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CaTS highlights the pitfalls of doing business in Nigeria

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Telephone communication expert Computer Assisted Telephony Systems (CaTS), which generates 80% of its income from African countries, has generated R1-million worth of business in Nigeria since opening offices in Lagos in the fourth quarter of last year.

Johan Grobler, MD of CaTS, says the company’s initial drive into Nigeria – the second biggest economy in Africa – had been successful. But he adds that “doing business in the country is not easy”.
“While we are categorised as a small medium business (SMB), the bulk of our revenue is generated from Africa. Due to interest shown from Nigeria, we recently opened offices in that country and have landed contracts worth R1-million. This is certainly great news for us, but many companies looking at this region are arguably unaware of the pitfalls of conducting business here.
“Our focus there is in the telecommunications industry," says Grobler. “One of the obstacles we are facing at the moment is that the Nigerian government wants 40% of Telco contracts to be supplied by local companies.
"This immediately makes entry into the market that much tougher. We are lucky in that we have a hardware partner in that country. We have included this partner, Net Solutions, in our business deals over there – and this enables us to show the government that 40% of the contracts are indeed being handled by a local vendor.
“Unfortunately there is a lot of red tape, and we are still awaiting the green light from the government confirming that our local distributor makes up the 40% component as prescribed – and this is having the affect of delaying payments.
“This is something that companies should take cognisance of,” says Grobler. “The business potential is certainly good – and we are seeing it – but we are in a position where we have to carry a debtor that is now going beyond 120 days. Companies should factor this cash flow implication into any business plan they might have for Nigeria – certainly in the telecommunications market sector.”
The company spent around R1-million to set up the Nigeria offices. “We are taking a medium to long term view of business in that country,” explains Grobler. “But we have already generated enough business to cover our set-up costs.”
He added that the company is also currently shortlisted for a tender that, if successful, will generate revenue of around R30-million.
CaTS is active in countries that include Lesotho, Nigeria, the DRC and Tanzania. It is one of a number of active business partners for IBM’s lotus Foundations Start solution – a version of Lotus specifically aimed at the small and medium enterprise business market.