As Nigeria continues to grapple with its worst recession, two pressing concerns revolve around its struggle to diversify – the state of the local manufacturing industry and the level of government’s commitment towards industrialization.
Nigeria is sub-Saharan Africa’s largest economy which boggles my mind when I consider the abject decline in the real GDP, income, employment, manufacturing, and retail sales.
The Nigerian economy is chiefly governed by oil and natural gas. While the oil sector provides almost 30% of the GDP and accounts for 90% of the total export capacity, the manufacturing sector provides around just 4%.
The sector is undergoing industrial collapse. The Manufacturers Association of Nigeria (MAN) reported that 272 companies shut down in 2016, 50 of those were manufacturing companies. Other reports claim that more than 1,500 of the 2,500 registered manufacturing companies folded up while millions of employees have lost their jobs.
At the forefront of this decline is Nigeria’s reliance on oil and the failure to make hay while the sun was shining. This focus on oil derailed Nigeria’s progress to becoming an industrialized nation. The government’s recklessness is to blame for the industrial failure, such as power problems, infrastructural deficit, economic mismanagement, taxation discrepancies, policy uncertainty, weak investor confidence, restriction of foreign capital inflows, affixation to irrational importation, and, notably, the low income of consumers.
As commodity prices plummeted, the manufacturing sector has impressively emerged. Despite challenges, the huge demography and being the largest African market makes Nigeria ripe for investment. The United Nations had projected that Nigeria’s population will rise to 240 million by 2050. Also, Renaissance Capital and Frontier Advisory forecast that the country’s economy will grow to $1 trillion by 2025. These are signals of the potential of industrialization.
All that is needed to harness this potential is the willingness of the government to act. A robust manufacturing sector and a willful program for industrialization are equally crucial for the dream to be realized.
It is, therefore, unsurprising that the present government is jumping on the industrial horse to achieve economic reform that will replace the oil and gas with manufacturing and agriculture.
“My engagements with the organized and informal sectors has been mutually affirmative that we should work harder in partnership and disagree less, grow confidence with greater transparency by government, and accelerate actions rather than words, to build our capacities and secure development,” said Nigeria’s Minister of Industry, Trade and Investment, Okechukwu Enelamah, at the Nigeria &amp; Entrepreneurship Summit &amp; Honors in December.
Since then, however, not much has changed. Private businesses are still hindered by unfavorable laws. To this end, the National Assembly is working on legislative economic reform – with 30 bills, including the Petroleum Industrial Bill, Infrastructure Investment Protection and Regulation Bill, Railway Sector Reform Bill, and Tax and Revenue Law/Bill. If successful, such a revolution would be a shot in the arm for industrialization.
The hopes of entrepreneurs and local manufacturers are also bolstered by the Made in Nigeria campaign, which is receiving encouraging support from top to bottom. President Muhammadu Buhari has reassured Nigerians that his administration is working on enhancing the support of locally made goods as well as improving access to finance for small and medium-sized enterprises across the country.
Despite enduring hardship at the moment, Nigeria can be reassured that greater opportunities lie ahead.

Nigeria Needs Industrialization now

There is a distinct difference between tax evasion and avoidance – the latter is a legal form of arranging one’s financial and other assets in such a way as to reduce one’s tax liability. Though it is a perfectly legal practise it is often not considered moral. Tax evasion is illegal and unethical.
Tax mitigation on the other hand is a more aggressive approach to tax avoidance that falls within a grey area of tax avoidance and tax evasion. Tax experts estimate that, over the past 20 years, tax mitigation schemes have been used to transfer trillions of dollars into tax havens. The leak of the Panama Papers has brought tax mitigation under the spotlight and whether there is a need for tax authorities throughout the world to come together to create legal certainty around the issue.
Around the world, private companies and individuals devise creative ways to reduce their tax liability in a bid to minimize what they think is an excess tax burden. They do this by studying the tax laws of that particular region and finding loopholes to exploit. Thus, tax avoidance is becoming increasingly prevalent in South Africa as more and more individuals move up the income ladder – primarily among the growing black middle class. These individuals are realizing that marginal tax increases come with moving up several income tax brackets, this apparently is giving rise to more tax avoidance schemes.
In many countries, the avoidance of personal income tax is more common among the more affluent individuals who have access to professional services such as tax law practitioners and private bankers.
Is it fair that wealthy people have the ability to circumvent the true cost of their tax liability when the same luxury isn’t available to the working class majority? The so-called rich will argue that it is fair because of the progressive personal income tax system South Africa employs, which has one of the highest income tax rates in the world. Whether or not they are justified in this view is contentious and often depends on one’s income bracket or social class. On the other hand, the progressive tax system had to be addressed due to the levels of income in South Africa being vastly skewed.
One concern, often not raised in the tax debate, is the blatant lack of accountability of the government when it comes to the blatant and intolerable waste of public revenue through pervasive corrupt behavior. I view these actions by government as an indirect contributor to tax avoidance schemes. Subconsciously, many are asking themselves: “Why should I be paying excessively high taxes if government perpetually squanders public funds?” And this is just one of the reasons people employ tax consultants to explore creative ways of reducing their income tax.
Can you blame them? I am not entirely sure. If I was taxed at a marginal tax rate of 41% of my income above the highest personal income threshold, I too would consider the possibility of reducing my tax liability – within the provisions of the law of course.
Going forward, I think that reducing government wastage could have a positive impact on the willingness of the rich to pay their full tax liability without apprehension. You never know, stranger things have happened.

Should Tax Avoidance Be Legal?

Rwanda’s President Paul Kagame has often urged Africa’s business and political leaders to “stop thinking about development as something we do with external resources.”
The current managers of the Nigerian economy will do well to heed this advice. They will spend 2016 struggling to rebalance their economy and its tax system. They must save their nation from the spasms of the Dutch disease.
Nigeria entered 2016 with its lowest external reserve levels in 10 years.
Nigeria’s foreign reserves peaked at $63 billion in September 2008. By January 2016, it had dipped to around $29.3 billion, barely enough to cover four months of imports.
The price of Nigeria’s Bonny Light crude was trading at $34 a barrel as this edition of FORBES AFRICA went to press. It has been dropping since September 2008 after attaining a record high of $147 in July that year. Prices for cocoa and iron ore have also been falling over the last two years.
Economists believe that the full effects of the resource curse may have finally caught up with Africa’s largest economy. For the third time in three decades, Nigeria’s economy is in serious wahala (Nigerian speak for trouble). Dwindling government revenue, foreign exchange pressure, institutionalized corruption and a massive infrastructure deficit confront the nation.
Like many resource-rich, mono-product economies, Nigeria faces the daunting challenge of curbing its appetite according to the size of its wallet. Embedded in Nigeria’s 2016 budget is a ginormous N6 trillion ($30 billion) revenue shortfall. The deficit financing will come from the domestic and international debts markets. But domestic resource-mobilization might be the key to fiscal and monetary efficiency.
Crude oil has defined Nigeria’s political economy for decades. It will continue to play a significant role, alongside commodities and Nigeria’s abundant natural gas reserves. Earnings from non-oil sectors, such as services, agriculture and entertainment, will continue to grow.
As Finance Minister, Kemi Adeosun, began talks with international finance institutions for external loans worth $3.5 billion to augment the 2016 budget, the local media was awash with two news reports – both revealing Nigeria’s scandalous administration of its tax regimes and import earnings under previous governments.
The first expose was a report published by ActionAid, an international NGO, which revealed how Nigeria had forfeited a staggering $3.3 billion in revenues through a three-part tax break granted to three of the world’s biggest oil and gas companies, over a 10-year period. Apparently, and obviously unknown to many Nigerians outside the infamously opaque petroleum sector, the tax breaks for Shell, Total and Eni started in 1999.
In a country where millions live in extreme poverty, the social cost of the tax giveaways is huge. The amount is double Nigeria’s education budget for 2014; and the money could very well have given 70 million young Nigerians access to quality education, rebuild the university system and tackle entrenched problems in the health system, according to ActionAid.
“It is a striking example of how a global race to the bottom on tax is harming resource-rich countries,” the NGO’s report says.
Previous ActionAid research shows that tax breaks cost developing countries at least $138 billion every year.
The second matter was the revocation of all import waivers granted to several “favored” firms and politically-connected entrepreneurs by previous governments between 1999 and 2015. Excise duty revenues from the Nigeria Customs Service for 2016 is consequently expected to be significantly higher than previous years. Finance ministry sources say Nigeria lost N797.8 billion (around $4 billion), between 2011 and May 2014, to import waivers and tax holiday concessions.
Nigeria’s lax tax system is just one of several public sector development issues awaiting resolution by President Muhammadu Buhari’s cabinet. Figures from the Debt Management Office show that in one year, Nigeria’s debt burden grew by N1.31 trillion ($6.57 billion) to N12.6 trillion ($63.2 billion) as at the end of 2015.
Also during the 2015 financial period, the state-owned Nigerian National Petroleum Corporation posted an operating loss of N267 billion ($1.34 billion). Its four refineries, with a combined installed capacity of 445,000bpd, continue to underperform.
Value Added Tax (VAT) and Company Income Tax (CIT) will account for 80% of the Federal Inland Revenue Service’s (FIRS) projected revenue haul in 2016.
Comparatively, Nigeria’s tax revenue performance is 7.4% of GDP compared with 27.4% in South Africa, 18.7% in Malawi and 19.5%, Kenya.

SERIOUS WAHALA AS THE RESOURCE CURSE BITES

It’s a scorching day in Johannesburg when we meet Busisiwe Mdletshe, clad in a chic knee-length dress and black heels. At 35 years old, she has a resume that would take as many pages to list her achievements.
Mdletshe owns a swanky accounting firm in the city and has a corporate profile few can dream of. But it was hardship that made her what she is today.
The eldest of eight children and born to a factory worker father and a mother who worked as a domestic helper in a small village called Engonyameni, south of Durban, in the South African province of KwaZulu-Natal, Mdletshe grew up poor, very poor.
Very early she knew her ticket out of poverty was to stay focused at school.
Encircled by rolling hills, acacia trees, gurgling waterfalls and natural forests, the idyllic landscape of Engonyameni could have made anyone laidback about their dreams.
Not her. Mdletshe today leads her own company, BtmtCapital, which specializes in accounting and tax advisory services. Her focus is to ensure full tax compliance. She inspects the tax impact of investment and retirement decisions and also looks at the tax and foreign exchange effects of offshore investments.
Prior to starting her own company, Mdletshe served as tax specialist and auditor at South African Revenue Services (SARS), where she led a team of investigators.
“Having gained experience from Mercantile Bank and SARS, I realized there was a niche in the market. We needed to provide a service to those who evaded tax, without intention, but [for] lack of understanding [of] compliance,’’ says Mdletshe.
Her most recent achievements include a radio slot with Metro FM and Nongoma FM, where she offers finance and investment tips.
Although Mdletshe is now immersed in the high-powered world of business and living the sophisticated city life, she says she will never forget her roots.
“When I work at my company and earn profit, I get happy, but when I see the foundation bringing change to the youth, I get satisfied,’’ says Mdletshe of  her BusiM Foundation, an initiative she says was inspired by a return visit to her hometown and the schools she attended that pushed her to strive for success.
“In my village, there are a lot of people who would pass matric but won’t pursue their studies further, due to poverty limitations and lack of funding for university. As a result, they end up having babies or get married or attract diseases or get involved in drugs.”
Her own life was far from perfect. Mdletshe’s parents were never married and lived separately.
“I was constantly moving between relatives and that motivated me to remain focused at school.”
After finishing matric, Mdletshe secured a place at university to study accounting, but couldn’t enrol for lack of money.
This was until her stepmother advised her father to secure an early retirement from his factory job and withdraw money from his pension fund to settle her university fees. Her father, stepmother and cousins joined hands to fund Mdletshe’s education. And this despite the fact that there were seven other siblings to feed.
“I was frustrated a lot but that did not demotivate me, I still knew that in order for me to get out of that situation, I needed to make sure I do well and get my degree,” she says.
Mdletshe obtained her bachelor’s degree in accountancy, auditing and taxation from the University of KwaZulu-Natal, and followed it up with a couple of postgraduate degrees.
Going forward, Mdletshe wishes to support the Department of Education to ensure pupils who achieve the targeted pass rates pursue their dreams at the tertiary level.
She aims to host career expos every year where professionals from institutions can offer guidance to pupils. And the first of many initiatives towards her vision began in April 2015, when a number of academic and business stakeholders assembled in Engonyameni in support.
“For me, I saw us breaking poverty in that area,” says Mdletshe.
The foundation has raised up to R40 million ($2.5 million) worth of bursaries through its partnerships and has awarded top achievers in the KwaZulu-Natal region. Mdletshe had the mind to work hard. The millions followed.

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An Account Of Poverty And Profit

It’s been two decades since South Africa became a democratic republic and the issue of gender equality in the workplace continues to surface. We have our Constitution as the supreme law of our land – that is widely acknowledged as one of the most progressive in the world. Enshrined in Section 8 of the Constitution is the right to equality. This provision prescribes that no one can be discriminated against on grounds of race, sex, religion and sexual orientation. However, there is an unfair disparity between the salaries of females and males in South Africa.
According to statistics published by the South African Revenue Services (SARS) in 2013, the average taxable income for females was around R193,908 ($14,543) per annum, while males earned an average of R254,347 ($19,076) per annum. This effectively means that the average female earns around a third less than males. There are, however, a number of plausible reasons: firstly the job market that succeeded the Industrial Revolution was primarily designed for men, men were, and still are to a degree, seen as the providers and women as caregivers.
However, this has progressively changed over the past few decades with gender equality groups, in recent years vehemently stating their dissatisfaction for the slow rate of transformation for women in the workplace. Interestingly, South Africa has funnelled out more female graduates than males in recent times and the pay at which both parties start is often based on the educational level, skills and experience. Thus, on the surface, it appears as though males and females start on a similar pay grade.
Nonetheless, what would be interesting to investigate is why the gap widens over the years. Are males offered better opportunities for career advancement than women purely based on the fact that they are men? Or perhaps are employers wary of the disruption pregnancy might have on labor supply? If the Constitution states that we are all equal, why should the latter even be questioned? After all, women do not get pregnant by themselves. Some sociologists believe that the proverbial ‘work/life’ balance for women may be an illusion, citing that females might have to concede a thriving career for a more family-orientated lifestyle.
A recent survey that was conducted in numerous university campuses across South Africa states that most female graduates’ biggest concern is how they will take care of their families amid ambitions of conquering the corporate world.
Some may wonder why the conversations surrounding the disparity of income between males and females are pertinent. In a South African context it is simply unavoidable: the country’s social structure tells us that more houses are headed by women than men. Thus females earning potential not only impacts their immediate spending potential on the people they care for but could possibly have an adverse impact their ability to take care of themselves in their pension years.
The call from gender equality organizations for the eradication of income disparities between men and women has never been more boisterous. This call includes getting more female participation in management and senior executive positions within organizations. Ironically, the private sector can learn from the government. Our government has taken the lead and should be commended for employing women as cabinet ministers, premiers, MECs, mayors and directors and CEOs in state organizations.
Diversity can be a significant competitive advantage for organizations that implement it correctly. Women are the backbone of our society and the role they play in our family structures is indispensable. Despite the prejudices women have overcome in the ‘free world’, there are biases that are firmly rooted in the workplace and should be addressed. Going forward, our labor legislative framework should consider shared paternity and maternity leave in order to minimize the biases that women encounter for falling pregnant – what I would call the ‘career penalty’. Conversations around the disparity in income of men and women is a decent start, but whether anything will be done about this remains to be seen.

Are Women Really As Equal As Men?

I am currently rereading my investment bible, Security Analysis written by Benjamin Graham and David Dodd. The book is still as relevant as it was in 1933 when it was first written.
What stands out in the book is the need to buy stocks at discounted prices, or those which are undervalued. Such stocks are usually difficult to get these days as investors have more information today than they had in 1933. However, I took a good look at the Nairobi Securities Exchange (NSE) and noted that there is more than meets the eye.
The fact is; we are experiencing a bear run.
This year has been a difficult one at the market. The NSE All Share Index (NASI) began the year at 162.9. By the time of writing, it had dropped to 147.6. This was a reprieve considering that, by August 27, the NASI had fallen to 137.5. To date, the market has shed off 9.39% in one of the longest bear runs.
This is in contrast to the 2014 performance where the NASI closed the year with a 19.9% gain, coming second only to Dar es Salaam on the continent.
There are many reasons why the NSE is shedding value. Firstly, the government introduced an unpopular capital gains tax which worked against the market from day one. The tax has since been abolished.
Secondly, and more importantly, the international investment climate is still recovering from the 2009 recession. Investors are still very jittery and, at the slightest provocation, they move their money to safe havens. Internationally, most investors believe the United States (US) is the safest place for their money and so, at the slightest tension, there will be a capital flight to the US.
This year began with uncertainty around the Greek problem and a subdued Chinese economy. These two factors drove foreign investors to believe that they should be cautious and most of them sold their holdings and took their money to the US. This strengthened the dollar, driving the forex rates of other currencies through the roof, the Kenyan shilling included.
If there is bad news in the market, to the effect that a considerable number of investors are selling, other investors will also sell without knowing why. It has a ripple effect. The international pressures caused only half the paper loss, the other half was due to fear and panic by other investors.
Nevertheless, prices of many counters have gone down. It is naturally a loss to many, but is there a silver lining in this dark cloud?
To understand this, one needs to check the best performing industries of last year. The champions of 2014 were the insurance industry and the agricultural sector. In 2015, the major gainers of 2014 are in the red. Britam has shed off 41.5% since January. CIC Insurance, the best price gainer in the sector in 2014, has shed off 26.04% this year. Pan Africa Insurance suffered the most, having lost 45.42% in the year.
There is no doubt that the insurance industry is expanding in Kenya, with the growing middle class requiring a wide array of insurance services. Furthermore, actions by companies like Britam create an investment appetite as the adjustments herald a growing stock. Yet these companies have lost significant value and present a great opportunity to a long-term investor looking for discounted stock.
But the attraction is not only in insurance. Housing Finance, ARM Cement and Total Kenya are all in the red, presenting opportunities for growth.
The end of the year is approaching and many investors are looking for value investments that will make 2015 worthwhile. If Security Analysis is anything to go by, then there is a real opportunity in the Nairobi bear run.
Tellingly, bear runs present investors with a great opportunity to buy choice stocks at prices much lower than the actual value. So while many are making a flight from the bear, embrace it and give it a bear hug, it might make you rich.

A Bear Hug That Could make you rich

In the last two years, a steady decline in the price of gold has brought the operations of many mining companies in Ghana to an abrupt halt. As a result, job losses and a reduction in royalties and tax revenues have been felt. Ghana is Africa’s biggest gold producer after South Africa, and with the mining sector contributing to 5% of Ghana’s economic output, the downturn in the sector has served a serious blow to the nation’s coffers.
Chinese investors, often depicted as parasitic investors, are keen to tap into this opportunity. The Chinese owner of the Akroma Gold project recently completed the purchase of Viking Mines in Ghana for $10 million. There are other new discoveries taking place and, while the sector might not be buoyant now, requisite preliminary studies should be done to mechanize deposits there.
Despite the tough economic climate, gold mining companies are able to meet their obligations, with Goldfields recently paying a $4.5-million dividend to the Ghanaian government and a total of $25.3 million since 2010. The fiscal framework that governs the mining sector in Ghana is a shining example to mineral-rich countries with a porous system due to a lack of transparency and regulation.
The Chinese have pumped billions into the Ghanaian economy. Mining in Ghana is integral to the development of communities; it brings jobs and economic vibrancy. But, for all the synergistic Sino-African trade partnerships being developed, an ability on the part of the Chinese to disregard the honesty and statutes that govern Ghana, especially in the mining sector, raises concerns over whether these agreements are lopsided.
Also, the Ghanaian government’s clampdown on illegal mining has only been marginally successful. Chinese companies use locals to front their mining activity, thus appearing to be credible operations. The lack of rehabilitation done by these companies also further exacerbates the problem. Many sites are left abandoned with no consideration for the environment.
Many large firms neglect their duties to rehabilitate the areas they have worked in, making them inhabitable. Companies, surveyed between 2009 and 2012, failed dismally to keep in line with the environmental protection agency requirements – a damning indictment of the attitude adopted by many foreign firms.
The inability of most locals to get finance to start their own enterprise ensures that development remains at an artisanal level.
Other areas in West Africa are showing promise though. Both Liberia and Sierra Leone are showing signs of reviving their mining sectors. Sierra Rutile is a company that was able to withstand the pressures brought by the Ebola epidemic. They recently raised $44 million to construct a dry mine at Gangama in Sierra Leone. The funds will be used to expand the existing mine. Rutile is used for the production of metal, specifically titanium. The investment will increase production and will provide more jobs.
Another mining company, Aureus Mining, has also signaled its intent to bring a new mine in Liberia into production. With the relative successes emerging in the region, there is confidence being shown by investors to reignite their interests in the mining sector and with it the hope that the sentiment spreads to other countries across West Africa.
The next step for the region is to engage stakeholders to develop concessions and form strategic partnerships. With industry being the buzzword for Africa to reach its full economic potential, the fact remains that infrastructural challenges are still an obstacle. Poor roads affect the transportation of materials. A lack or railways reduces the amount of goods that can be transported. The lack of power is another thorn in the side. The Economic Community of West African States (Ecowas) must integrate by encouraging free trade between the regional countries. By identifying the above issues, governments can make a concerted effort to tackle them.

Work To Be Done But There Is Hope

It’s hard to determine Sol Kerzner’s net worth due to his complex web of properties, consultancy fees, dividend income, tax havens, and public and private interests. What’s clear is that he’s sitting pretty in retirement.
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His is a story with humble beginnings.
Born in August 1935, in Troyeville, a rough part of Johannesburg, Kerzner was the youngest of four children. A couple of years later, the close family moved to the nearby Bezuidenhout Valley. While in Johannesburg, Kerzner’s parents, who were Lithuanian immigrants, ran a café and he gives credit to his eldest sister for raising him since his parents were busy seven days a week.
Kerzner was not the best student, more of a boxer, preferring sport to books; he is surprised he made it through school without a problem. His father sent him to Damelin College for his last two years of schooling, where there was no sport to distract him.
He went to the University of the Witwatersrand to study accounting, not knowing what else to do. After graduating, he moved to Durban to do his articles at a top firm. His parents had taken up a lease for a 50-room residential hotel in the coastal city. Kerzner convinced his dad to buy another, down the road, that had a liquor license. He would work there at night, while keeping his day job as an accountant. This gave him his first taste of the industry in which he was to make his fortune.
At night, they would change the light bulbs – and the mood – in the dining room, playing some music to create a spot where the revellers and sailors could unwind. It’s a place Kerzner says was far from five-star but definitely interesting.
In 1962, things were going well for Kerzner. He was a junior partner at an auditing firm and was offered a chief financial officer job at a big industrial company. Instead he bought the lease of the Astra Hotel in the backstreets of Durban.
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“I can’t tell you exactly why, I just got the urge to give up the profession [accountancy] and actually get involved in the hotel [business].”
While he was saying his goodbyes, one of his clients, Herald Franckle, asked why he was doing this when his career in auditing was going so well.
“I’m going to build South Africa’s first great hotel,” Kerzner said.
Kerzner had been receiving brochures from holiday destinations like Miami and Hawaii, and looking around Durban he realized South Africa wasn’t in the same league.
“I’ve always had confidence that South Africa should be able to do as well as any other country.”
The Astra Hotel was just a test run to get a feel of things, complete with dinner club and cabaret to draw in a crowd. He ultimately wanted to build in Umhlanga, a few kilometres north of Durban, because he used to take his girlfriends there and thought it was a ‘nice spot’. Trying to get his vision across, and prove he wasn’t crazy, Kerzner drove Franckle to the spot he had in mind and hooked himself an investor.
At the end of 1963, the designs for his big project in Umhlanga were complete and the bulldozers were on site. But Kerzner had never been abroad, so in November he flew to Miami, via New York. After checking in at the hotel, Kerzner asked a cab driver to show him every hotel in Miami Beach. The trip lasted from midday to 2AM the next morning. By lunchtime the following day, he was back on a flight to New York and recalls hearing about John F. Kennedy’s assassination while he was in the elevator. When Americans were weeping, he spent the night in New York looking at hotel lobbies
and restaurants.
He was convinced his designs were as good as what he had seen in the United States. Kerzner recalls articles in the Sunday Times calling him crazy and over capitalized. He was in his twenties and little worried him. His bet paid off and turned out to be exactly what South Africans were waiting for.
In 1964, the 88-room Beverly Hills Hotel, boasting uninterrupted views of the Indian Ocean, became South Africa’s first five-star hotel, with a R1 million price tag at the time.
The Elangeni Hotel in Durban was bigger and attracted a lot more financing since Kerzner now had some credibility. While he was building it, South African Breweries approached him and together they founded one of South Africa’s largest hotel groups, Southern Sun, now Tsogo Sun. Kerzner later founded Sun International.
A casino license was to prove a spur. A concession was up for grabs in Bophuthatswana, an independent homeland of the apartheid regime. Kerzner and his team won the concession with a warning to deliver.
This became Sun City, a renowned resort around 150 kilometers north west of Johannesburg. The four hotels, two Gary Player-designed golf courses, manmade lake, artificial rainforest and entertainment center took about 10 years to complete. When the resort first opened in 1979, the place was so overwhelmed the doors had to be locked. The estimates of 2,000 day visitors were way off with almost 15,000 turning up that first weekend. Kerzner laughs about how he had to come out with a megaphone to turn people away. The 6,000-seater Entertainment Centre opened with Frank Sinatra in 1981, in breach of the cultural boycott imposed on the country.
“He [Sinatra] walked in, he got on stage and he started singing with the orchestra and he stopped after a few bars and said ‘Sol, I’ve played all over the world… I’ve never played in a room with the sound as what you’ve created here, this is the best room I’ve ever worked in.’”
Kerzner sold his stake in Southern Sun in 1983 and a deal to sell out of Sun International was finalized in 1992. He left South Africa for London in 1987 to break into the international market as he felt he had reached the ceiling at home. It was tough because of the negative feeling towards South Africa at the time. Sentiment changed after Nelson Mandela’s release from prison in 1990.
Two months after his release, Mandela’s office called Kerzner to discuss a meeting. It took place at Kerzner’s Johannesburg home and was about his relationship with the then president of Bophuthatswana, Kgosi Lucas Manyane Mangope, and Zulu chief, Mangosuthu Buthelezi. Mandela wanted to create a united South Africa and wanted Kerzner’s help.
When Kerzner asked Mandela about his thoughts about the controversies surrounding Sun City, the then future statesman said he thought it was great that a young man was creating thousands of jobs out in the countryside.
The business was not easy. Kerzner had to face bribery allegations. In the late 80s there was a long investigation into an alleged R2 million bribe to Transkei‘s prime minister, George Matanzima, for exclusive gambling rights.
Kerzner soldiered on to build award-winning international ventures that include Atlantis Paradise Island in the Bahamas, the One &amp; Only Resorts and The Palm in Dubai.
The Bahamas adventure began when Kerzner was approached by an investment bank to see if he was interested in American entertainer Merv Griffin’s bankrupt Paradise Island resort. He bought it in 1994 and launched into a major redevelopment and expansion program – demolishing the entire front and creating a nearly 60-hectare aquarium that allows you to walk under the sea. The resort ran throughout the construction with cheaper rates, scaffolding and all.
Paradise Island became Atlantis when the Governor General’s wife came over for tea one afternoon, heard the plans and said it sounded a lot like the lost city of Atlantis.
The response was great and occupancy high. Michael Jackson wanted to see it for himself. His tour of the water habitat ended in a mob of tourists taking pictures and getting autographs, none of which fazed Jackson or his bodyguard.
In 2002, the One &amp; Only Resorts were launched in tourist destinations. In 2009, the $128-million, six-star and seven-story One &amp; Only in Cape Town’s V&amp;A Waterfront opened six months ahead of schedule.
Located on Dubai’s manmade Palm Jumeirah is The Atlantis Palm Dubai, a $1.5–billion and 1,539-room joint venture between Kerzner International Holdings Limited (KIHL) and Istithmar World, a private equity and venture capital arm of Dubai World Corporation. Home to a seven-hectare waterpark and 65,000 marine animals, it survived a fire in its lobby before its $20-million opening. Being the biggest opening the company has ever had, a lot of the money was committed before the global financial crash, so the show went on. It featured impromptu performances from friends like Stevie Wonder, Michael Jackson and Natalie Cole, as well as fireworks by the same company that lit up the Beijing Olympics.
Istithmar bought out Kerzner’s 50% stake in the resort in 2012 and sold it last year to the Investment Corporation of Dubai (ICD), the emirate’s sovereign wealth fund.
Kerzner historically had no capital and relied on financing and strategy, and as a result his ventures had always been financed conservatively. This policy changed in 2006. His son Howard ‘Butch’ was chief executive officer and told him it was a great time to go private. The markets were great and everyone was doing it. The company was taken private in a reported $4 billion buyout; a $2.6 billion mortgage to finance this came at a most inopportune time.
The global recession led to a decline in leisure travel. The situation in the Bahamas was bad. The group also had to face the threat of competition from Baha Mar, which had found a new financial backer and builder in the Export-Import Bank of China and the China State Construction Engineering Corporation, and was being built less than 10 miles away from Atlantis Paradise Island. Brookfield Asset Management held a small piece of the Kerzner loan, $175 million, and went into debt restructuring talks – converting the debt into equity. Brookfield took ownership of the Atlantis and One &amp; Only Ocean Club in the Bahamas, as well as a 50% stake in the One &amp; Only Palmilla, in Mexico, but KIHL held on to long-term management contracts for
the properties.
In 2006, when Butch died in a helicopter crash in the Dominican Republic, Kerzner took two weeks off to figure out if he would take the helm again. This was in the midst of building phase three of Atlantis. It was work that eventually helped him through that difficult time. It was then that he knew it would never be a family business.
“He was one of the few sons who was able to stand up in terms of talent to a great father, and you don’t see that much in my business,” Donald Trump once told the Los Angeles Times about Butch.
The ICD purchased a significant, yet unspecified, stake in KIHL for an undisclosed amount; Kerzner stepped down as chairman and was replaced by Mohammed Al Shaibani.
There is no question in Kerzner’s mind that there are still some investment opportunities in Africa’s hospitality industry. He believes that Africa has opened up and is a whole new ball game.
Although Kerzner has retired, he’s not ready to sit around and do nothing. He is involved in a joint €790-million bid for Club Med with Andrea Bonomi, a former chairman of Banca Popolare di Milano.
During his career, Kerzner planned to open hotels in Zimbabwe and built Chobe Game Lodge in Botswana. He recalls taking in Elizabeth Taylor and Richard Burton for what was to be a two-day visit. When Kerzner got back to his friends two weeks later he found out that not only had they not left, but had decided to get married on the banks of the Chobe.
A 50-year career has its fair share of mistakes.
“In business, if you’re going to be successful and do things that are a little out of the ordinary, invariably you’re going to make mistakes.”
He just tries to avoid the very big ones and has had too much fun to do much differently. One missed opportunity was turning down an offer to be the first person to get involved in a gambling operation in Macau. Another big mistake was going private.
“It’s not only all about how much money you would have made and what you would have got. It’s about having a little bit of fun, being able to create things.”
The part of the business that excited Kerzner most was creating it all and watching it come to life. He feels that his intricate involvement in the design process is part of the reason he has succeeded.
When you are this enthused by what you do, it’s hard to balance work and family. Kerzner has been married and divorced four times, has four children and 10 grandchildren. He feels blessed to have the family and friends he has and admits that he perhaps got a little too carried away with his work.
After a quashed unauthorized biography, we can only hope for a sanctioned one giving greater insight into this private yet well-known personality.

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