South African hotel and gaming company, Sun International has decided to hit the exit button on its investment in Tourist Company of Nigeria, owners of Federal Palace Hotels due to harassment from Nigeria’s Economic and Financial Crimes Commission (EFCC) as well as unresolved dispute with the co-investors in Federal Palace Hotels.
“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 statement made available to the Johannesburg Stock Exchange on 17 August.
Narrating its ordeal with the EFCC, the Sun International said “Five of our staff members who were detained by the Economic and Financial Crimes Commission earlier in the year have still not had their passports returned to them despite no charges being laid against the individuals, the company or Sun International.”
“As a result of the current environment and issues facing the company the board has taken the decision to exit our investment in Nigeria. This is however expected to be a protracted process given the challenges we are facing and to ensure we receive fair value for our investment.”
The company’s statement has also highlighted the challenges it is facing operating in the Nigerian economy including; “low oil price, Boko Haram and a weakening Naira and it has still not recovered from the significant impact that the Ebola epidemic had on the business.”
Hotel occupancy rate according to the statement has dropped to 41.6% which was 6.8% below the comparable period for 2015 with the average room rate up 3.8%.
Sun International bought a 49 percent stake of the Nigerian Stock Exchange-listed TCN in 2006, becoming the largest single shareholder. In recent years, Sun has been drawn into a dispute within its fellow shareholder, the Ibru family.
But analysts speaking to Reuters said that the company’s dispute with fellow investors was the major reason for the exit.
“They are in a way stuck in a problematic arrangement on the property and it’s been very difficult for them to create value there. It certainly makes sense for them to reduce exposure to Nigeria,” said Avior Capital Markets analyst De Wet Schutte.
Sun International CEO, Graeme Stephens told Reuters that the exit could take a year or two, and the company was no longer committed to expanding in Africa.
“We’ve been strategically exiting Africa for a couple of years and what was left was Nigeria. We’re not looking anywhere else in Africa,” Stephens told Reuters, adding the company would focus on growing its Latin America business.
