Sun International, with 49 percent stake in Federal Palace Hotel, says it is leaving Nigeria, owing to “challenging economic conditions and regulatory dispute”.
The hospitality and gaming company, which becomes the fourth major South African company to exit Nigeria in 2016, said the controversial detention of five of its staff by the Economic and Financial Crimes Commission (EFCC) spurred its decision to exit Nigeria.
“Continued setbacks in Nigeria as well as the ongoing shareholder dispute have frustrated all attempts to develop and improve the property,” the hotel said in its 12-month financial statement.
“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.”
It said the exit “is however expected to be a protracted process given the challenges we are facing and to ensure we receive fair value for our investment”.
EBOLA AND FOREX LOSSES
The company said it also recorded “an unrealised foreign exchange loss of $15.2 million or R207 million (R102 million attributed to Sun International) incurred on the group’s Nigerian subsidiary’s US dollar denominated shareholder loans”.
“The Federal Palace continues to operate in a difficult environment with the Nigerian economy facing a number of crises including the 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.
“Occupancy at 41.6% was 6.8% below last year with the average room rate up 3.8%. Despite all efforts to keep costs as low as possible EBITDA declined 58%.
“In addition to the problems that the country faces, there are a number of issues specific to the local Nigerian partners in the Federal Palace and these have further exacerbated the problem.
“After much consideration the Board has determined to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value.”
Truworths announced its exit from Nigeria back in February, due to the same issues, while Clover left about two weeks later.
Tiger Brands also sold off its stake in Nigeria-based Dangote Flour, following challenging economic environment in the second largest economy in Africa.