Transcorp: Yet another white elephant Project?

By now the Transnational Corporation of Nigeria (Transcorp) is now an household name in the financial and business sectors of Nigeria. The company which was launched at a banquet by no less a personality as: President Olusegun Obasanjo on July 15, 2005, as as its aim, investment in areas like:Oil & Gas, Information Technology, Power,Agriculture and Free Trade Zone, in effect creating a national champion . Most observers would recognise the company as the new owners of Nicon Noga Hilton (since renamed Transcorp Hilton).

Now, this is my grouse with Transcorp, the company keeps shouting chaebol at me. My first reservation against the company, is the number of bankers on the board of the company. It is my belief that the major cardinal sin that can be committed by a capitalist is the inefficient use of capital. Having a disproportionate number of bankers on the board of a company, may reduce the level of due dilligence that their banks conduct, thereby throwing good money at potentially bad investments. This situation can be potentially disastrous, as is evident in Japan where some banks have been threatened to the point of extinction, because of the exposure to Bad debt incurred by companies, on whose boards their senior bankers sat on. That is why I am slightly uncomfortable with the fact that chief executives or board members of some of Nigeria's biggest banks such as Zenith, First bank,Standard Trust Bank and GTBank, sit on the board of Transcorp.

Furthermore, the need to create a National (Homegrown) business champion which is often cited as the motivation for the establishment of Transcorp is suspect. There already exist quite a number of homegrown industrial champions, that have emerged or are in advanced stages of emerging. Oando is an emerging national champion in the field of energy, the company's petroleum products retail network is steadily improving. It has an Exploration and Production subsidiary that has just been awarded Oil blocks. It has a power generating subsidiary, it is expanding across the West african region, running refineries and distribution outlets.

Another case in point, is the Dangote Group which has proven itself in the area of manufacturing, running perhaps the biggest cement project currently in Sub-Saharan Africa(Obajana). Globacom is another national champion in the area of telecommunications, the speed at which it has rolled out sophisticated services, is unmatched even by the south African backed companies. The question I have for the government is,given the few examples listed above is: why not actively promote these companies in the fields in which they have been showing leadership, rather than try to create an artificial Champion that pretends to be a Jack of all trades?. I think that is food for thought.