French Police Seize Nigerian Jet for Chinese Company: the CARI Connection

SAIS students with Zhongfu in Nigeria

A private Chinese company is behind the French seizure of Nigeria’s presidential jet. What’s that about?

Over the past few days the internet has been buzzing about Zhongfu Corporation’s successful arbitration action against the Nigeria government for Ogun State’s wrongful seizure of Zhongfu’s joint venture with the Ogun State Government.

Bailiffs in London, New York and Paris have been seeking Nigerian overseas assets to impound as they enforce an arbitration award. I’d often wondered what happened to John Xue and Jason Han, the two dynamic investors leading Zhongfu Corporation. They had a CARI connection.

The CARI Practicum with Zhongfu

I happen to read your letter dated June 24 addressed to Colleagues about your Practicum Class. I wonder if you might be in interested in what we are doing here in Nigeria. As a private Chinese consortium, we are managing and developing an industrial park in Ogun State in Nigeria. We came in late 2012 and the zone has developed into the most active zone in Nigeria with over 20 investors from China, India, Lebanon and 4,500 local employees. If what we are doing sounds like a good target or client for the team work you mentioned in your letter, please feel free to contact me.

Delighted to read your quick response. It seems we do have something to share. As far as we know, the majority of Chinese in Africa are involved in trade, others are engaged in infrastructure projects such as roads, rails, ports and estates contractors. We are in the third category, focusing on industrial park development. This may not be a new phenomenon but we are trying to identify a approach for a diversified industry park with sustainability, run by a private consortium, which could be replicated in Africa.

The Ogun-Guangdong Free Trade Zone (OGFTZ) began as a partnership between the Chinese Guangdong state government and the Ogun state government of Nigeria, with Chinese partners holding an 82% share and Ogun state holding the remaining 18% ownership share. By 2012, however, operational practices of the original Chinese SOE management team had deeply strained relations with Ogun state officials, ultimately requiring their exit from the zone and motivating a potential shutdown of the project.

At this time, members of what would become the Zhongfu Management Company had begun an investor relationship with the zone as an potential on-site manufacturer. Facing a potential loss of their investment, these individuals accepted the invitation of the Ogun state government to assume management responsibility for the zone (as well as the Guangdong state government’s ownership share in the zone) at the end of 2012. Though the original name for the special economic zone was retained, the Guangdong state government completely exited the project, and Zhongfu emerged as the only case where a unique model of Chinese private ownership and management of a special economic zone in Africa has transitioned from a state-owned group to a private company headed by a manager with an American MBA.

On 28 November 2011, a senior official of Ogun State wrote a letter to CAI complaining of its violation of the terms of the 2007 JVA, the unsatisfactory share arrangement, and rampant smuggling. In the letter it also referred to the fact that following extensive due diligence enquiries in both Nigeria and China, CAI or its parent company was now officially bankrupt. On 10 April 2012, CAI’s appointment as manager and operator of the Zone was terminated by Ogun State via letter. On the following day a further letter wrote to Zhongfu confirming its appointment as the managers and operators of the Zone.”

As you have learned, Zhongfu went to the Zone as tenant in the first place, however, the former management team was terminated and Zhonggu’s interest was at risk. So we took over the zone hoping to recover our investment. Though it was an “accident”, yet we believe we have done the right thing.

We have been officially notified by State-Owned Assets Supervision and Administration Commission of Guangdong Province, China about the replacement of shareholdings owner of China Africa Investment Limited from Guangdong Xinguang International Group to Guangdong New South Group. The shift of shareholdings will legally lead to the replacement of management rights of the OGFTZ, which is now in the hand of Zhuhai Zhongfu Group, to Guangdong New South Group.

Dear Deborah, I am sure you have heard about our case here. I am sorry I was not able to give you an update earlier. Here’s the briefing on our case. Zhongfu is creating history and we might be the first Chinese investors to say no to the most powerful people in Nigeria for their bright day light robbery. Best regards, John

“We regret that innocent Nigerians may have to bear the burden of the substantial damages that we will undoubtedly be awarded in legal action against the OSG and others,” he concluded.