If Transcorp
’s a bona fide business, it would continue to exist long after my Mr. Obasanjo leaves office. There is no doubting the fact that Mr. Obasanjo was heavily involved in the setting up of this corporation as your rightly stated. But let’s face it, this is a company run with public funds (raised on the stock market) and loans. In other words, unlike the Nigerian Telecommunications Limited (NITEL) which it recently acquired a 70% stake in, Transcorp is a profit-driven business.
Obasanjo
’s government appears to know that there is no such thing as absolute market liberalization. In other words, you cannot have foreign companies coming in and buying key stakes in pricy but run-down Nigerian government enterprises like the telecommunication and power industries. And with not a single Nigerian company big and rich enough to make the required investments, they decided to create one.
Mr. Segun Adeniyi
’s statement about Transcop’s share price appreciating by about 500% in less than a year, despite the fact that the company produced nothing is a bit misleading. There are several factors that determine the value of a company’s share price, some of which are intangible. Transcrop recently acquired the Hilton Hotel in Abuja. That alone would have caused its share price to appreciate a bit.
In my opinion, it is better for the Nigerian government to provide subsidies for the creation of profit-driven enterprises, which would in turn be independent and bid to run key sectors of the Nigerian economy than for the government itself to be involved in doing this. Of course, the Nigerian economy must be open to competition and foreign investment but no society ever develops solely on foreign capital.
"Obasanjo
’s government appears to know that there is no such thing as absolute market liberalization. In other words, you cannot have foreign companies coming in and buying key stakes in pricy but run-down Nigerian government enterprises like the telecommunication and power industries. And with not a single Nigerian company big and rich enough to make the required investments, they decided to create one..."
There is every sense in having a mega enterprise 'big and rich' enough to compete favorably in the open market; however, to create one through government fiat is an absurdity. And to pack its management board with strange bed-fellows is an ingredient for failure. The excerpted statement above brings to fore a major fault-line in the creation of TransCorp.
TransCorp is one example of the command economy mentality of the Obasanjo administration. (The recapitalization of the commercial banks is another one). Yes, the economic indices will look good on paper; the reality is that these measures have little or no impact on the life of an average Nigerian who continues to sink deeper in poverty.
There is enough indigenous capital to acquire the majority of the publicly-run enterprises being privatized by the administration. Somewhat, despite the acclaimed brilliance of the Obasanjo's economic team, it hasn't been able to mobilize this capital- of course the easier way out is to resort to the use of government fiat and create one! What has happened to the spirit of free enterprise? Why limit opportunities to a group of few selected cronies?
The provision of incentives and subsidies to businesses are necessary as you mentioned Chippla, but I'm afraid these would amount to little if there is not a comparable and visible upgrade in our national infrastructure.
I would rather have TransCorp invest in tangible projects that'll augment and strengthen our infrastructural base; investing in hotels and cheap beat-up public utility companies isn't the mettle successful mega businesses are known for worldwide. Thanks for your comment Chippla.
“I would rather have TransCorp invest in tangible projects that'll augment and strengthen our infrastructural base; investing in hotels and cheap beat-up public utility companies isn't the mettle successful mega businesses are known for worldwide.”
What sort of tangible projects are you referring to? Could you give a few examples if you don
’t mind? TransCorp is a business largely built on funds acquired from local investors. Investors are primarily concerned about seeing good returns on their investments.
By tangible projects I largely meant heavy industry such manufacturing and construction and not service industry.
TransCorp is a business largely built on funds acquired from local investors: Just because the company is funded by "local investors" (majority of whom belong to the Obasanjo-Aso rock caucus) doesn't mean its stocks can not be manipulated.
I guess like any business, TransCorp
’s investment decisions are based on available market data and projections. Few companies would dare go into manufacturing in Nigeria today, given the prohibitively high-cost of doing so. Does it then surprise one that the best performers on the Nigerian Stock Exchange belong to the service industry (with the exception of breweries)?
For manufacturing to work on a large scale in Nigeria, there needs to be deep government intervention in the provision of infrastructure, subsidies, tax breaks and tariffs reduction. Any product manufactured in Nigeria today must be gauged against the same product being made in China or other Asian countries (we live in a very flat world). Automobiles are currently being manufactured in Nigeria but the cheapest go for about N 2,000,000 ($ 15,000). At this rate, most Nigerians would never own cars. Even second hand automobiles are quite expensive.
The Chinese hope to enter the automobile market a few years from now, and if they are able to bring the price down to $4000 - $5000, automobile plants in Nigeria might be forced to close down. It is the same Chinese who caused most Nigerian textile industries to fold up within the past six years
—the Nigerian industries simply could not compete because of their higher production cost.
Manufacturing requires technology and it isn
’t just good enough to set up manufacturing outfits without research and development. That is why the importation of machinery for producing goods wouldn’t necessarily solve the dearth of the manufacturing industry in present-day Nigeria, not when the Chinese are able to improve on such machinery in half a year—cutting down on the cost of production and flooding the market with cheap goods.
For manufacturing to work in a developing nation like Nigeria, preference must be given to science and technology education. Chinese society didn
’t start learning the sciences yesterday. It has a science tradition, which dates back to hundreds of years. The Europeans have a half millennium duration of such delving into the sciences. Nigeria only started a few decades ago, and has not made that much progress.
There
’s nothing stopping anyone with money from investing in TransCorp. Describing all its core investors as belonging to the Aso Rock caucus is a bit unfair from my point of view. They are business people brought together for the purpose of creating a conglomerate from scratch.Whether or not it would work, no one knows. But then a business is about taking risks. And buying shares on the stock market is like gambling, with a bit of rationality.
The investments that will bring good ROI in Nigeria includes; "rule of law" and "people benefit projects". Everything else is a great cost. We may brand Nigeria until we have spent all our $30B in reserves and will still be a banana republic. "Investors are primarily concerned about seeing good returns on their investments" is true but the social side of this system will turn Nigeria into huge Somalia.
As you excellently made your points Chipppla, you also indirectly strenghtened my argument! It appears the core competency of TransCorp is money making, and at the moment its main focus (at the moment) is to do just that.
Of course, "they (TransCorp directors) are business people brought together for the purpose of creating a conglomerate from scratch", the question is: Is there more substance to this conglomerate beyond its primary duty of money-making?
I strongly believe that there is a social side to doing business just as Beauty stated. I also believe that if the main purpose of creating TransCorp is to make money for its investors (again the core investors are Obasanjo-Aso rock apologists) then the existence of the company is a collosal rape of justice and fair play.
I want to believe there is a nation-building undertone to the inauguration of TransCorp- and that is-or maybe- why it has been granted all sorts of waivers and incentives to engage in oil and power sectors, agriculture, and manufacturing. Maybe by the time TransCorp finished moping up all the moribund public utilities and companies currently up for grabs it will shift its attention to the aforementioned and other projects that will truly reveal if there is anything in its mission / vision statements that speak to nation-building and corporate social responsibility.
As long as the Nigeria lacks the necessary infrastruture needed to quicken investments in the manufacturing and the sector sector, the nation-building agenda of TransCorp (if there's any) will remain largely unfulfilled, and the company will remain relatively impotent and lightweight- limiting its investment to the safer realms of the service industry and real estate development. But as long as TransCorp does well in the stock market, who really cares?
TransCorp was concieved as a vehicle for the creation wealth. The owners may profit, but so will the the masses. I would sooner see these national assets in Nigerian hands, rather than in the hands of foreign corporations. If TransCorp will create jobs, if TransCorp will promote competition, then they must be supported. There are some, driven by idealism, political affiliation, or plain ignorance who criticize unfairly the efforts of transcorp. Where we are today as a nation, many developed nations have been. It may have been easier for the finaciers of TransCorp - given their alleged access to power - to acquire oil blocks or steal directly from the treasury, then deposit the funds in foreign banks away from prying eyes. In the case of TransCorp, at least, the money is working in Nigeria, and the social structure which you refer to will come in time, just like it is in China and Malaysia, and it did in Japan and Singapore. We cannot run, as we are yet to walk. The accusation of cronysm is unsubstantiated and misplaced. There is no major business entity in the world that thrives without goverment patronage or access to power, especially in emerging economies like ours. Afterall, even in a developed economy like England's, corporations are often given massive cash incentives to acquire ailing corporations as was the recent case with Rover automobiles. The formation of TransCorp and the purchase of goverment assets at discounted rates may not be ideal, but it's definitly a step in the right direction, and it has my full support.
Sebastin: I agree totally that our 'national assets' should be in Nigerian hands and there are many ways this can be achieved. If there is going to be a government sponsored conglomerate, why limit it to just one? Why select only apologists and political cronies? I agree with the use of incentives and government patronage, but spread it around so that other people with good ideas and resources can contribute to the Nigerian economy. I'm yet to see how TransCorp will 'promote competition' and 'generate jobs'. If you'll look at economic data of developed countries, the real job providers are the small to mid sized businesses, not mega corporations.
Undoubtedly, SME's provide sustainable employment and serves as the main engine for growth in any economy. This, is not in dispute.
That our leaders - past and present - have failed to implement micro economic policies that promote an enabling environment for SME's to thrive is no news. Given the woefull state of our economy (particularly before 2003), it will take many more years to promote this policy which will largely be driven from the local goverment level. It will requre a pardigm shift, a seventh wave in the way we think and act as a people. There is a cultural re-orientation element to this. There is a lot more involved here than building factories. It will take time and patience.
The case, however, must also be made for large corporations. The Industrial revolution in 80's Great Britain and the United States was driven by a combination of large and small enterprises.
TransCorp is an idea that has come about as a result of the gap that exists between the financial capacities of our local corporations and the opportunities that abound around us.
These opportunities existed long before Obasanjo time as president, but were largely ignored - perhaps due to the absolute zero forsight of past leaders or their failure to recognize opportunities and act in the interest of the people they govern. Rather, most were busy in the oil sector, amasing personal wealth for themselves and their families.
TransCorp will not create monopolies, but through assets like Nitel, could provide competition to establised players like MTN. If they acquire or build refineries, it will be to the benefit of Nigerians. There are hundreds of similar enterprises to be privatized in Nigeria. It is noted the little interest being shown to these assets by prospective bidders.
As TransCorp rises to the challenge with a bids for these failing entities, they should be encouraged and not vilified.
There is a lot involved in taking over large corporations of this kind.. agreements with international lenders, pacts with technical partners.. It takes credibility and sacrifice to pull this through. If no one else can rise to the challenge and TransCorp does and succeeds, they deserve applause, rather than vilification, lest we prove the more cynical amongst us that indeed, we are our own worst enemies.
The individuals that constitute the board of directors of TransCorp are all accomplished men and woman and I have nothing but admiration for them. So this post is not a vilification or slandering of TransCorp, but the process through which the corporation emerged.
If you had read closely my earlier comments, you would see that I support the idea of having credible mega-business entities that can favorably compete internationally and also locally. I have no doubt that TransCorp will do well, as a matter of fact; it has to perform beyond expectation given the privileges it enjoyed from the government!
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