. Success as a global business operator depends less on size than on other factors such as being able to discern and take advantage of available opportunities, building up a thorough understanding of the business and social cultural environment and familiarity with local business rules, regulations and conventions.
Well organized and properly managed developing economies provide fertile ground for SMEs to thrive. In decades past, Asia provided such fertile ground for small industries to grow. Asian economies attracted and continue to attract massive foreign investment which fuelled the remarkable economic growth in places like Hong Kong, Singapore and Malaysia.
Africa and the Case of Nigeria:
Since the start of the 21st century there has been an emphasis on economic reforms in Africa which make regional economies more attractive to foreign investors.
Over the past six years in Nigeria, for instance, the government has pursued a policy of trade liberalization — making the operating environment for businesses less rigid and more friendly to foreign investors; and privatization — allowing private ownership of previously government-owned operations. As a result, many opportunities for global business operators have been created in Nigeria — the second largest economy in the region after South Africa.
Efforts to Change Negative Image:
Because of the negative way the international press portrayed Nigeria beginning from the mid 1980s through the ’90s, foreign investors have been slow to take advantage of opportunities in the country.
Since 1999, however, the government of President Olusegun Obasanjo and individuals and organizations in the Nigerian private sector have worked to erase that negative portrayal of the country. The private sector engages in public (international and domestic) education about Nigeria through workshops, seminars and trade fairs. The government is doing the same as a sponsor of public education programs as well as through its economic policies.
All the effort is yielding results. The World Bank and other international lenders recognize improvements in Nigeria’s macroeconomic performance and say this is an indication of the soundness of government economic policies. The International Monetary Fund (IMF) has agreed to support more economic growth in Nigeria through its willingness to help finance infrastructure development and improvements in the country. The IMF, however, urges fiscal prudence and a sustained program of inflation reduction.
On a visit to Nigeria in December 2004, IMF executive, Anne Krueger, observed that, “Prudent management of [Nigeria’s] significant oil windfall has helped to stabilize the economy and to begin to address the major macroeconomic imbalances. Inflation has begun to fall, the exchange rate is more stable, and there has been significant buildup of reserves.”
Ready For SME Investment:
What all of this means is that Nigeria is ripe for SME investors from everywhere in the world. While Western (European and North American) investors have largely been scared off by past negative media portrayals of the country, Asian entrepreneurs were far less impressed by the negative press and are today the largest group of global SME investors in Nigeria.
The Asians have not been afraid to invest in Nigeria and learn about the nation’s business culture. Many of them (Lebanese and Indian entrepreneurs) have been in Nigeria since the early 1970s and longer. Newer arrivals from China have also invested heavily in the Nigerian economy. Many of the early Asian SMEs in Nigeria started out as traders and retailers of consumer goods. Slowly they have graduated to small scale manufacturing and food packaging for the Nigerian consumer market and for export.
Case Histories:
Rofico: Maker of Milcow – a popular milk brand
The Letraco Group is a Lebanese business concern that has been in Nigeria for 25 years. They operate as importers of consumer goods and supermarket operations in Nigeria.
In 2002 Letraco set up a food packaging company at a new factory in Ikeja, Lagos State. The new company, Rofico packages powdered milk products under the brand name, ‘Milcow’. The powdered milk is manufactured in other countries and imported by Rofico for packaging in Nigeria.
Rofico became quickly successful under the economic policies of the Nigerian government. The company opened 14 warehouses in less than 18 months after startup. Their distribution network reaches 26 of Nigeria’s 36 states as of February 2005. According to Raja Ezzeddine, managing director of Rofico, his company developed the Milcow package in 6 months and the product attained high market penetration with good customer patronage within a few weeks of introduction.
“When we decided to invest in Nigeria, we did a lot feasibility studies… in the food packaging subsector, fast foods and restaurants. We also carried out other market studies and found out that food packaging has good business opportunities here. We did very deep and thorough marketing studies that took us about ten months before we decided on the business we would go into. After this, we used another four to six months to go to the regulatory authorities to register the company, to register the brand and then went to meet machine suppliers and milk suppliers. We had to study the whole process of the packaging industry before we were able to put the company together,” Ezzeddine says.
De-United Foods Industries Limited – Maker of Indomie Noodles:
De-United Foods is owned and operated by Chinese entrepreneurs. They manufacture the internationally popular chinese noodles under the brand name ‘Indomie’. The company has operated its factory in Ota, Ogun State for more than 10 years. A new factory was completed in Port Harcourt, capital of Rivers State in 2004.
In mid 2004 a rumored death after consumption of the Indomie noodles caused a health scare in the country. The Nigerian National Agency for Food and Drug Administration and Control (NAFDAC) closed down the Ota factory as it carried out tests on the noodles. At the time, De-United CEO, Roger Yeo, expressed confidence that his company would be found not responsible for the one death. Eventually, the rumor was found to be false and sales picked up again and has continued to climb.
De-United employs over 700 people in two factories. The company has 300 distributors, 100,000 retailers throughout Nigeria servicing over 38 million consumers in the country.
A Case for African-American Investors
The presence of Asian businessmen in Nigeria is comparatively very high. Only South African businesses are competing as highly. While American corporate presence is very strong, African-American SMEs do not have nearly as strong representation. And yet there is no reason why the African-American presence should not be as strong and even stronger in Nigeria than the others.
There are many reasons why the Asian presence is so strong in Nigeria. One of them is that the Asians have not hesitated to learn about the country through long-term investment, and so they have been able to properly acculturate. South Africans are also strong in this country because of their government’s recognition and championship of a common purpose with Nigeria and the rest of Africa through the New Partnership for African Development (NEPAD).
African-Americans have strong reasons to invest in Nigeria. Their historical affinity with Africa and their government’s current policy for the continent, such as the African Growth Opportunities Act (AGOA), represent an advantage for a strong African-American SME presence in Nigeria.
The Nigerian government looks favorably on partnerships between Nigerian entrepreneurs and foreign investors. Their National Economic Empowerment and Development Strategy or NEEDS is a reform program supported by the US government and the IMF. It focuses on the non-oil sectors of the economy, like agriculture and food processing, and is aimed at alleviating poverty in Nigeria. Companies that can take advantage of these initiatives in developing their business plans are more likely to succeed in Nigeria.
Many areas of investment exist for which African-Americans can benefit and at the same time have the satisfaction of being direct participants in the development of Nigeria and Africa. In the agricultural sector, Nigeria is looking for investors in the processing of produce, like cassava, for the export market. In the energy sector, they are looking for investors in electricity generation. The banking sector is another growth area. Recent changes in policy by the Central Bank of Nigeria requiring each commercial bank to attain N25 billion (US$185 million) capitalization by December 2005 is behind the drive to mergers and increased stock exchange activity. Here also the Asian presence is strong.
Early in December 2004, Malaysian and Singaporean investors, through a deal put together by Price Water House of Hong Kong, agreed to invest US$100 million in Hallmark Bank of Nigeria.
Because of the culture and the way the economy is set up, it ought to be easier for African-American entrepreneurs, with relatively small capitalization, to do business in Nigeria so long as they are willing to learn and adapt to the Nigerian orientation.
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