Dangote: Africa will deliver on its promise

In an exclusive interview, Africa's richest and arguably most successful entrepreneur talks about his firm's rapid expansion and the future of the Nigerian economy.


Few individuals embody the African growth story more than Nigeria’s Aliko Dangote, arguably Africa’s most successful, and actually its richest man. With an estimated personal fortune of $18,3bn, he and the company that bears his name – the Dangote Group – have become a byword for business success in Africa.

Established in 1981 as a trading company, the Group has since grown into a sprawling and diversified conglomerate, spanning everything from food processing to oil and gas, real estate, logistics and finance. With its base in Nigeria, the Dangote Group is now in the midst of an aggressive pan-African expansion drive.

The latest addition is Zimbabwe, where Dangote announced plans to construct a $400m cement plant in September. In June, it launched a major cement plant in the Ethiopian capital, Addis Ababa, as well as commissioning a $250m factory in Cameroon.

These investments add to a diverse roster including Senegal, Kenya, Liberia, South Africa, Tanzania and Sierra Leone.

Such aggressive expansion in 2015 might surprise some. The collapse of the oil price, coupled with the slowdown of the Chinese economy, has hit African economies. Growth across all 48 sub-Saharan countries is now forecast at 4.4% in 2015 by the IMF, a downward revision, and below the regional average – which has exceeded 5% – over the last few years.

Figures like this have prompted bearish headlines from major international news sources. On 15th September, Bloomberg News ran a story with the headline “Africa’s Oversold Growth Story Has Investors Confronting Losses”, echoing ongoing criticism that the continent’s “Africa Rising” narrative is being overplayed.

Dangote’s home country of Nigeria – Africa’s largest economy – is no exception in this regard. Growth for 2015 is forecast at 4.8%, down from 6.3% in 2014. As Africa’s largest oil producer and exporter it has also been hit particularly hard by the collapse in oil prices. With exports accounting for 70% of government revenue and almost all of the country’s foreign exchange earnings, there have been pronouncements that the country is “broke”.

Dangote, who speaks in a measured but forceful tone, is unimpressed by such rhetoric, saying, “I think there is quite a lot of exaggeration. Anything with Nigeria raises a lot of red flags.”

First and foremost, he insists, it is important to understand the significance of the change of leadership the country has undergone this year. In March, opposition candidate Muhammadu Buhari convincingly defeated incumbent president Goodluck Jonathan. This marked the first time an incumbent was defeated at the polls in Nigeria, and has raised hopes the new administration heralds a meaningful change in leadership.

Dangote has no doubt this is the case, saying that the election of President Buhari is “like day and night compared to the previous administration”.

“The economy was not managed properly,” he adds, highlighting the notoriously high volumes of oil that are siphoned off official production levels and sold on the black market on a daily basis. As much as 500,000 barrels a day have gone missing to this in recent years, representing billions of dollars in lost earnings.

“It’s a well-known thing but there was no leadership to stop all the leakages,” he says, and is certain the new government will address such issues.

“I have a great confidence in them and I believe they will actually do the right thing,” Dangote says, using the example of President Buhari’s recent decision to declare his assets. Surprised at the President’s modest wealth (a single bank account with $150,000 in it), he says that “I thought he would be declaring much more money, but that’s what you have – they are very honest people.”

Beyond the change in political leadership, Dangote argues that the significance of falling oil prices must be analysed with a nuanced understanding of the country’s economy.

“It is true the oil price has actually come down by half, but at the same time, Nigeria is a very dynamic place.”

He points to the estimate that while oil dominates foreign exchange earnings, the agriculture sector alone contributes more than 30% to GDP, significantly more than the oil sector. Other sectors such as telecommunications – Nigeria is Africa’s largest mobile phone market – as well as financial services and retail, have also emerged as major contributors to the economy since the turn of the century. Their growth contributed to the 2014 re-evaluation of national economic data, which saw its GDP almost double.

Far from being a threat to the economy, Dangote believes the collapse in oil prices may even represent an opportunity.

“It might be a blessing in disguise for us in Nigeria, because it will force us to be more serious and more focused in terms of diversification of the economy.”

The need for diversification is close to Dangote’s heart, and has featured strongly in the evolution of his company. While still primarily known for its cement business, it straddles a multitude of sectors, including food processing, finance and real estate.

The bottom line is not the only driver of this emphasis on diversification, he explains.

“We need to look at how do we diversify the economy,” he says, adding that “we are looking at this issue and trying to address it as a conglomerate, with the hope that others will join.”

He highlights projects he believes will have far reaching impact on the Nigerian economy.

This includes a planned 550km gas pipeline project to connect the oil-producing Niger Delta region in the southeast with the commercial capital of Lagos. Dangote estimates the potential generation capacity of this project to be 12,000MW – several times the country’s currently installed capacity. The Group is also constructing a major refinery to process crude oil locally, and address the country’s chronic fuel shortages.

“This alone I think will help in shaping and also transforming the economy of Nigeria,” Dangote says.

The need for diversification is a challenge faced by most of Nigeria’s peers on the continent, and his expansion drive goes hand in hand with a desire to see economic progress not just in his home country, but across Africa.

“We are also trying to make sure that we actually help in terms of transforming the African economy…we Africans don’t really invest in our own economy, and people will not really come and transform our own economy for us.”

For the time being, operations outside of Nigeria are restricted to cement production, he explains, because it is a “business that we know very well. We will get there with the others too, but we need to do more of consolidation moving forward.”

While he has no doubt that business will play a crucial role in realising the continent’s economic potential, Dangote is unequivocal about the need for strong leadership from governments to support companies.

“There is no way the private sector will be able to drive the economy without the cooperation of the government. They are the facilitators, they need to roll out good policies for you to even be interested in investing.”

More than anything, he argues, there needs to be more concerted action around strengthening institutions.

“This is one of the areas that we are lagging behind. Institutions are very, very important. Obviously nobody will go and invest in a place where there is no rule of law.”

He is also outspoken on the issue of regional integration. Intra-African trade is currently estimated to be lower than 15%, representing enormous untapped potential.

“I always say this whenever I meet any president. There is a big challenge which we need to look at; the free momentum, goods and services within Africa,” he says, musing that “we belong to the same continent but I don’t know whether we really trust each other.”

Despite myriad pan-African conferences and agreements aimed at addressing this challenge, Dangote believes “there’s a lot of talk about integration but really not much action is taken. Unless governments address these issues I think presidents have just been there [conferences] to waste taxpayers’ money.”

While exhibiting tangible frustration over the lack of progress on such a fundamental issue, Dangote is ultimately optimistic about the prospects for better
leadership and economic development on the continent. “Leadership is changing within Africa … I think there are quite a lot of transformations that are happening that people are not even looking at. So there are pockets of improvements here and there. We are not yet there but we are trying to get there.”


Rising global interest

Following more than a decade of sustained and resilient growth, the conditions have arguably never been better. As Africa’s economies rise, so too does global interest in their commercial and social potential.

Foreign investment has shot up in recent years. According to consultancy firm Ernst & Young, capital investment across Africa totalled $128bn in 2015. The Africa investment conference circuit is overheating with seemingly insatiable demand for investment opportunities on the continent.

The interest is not just from the business community. From the US to China, the world’s major economies are actively seeking to compete for opportunities in one of the world’s fastest growing regions. In August 2014 US President Barack Obama convened the first ever US-Africa Leadership Summit, which was used as an opportunity to facilitate commercial investments from American companies, many of whom have been pushing for more support from Washington for years.

The European Union has its own iteration of such a platform in the EU-Africa Business Forum, and even countries such as Norway, which have long viewed Africa purely as a destination for development aid, are actively encouraging their companies to invest.

Yet nowhere has the growth in interest been more pronounced than in other emerging markets – most notably from China. It is now virtually impossible to travel anywhere on the continent without a visible representation of the Asian giant’s economic influence. Already the continent’s largest single trading partner, annual volumes are forecasted to be as high as $400bn in 2015. Other major emerging markets including India and Brazil have also significantly ramped up their commercial and political engagement with the continent.

To Dangote this swell in interest comes as no surprise.

“There is nowhere foreign investors can generate the kind of returns Africa offers. You are talking about a 30% return on your investment. It is a good place to invest.”

In principle, this surge in foreign capital represents significant opportunity for African economies, but he argues that a careful balance must be struck.

“Some of the foreign investors, when they come in, they actually take more out than they invest. So they are actually not helping.” At the same time, however, he argues that most African economies do not have the financial strength to go without foreign capital.

Even a company the size of the Dangote Group is relying on the support of foreign partners to fuel its growth. The company recently inked a landmark $4.34bn deal with China’s Sinoma International Engineering Co to drive its pan-African expansion, and Dangote is in no doubt about the value foreign capital can represent.

“There is no way we would be able to grow the cement business as fast as we are without the Chinese partner we have. We don’t have the capacity but they do have the capacity and they have the people,” he remarks.

Ultimately, Dangote argues that Africa cannot develop in isolation, but must take the lead to ensure that any foreign capital or interest in the continent serves its long-term development needs.

“I believe that we will be able to transform Africa by ourselves. Not alone, but we will lead and others will follow.”

“The upside is great, it’s fantastic – it will happen. There are obviously ups and downs, but we are going through the normal growing pains of life, which I think will make us stronger than where we were before.”

Given his success to date, few would argue with such a prediction.

Lanre Akinola

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