The Parable of SABC And General Electric, By Azu Ishiekwene
Conversation with Azu
What is it about us, Nigerians, that make others think they can take us for granted and get away with it? Two different recent news items got me thinking about how long we would be prepared to put up with the shenanigans of folks who think that we live to walk their dog.
In South Africa where presidential aspirant, Omoyele Sowore had a series of scheduled media engagements, he stirred the hornet’s nest in an interview with e-TV. In answer to a question about South Africa-Nigeria trade, he described Nigeria as “South Africa’s big brother.”
Apparently offended by the down-to-earth, politically inconvenient description, SABC pulled an interview earlier scheduled with Sowore, while e-TV bit its finger in regret that it invited Sowore at all.
Africa and the world are so used to generations of Nigerian leaders carrying their bags, the folks at e-TV and SABC could not believe there’s still one Nigerian left that won’t call a cow by its name for a steak of beef.
That nonsense is also widespread in the corporate world and General Electric (Nigeria) has been in the news lately precisely because the company believes that when you do business in Nigeria, you can make the rules by yourself for yourself and also for third parties.
According to news reports, in 2006, General Electric signed a staff-sourcing service agreement with a Nigerian local content firm, Arco Engineering. The service lasted nine years during which GE was reported to have been deducting 10 per cent withholding tax amounting to nearly $3million (about N1billion).
Arco said it protested that the provisions of the tax law in this particular instance permitted only five percent deduction, not 10. The multinational stood its ground –and Nigeria, being Nigeria, it seemed pretty sure that nothing would happen.
After a back-and-forth that lasted nine years (2006-2015), both parties, according to the reports, agreed last November to ask the Federal Inland Revenue Service to clarify the provisions of the law regarding withholding tax for the service provided.
In a letter signed by the Chairman, Tunde Fowler, FIRS said the applicable withholding tax was five per cent. You would think that should settle the matter. Maybe it would elsewhere. But in an environment where people, especially some foreigners, think there’s nobody they
can’t bribe, a yellow flag is often interpreted as a sign to get the grease ready.
So, in spite of the letter by the FIRS chairman, GE doubled down on its filibuster. Arco, according to one report, ran everywhere it could to get help – from NNPC to its subsidiary NAPIMS and from the Ministry of Labour back to NNPC – but GE simply stood its ground, hoping the matter would go to court to fester for donkey years.
In this corporate epic of an Arco David versus a GE Goliath, attrition by the latter has been the weapon of choice. Why should Arco, an “ordinary Nigerian
company” challenge a global giant?
Finally, in January, GE made what was obviously a time- buying concession. The same company that had agreed last November to abide by the outcome of Arco’s letter
to FIRS on the position of the tax law, said, after FIRS had written, that it was now going to ask PricewaterhouseCoopers (PwC) to follow up with FIRS.
That is, two years after its nine-year contract with Arco was demobilised, and three months after FIRS formally clarified any purported ambiguity in the applicable tax.
A report by Cable on Monday – the second in two weeks – said FIRS has written again, the second time in 10 months, this time to PwC, virtually repeating the same thing it said last November: GE should follow the law, which does not permit more than five per cent WHT in
this case and show proof that it had remitted the deductions made.
But will GE? Will GE follow the law when it believes that in Nigeria, this Nigeria, anything goes? Will it comply with FIRS’s requirement that it should stop its predatory tactics and do even the minimum of providing credit notes for deductions made over nine years?
Or are we to believe that in continuous spite of the FIRS, GE has made itself the alternative warehouse for taxes deducted? If at all it has even made any remittance to FIRS, which law authorises it to remit excess tax without the authority or approval of its client? In the US, its home country, will GE over-deduct or withhold the tax of a US company for nine years and refuse to provide a credit note or remit what is due even after the intervention of
the IRS? There are stories of Chinese companies that deliberately manufacture sub-standard products for the Nigerian market, either because that’s what their Nigerian business partners ask them to do or because they believe they can get away with it. That’s how we end up with adulterated rice and egusi soup on supermarket shelves.
There are Indian and Lebanese companies that cut corners first by learning from their Nigerian partners and later by outclassing them in the business of cutting corners. Who will enforce the rules and uphold the standards? Who will tell them that in tomorrow’s Nigeria, there’s no shortcut to playing by the rules?
In June, the French Labour Minister, Muriel Penicuad, threatened GE with a fine – which could be up to $34million – for failing to keep its pledge of 1,000 jobs in Alstom.
Part of the deal when GE took over Alstom’s power and grid business, was that it would provide 1,000 jobs by the end of this year. By June, however, it had provided less than 400, prompting Penicuad to warn that if GE fails to meet its target, it would pay up to 50,000 euros for every job it fails to provide.
If GE fails to meet its target, it knows what to expect by December. It won’t be asking PwC or any of its consultants in Paris for help, because French law will take its course.
Does anyone remember what GE promised to do at Tinapa, the Calabar Free Trade Zone, five years ago? In June 2013, Vanguard published a report that GE intended to invest $1billion in Nigeria.
The company reportedly said that as a first step towards making Tinapa West Africa’s engineering hub, it would invest $250 million and former President Namadi Sambo
would headline the ground-breaking ceremony.
The plant was supposed to “manufacture generator turbines for power plants, coaches for trains, engines for aircraft as well as hospital equipment, among others,” the sort of parts and accessories that would put our railway on stilts. And jobs? Of course. “About 300 Nigerian professional engineers and technicians would be employed in the factory, with provisions for the training of young Nigerians through the company’s technology transfer programme.”
So, what has happened to the promise of that engineering hub and the promise of hundreds of jobs made five years ago? Nigeria being Nigeria and not France, GE, has built not an engineering hub yet, but certainly a hub of empty promises.
Incidentally, we were told last week that the same GE backed out of working with the Nigerian government to fix the Tin Can Island Port and the Nigerian government is not courageous enough to tell the public what really happened.
With its global footprint in power and engineering of over 125 years, GE could not have achieved its preeminent status by playing fast-and-loose. But like most companies out for profit, especially multinationals, GE will not restrain its predatory instincts wherever it can
get away with exploiting the system to its advantage.
The storm of profit will not spare the fragile roots of struggling enterprises if the local house owners/governments simply fold their hands and watch. It’s up to us to draw the line and say, “Enough!”.
Whether it’s in Johannesburg where Sowore had a running battle with SABC or in Lagos where Arco is getting a raw deal at the hands of GE, folks out there are so used to taking Nigeria for granted, they cannot bear the prospects of dealing with a different country.
At some point, we’ll have to say, “Enough!”
Ishiekwene is the Managing Director/Editor-In-Chief
of The Interview and member of the board of the Global