Ogun FTZ: How Not to Do Business In Nigeria

Posted by African Examiner Articles/Opinion, Featured Contributors/Columnists, Latest Headlines Thursday, September 8th, 2016

By Olu-Bolu Esho

There is no gain repeating the fact that Nigeria is indeed one of the most viable countries to do business in Sub-Saharan Africa. It is also a known fact that the country desires credible foreign investors to explore its great potential, of abundant human and natural resources. What I also know however is that Nigeria and indeed the present government of change under President Muhammadu Buhari will not condone fraud under any guise. This statement of fact is necessary to lay the basis for my intervention on the bundle of lies being peddled in the media by a Chinese businessman, Dr. Jason Han, Managing Director of Zhongfu International Investments (Nig.) FZE, whose management engagement was recently terminated by the Ogun State Government in regard of his involvement with the Ogun Guangdong Free Trade Zone, Igbesa. Based on my findings from Ogun Statement and investors in the Zone, I shall in this write-up attempt to defend the action taken by the State Government to protect the interest of Nigeria and ensure transparent business transactions, while providing factual details to counter the many lies of Mr Han in an attempt to confuse and mislead the Nigerian public and the Federal Government especially President Buhari.

After his first lie that foreign investors at the Zone have threatened to pull out following his disengagement, was roundly debunked by the same investors, Mr Han has now resorted to writing open letters to Mr President, this time appealing to emotion and sentiment, with threat as an addendum. Even though, he admitted that the Ogun State Government acted based on the request of the Chinese Government, he never provided the details that put a question mark on his credibility.

He failed to state that Zhongfu could not provide a single fire station or a mobile fire fighter machine in the zone for the past four years, even when this is mandatory according to NEPZA rules, while claiming to have spent $60m in the Zone. Where did the money go to? They unilaterally increased service charges and imposed different tariffs on investors without consulting the shareholders. This is beside using the name of Ogun State Government and other eminent Nigerians to intimidate foreign investors in the Zone, moving around with sirens and a retinue of heavily armed policemen meant to protect the people in the Zone, taking expensive gifts round to eminent Nigerians for lobby as if that’s what the Nigerian economy requires this critical time.

It is equally appalling that at a time when Nigeria is battling to stabilize its economy, Zhongfu was demanding investors in the Zone to pay charges and tariffs in dollars or Chinese Yuan against our own local currency, thus further putting more pressure on dollar demand in Nigeria. It is equally disturbing that Zhongfu was using the Zone to secure personal international loan. Worse still, they failed to provide other basic amenities such as emergency medical facility/clinic, motor-able access roads leading to the OGFTZ and within it, drainage system within the Zone, office and residential accommodation for government agencies (Customs, Immigration, DSS, Police, NEPZA) within the Zone, all of which are still using the containerized office and accommodation provided by previous managers of the Zone.

It is also worthy of note that Zhongfu promised to make the provision of the above their immediate priority when they were being engaged as managers but such is not the story today. Not one item on the above was ever done, leaving one to wonder where their so called $60 million was invested. They rather persisted in flouting every law and laid down rules including but not limited to: increasing tariffs paid by investors without the input and approval of the JVA (Joint Ventures Agreement) partners, forcing investors to pay tariffs in foreign exchange (US dollars and Chinese Yuan) without the input and approval of the JVA partners, refusing to provide audited accounts for the four years they operated in the OGFTZ in spite of repeated demands by the JVA partners, failing to compensate the indigenes of Igbesa for their land and crops on their farmlands. Also pertinent is the fact that the Zhongfu executives were found of staying away from the country for upward of three months and delegating vital official functions to inexperienced and unqualified Chinese employees.

It’s also worthy of mention here that Dr. Jason Han had worked for Zhongfu in China for over 20 years and was rewarded with shares in the company for his ability to deceive the Joint Venture partners in executing the JVA, hence his present desperation. The recent happenings in the OGFTZ is simply a disagreement between two Chinese business entities and should be resolved by their Embassy without dragging other JVA partners in the mud with them. I can go on and on, on the many sins of the company which culminated in its disengagement by the Nigerian Government.

But let me suspend that for now and set the record straight by stating the following facts held back by Mr Han in his media statements.

By virtue of a Joint Venture Agreement (JVA) executed on June 14, 2007, the Government of Ogun State (OGSG) and Guangdong Xin Guang International China Africa Investment Ltd. (also known as “China Africa”) entered into a public/private partnership (PPP) arrangement wherein OGSG partnered China Africa in establishing a Free Trade Zone within Ogun State for the purpose of improving commercial activities within the State, particularly, activities of developing the Zone into a multi-purpose industrial area. This led to the establishment of Ogun Guangdong Free Trade Zone (also known as “the Zone”) in Igbesa Area of Ogun State. It should be noted that Guangdong Xin Guang International China Africa Investment Ltd. is a corporate body owned by the Government of the Province of Guangdong in the Peoples Republic of China;

By virtue of the Joint Venture, China Africa owned 60% equity in the Zone, and in accordance with the dictates of its equity contribution, China Africa funded the construction of the basic structures, infrastructural development and provision of basic amenities within the Zone.

As a result, on April 3, 2008, Nigeria Export Processing Zones Authority (NEPZA) issued a license in the name of Ogun Guangdong Free Trade Zone certifying same to be under the Nigeria Export Processing Zones Authority Act. China Africa, being the major stakeholder in the Zone, not only built the main structures and provided basic infrastructural development within the Zone but also ensured the proper management and smooth administration of the affairs of the Zone from inception till sometime in 2012 when its appointment as managers of the Zone was wrestled by Ogun State Government. It is important to state here that, that decision was largely due to the dangerous scheming of Mr Han who recruited people to cook lies against China Africa and scare them away.

China Africa’s 60% equity investment in the Zone, however, remained intact and unencumbered as this goes to the ownership of the zone rather than the management. This enabled China Africa to entrust its equity holding and management functions to Zhuhai Zhongfu Industrial Co. Ltd. and signed appropriate agreement in this respect. It is pertinent to note that Zhuhai Zhongfu Industrial Co. Ltd. is a company incorporated under the laws of the Peoples Republic of China and carried on business in the Federal Republic of Nigeria under the name and style of Zhongfu International Investment (Nig.) FZE.

As part of the term of the Entrustment Management Agreement, Zhongfu covenanted then: not to operate illegally; not to harm the interests of China Africa; not to dispose of the major assets of OGFTZ; to operate OGFTZ in accordance with the applicable laws, rules and regulations.

As a result of the agreement with Zhongfu International Investment Nigeria as the new manager/administrator of the Zone, the Ogun state Government equally endorsed the arrangement and then vested the management right in the company; while the 60% equity stake of China Africa in OGFTZ ownership remained intact and unaffected by the displacement of its managerial and administrative role.

It was however shocking, when China Africa discovered that rather than represent its interest in the Zone, Zhongfu presented a fraudulent position to Ogun State Government by concealing the management entrustment agreement with China Africa from Ogun State and presenting itself as being an independent replacement of China Africa, thereby, purporting to enter into a new Joint Venture with Ogun State Government. When the questionable activities of Zhongfu came to the attention of China Africa particularly with regard to embezzlement and failing to render accounts to both China Africa and Ogun State Government, the Government of the Peoples Republic of China, through her Consulate in Nigeria had to intervene in order to protect the symbiotic diplomatic relationship between China and Nigeria.

It was on this basis that the purported Joint Venture of Zhongfu in the Zone was duly terminated by Ogun state Government, a JVA obtained by fraud, including the Zhongfu’s management of the Zone. At this point, it is also necessary to state that by virtue of equity transfer through a public auction, Guangdong New South Group acquired 51% stake (controlling interest) in China Africa. Accordingly, the Guangdong Province State-owned Assets Supervision and Administration Commission duly notified the Chinese Consulate in Nigeria of the transfer of shares from China Africa to New South Group; and by a Diplomatic Note dated March 11, 2016, the Economic and Commercial Section of the Consulate General of the People’s Republic of China notified the Ogun State Government of Guangdong New South Group’s acquisition of the controlling interest in China Africa and the need to formally confer management rights on Guangdong New South Group as the operators/manager of the Zone, being the representative of the controlling shareholder.

This also became necessary due to the several indiscretion of Zhongfu International including financial improprieties and poor management of the Zone. Accordingly, by a letter dated May 27, 2016, Ogun State Government terminated the appointment of Zhongfu as the manager of OGFTZ. Zhongfu was, by this letter, directed to hand over all Ogun Guangdong Free Trade Zone assets in its possession to the Coordinator, Zenith Global Merchant Limited.

It is also very important to state that, contrary to the falsehood being peddled by Mr Han, Zhongfu did not make any investment in the Zone. The physical structures erected therein and the amenities therein were put in place by China Africa. On the contrary, Zhongfu depleted the assets and infrastructure they met on ground and up till date, are yet to account for all revenues made during the period of management.

It is therefore no surprise that Zhongfu was only able to express its investment in vague terms in his open letter to the President. Since the termination of Zhongfu’s management of the Zone, the existing investors have registered several complaints on the inability of Zhongfu to address the needs of the investors within the Zone. In the same vein, due to the fact that most of the investors within the Zone are aware of the managerial pedigree of the New South Group, they have since expressed their support for the new management and readiness to work with the new management under New South Group.

It is also worthy to note that the Government of Guangdong Province in People’s Republic of China is also looking into the activities of Zhongfu within the Zone and in its interface with Ogun State Government with a view to deal with them in accordance with the applicable Chinese law. This is because Guangdong Province still owns 49% equity in China Africa.

There is no doubt that both Guangdong New South Group and the Guangdong Province have the capacity to further develop the Zone to match standard of the most notable Free Trade Zones in the World. They remain committed to the course and have already begun works to achieve this, because they have a clear plan of achieving this and have the support of both the Government of the Peoples Republic of China and the Ogun State Government.

It is therefore surprising that rather than give accounts of how it ran the Zone for years, Zhongfu has been running from pillar to post, trying to discourage investors from coming to do business in Nigeria.

Before embarking on another fruitless campaign of calumny against the Government and people of Nigeria, Mr Han should please give account of the revenue generated from the Zone under his company’s management, explain why he was collecting revenue into his company’s account ( Zhongfu), instead of Ogun Guangdong Free Trade Zone, why he hid the Entrustment management agreement with China-Africa from the Ogun State Government for years until the Chinese Government exposed the deceit.

This is certainly not the way to do business in Nigeria under the Change dispensation!

* BOLU-OLU ESHO is an Abeokuta, Ogun State based journalist.