South African hotel and gaming group, Sun International, said on Monday it expects an investigation into a shareholder dispute in Nigeria to be completed shortly, before it would finally exit the country.
The firm, operators of the Federal Palace Hotel, Lagos, had been subjected to probe by the Economic and Financial Crimes Commission (EFCC) over issues surrounding its initial investment in the Tourist Company of Nigeria (TCN).
In 2006, Sun International, which reported a 46 per cent decline in half-year earnings hurt by subdued growth, bought a 49 per cent stake in TCN, making it the largest single shareholder.
Trouble started, however, when that deal was disputed by some of Nigeria’s Ibru family, a fellow shareholder in TCN, which prompted various parties including Sun International and Nigeria’s Securities Exchange Commission (SEC) to appoint consultants Deloitte to investigate.
“The Board has decided to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value. Continued setbacks in Nigeria as well as the ongoing shareholder dispute have frustrated all attempts to develop and improve the property,” Sun International said in 2016.
According to Reuters, the company said the board of the TCN, which owns and operates the 5-star Federal Palace Hotel in Lagos, had been reconstituted, with Nigeria’s SEC appointing two directors.
“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.
“The property is sought after given its location so there are potential buyers but Nigeria has been volatile for a while. It starts becoming difficult for investors to have confidence,” Reuters quoted Sun International Chief Executive Officer, Anthony Leeming, to have said.
Reports on Monday said that consumers in the South Africa market, which contributes 69 per cent to group income, are gambling less as high levels of indebtedness and a recent increase in VAT continue to pressure incomes.
Earlier in March, the company announced the closure of loss-making operations in Sun Nao and the Fish River Sun casino in South Africa, as well as its International VIP Businesses in both South Africa and Panama.
Sun International’s planned exit is coming amid operational challenges faced by another company, MTN. The Nigerian government recently ordered the telecoms group to repatriate $8.1 billion that the Central Bank of Nigeria (CBN) said was illegally sent abroad.
The fine comes two years after MTN, Africa’s biggest telecoms company, agreed to pay more than $1 billion to end a dispute in Nigeria over unregistered SIM cards.
The CBN said MTN repatriated the money based on illegally issued Certificates of Capital Importation (CCIs) with the ‘connivance’ of Standard Chartered Bank, Stanbic IBTC, Citibank and Diamond Bank between 2007 and 2015.
But a defiant telecom firm, in a reaction to the sanctions, said it will vigorously defend its position on the issue, describing the sanction as regrettable.