When Aliko Dangote signed the agreement with a
consortia of banks to finance the $9.5 Billion refinery, petrochemical and urea
plant he was consciously doing all of four things:
1.
He was putting Nigeria on the path of industrialization
and modernization
2.
He was decisively removing the rent economy
from the operations in that sector
3.
He was undertaking the largest ever private
initiative of its kind (as sole risk taker) in Africa and the Middle East
4.
He is making it possible for other
entrepreneurs to invest in Nigeria and Africa by providing the model financiers
want.
Aliko needs no
introduction as the richest African and one of the top twenty rich persons
globally, is rather a modest, private person with the gift of humility and open
candour you hardly find in a billionaire (albeit a Nigerian billionaire), can
be surprising disarming. You then tend to wonder: “how did he get here so
fast?”
Don’t be fooled by his charm and nature! Behind that
cool persona is a brutally calculating and efficient mind attuned to only one
frequency: SUCCESS!
For Aliko success is the driving force of his ambition
and he has proved it patiently time and time again. From the N500, 000 loan given
to him by his Uncle (which at the exchange rate of N0.56 / $1 is almost $1
Million at that time) he saw opportunity in trading and left the Dantata fold
to make his own way in business. By intuition and street savvy he repaid the
loan back in less than a year (instead of three years as agreed with his Uncle) and has never
looked back.
Foray into cement in the 70’s and early 80’s taught the
young Aliko three things that have become his hallmark:
·
Capacity: Develop capacity to do the
business and do it at razor thin margins if need be
·
Concentrate: Pool together that capacity on
a single business line and grow it..never dissipate your energies so you can
control that market
·
Consolidate: Bring everything under one
roof and price out your competition.
Because he lacked the capacity he had to leave the
cement market altogether and delve fully into the sugar business with the
oneness of mind that was incredible. Within ten years he had gone on to
consolidate his sugar business into a near monopoly and was also successful in
the rice importation and salt business too. By 1997 he was the most liquid
Nigerian business with turnover exceeding N13 Billion and that was when he had
his epiphany with a studied visit to Brazil.
In Brazil he saw a country that had all the same
problems as Nigeria, yet in Brazil the business men were committed to
industrialization as government policies began to open up to favour them and
give them a more level playing field to operate competitively with
international players. In Nigeria the similarities ended with government
opening up the market and the businesses let the opportunities pass due to lack
of capacities (finance) or mismatch of economic and investment priorities.
Dangote decided to change that and determined to
succeed he made a strategic two pronged move:
·
Set up shop within the Nigeria Ports
Authority Lagos ports for Sugar, Salt and Cement Re- Bagging Plants
·
Lobbied and got the Federal Government to
ban importation of bagged items like salt, sugar and of course cement.
With these plants in operations he could import bulk
un-bagged commodities ( pay reduced
custom duties ) re-bag in his plants and sell in the local market as “made in
Nigeria” he carried on seamlessly
without breaking a sweat. With this move he gained control of these three
commodities market in Nigeria as his competition were left dis-organized ( they
all relied on importation of bagged items) and totally took over their market
share with the exception of BUA who quickly followed suit with the Dangote approach.
He quickly followed up with the acquisition of majority
equity of Benue Cement Company and quietly purchased the Obajana Cement plant
from the Kogi State Government which will soon become the crown jewel in his
empire. He unveiled his mega plan to build the largest cement plant in Nigeria
and Africa at Obajana and boldly acquired 49% in a cement project in South
Africa prior to their hosting the world cup which ensured demand for the
project. All these were just book building for Aliko who had a grand plan of
consolidating his holding in cement into one single block and still be the
majority shareholder with over 95% even after listing on the Nigerian Stock
Exchange. This cement holding is now a global player with plants in Zambia,
Ethiopia, Cameroon, Tanzania, South Africa and even India with market cap
exceeding $20 Billion with less than $1 Billion of debt.
Aliko now has his eyes on three prizes and these are
primary objectives to him:
·
Oil and Gas: These comprise of his “association”
with MRS PLC, The New OLOKOLA PROJECT for which he is committing $9.5Billion
and will eventual include a 3MMT LNG PLANT ( Dangote from observation does not
do things in half measures)
·
Ownership of a National Telco GSM license
as well as Fibre optic infrastructure that spans Nigeria (14,000 Kilometres) to
provide internet access to Nigeria. This license was obtained as a 3G Auction
which he paid $150M for.
·
Several Dozens of Licenses that cover solid
minerals of all sorts.
All said Dangote is a problem solver for profit and he
has a healthy appetite for taking on risk and turning them into tantalizing
rewards.
If he succeeds with the Refinery and Petrochemical
plant he will have dealt traders like VITOL, TRAFIGURA, MERCURIA,GLENCORE a
deadly blow as a significant portion of easy money will vaporize. I for one
pray he does succeed as he has shown commitment to the Nigerian economy and the
Nigerian people by investing his wealth into the system and not putting it in
some private account in Europe or America as is the norm with Nigerian
businessmen.
With the refinery and petrochemical complex due to be
commissioned in three years its time that that Dangote does what he is good at:
LOBBY THE GOVERNMENT!
WHY? TO WHAT END?
For government policies to change, influential people
and interests converging tend to have better chances at making these shifts happen
than academic or research insights. At this Dangote is a past master! He has
thrived within the system: knowing which lever to tweak and which not to so
lobbying the government comes natural to him; especially when the benefits
comes to him first and then diffuse to others.
The end benefit is to lobby the Federal Government to
institute a policy of phasing out crude oil export from Nigeria from 2018 so as
to spur the construction of other refineries on the one hand and promote
investments of higher value significance into the Nigerian economy by the Oil
Majors. Their excuse that the market is globally saturated for refineries
business does not hold water as Singapore and Rotterdam are cities that don not
produce oil and yet are the global refinery hubs of these companies. After all
it is illegal to export crude oil from the United States; as such these has
spurred excess refinery capacity in that country and boosted their development.
The above restrictions should be phased over a period
of five years to give Major Oil companies time to plan their investments
options in these sectors. But an immediate quota should be introduced that will
target the first excess above 100,000 BPD production. So producers below the
100,000 BPD will initially not be affected in the policy and producers who have
in excess of 100,000 BPD will see a Refinery Quota of 25% of output. If firm A produces 105,000 BPD it will have a
Refinery Quota of 26,250 Barrels that it must refine in Nigeria or the Firm
pays a Non- Refinery Fee of $5.00 Per Barrel. This will equate to $131,250 Per
Day in fees.
If this is implemented at a target level of 1,600,000
BPD with a 25% Refinery Quota, 400,000 BPD will need to be refined locally and
the existing National Refineries (once privatized) can amply handle this.
The economy (Government) benefits in the following ways:
1.
It achieves the privatization of its
refineries
2.
Creates jobs in the petrochemical and
allied sectors
3.
Boost GDP with increased value added
4.
Earns Tax incomes from the Export of Refined
Products (the products are sold from Nigeria and so the sales proceeds are
subject to taxes in Nigeria
5.
In the event that the Major Oil Companies
refuse to refine in Nigeria they pay the Non- Refinery Fee on the prescribed
quota (which is determined by the Ministry of Finance and will increase yearly)
to the tune of $730,000,000 for the first year.
The logic is aptly captured in ERIK S. REINERT book HOW
RICH COUNTRIES GOT RICH-Page 87 ( which should be a must read for any right
thinking businessman, politician and student in university) and I quote:
“The fundamental idea here –that finished product might cost
from 10 to 100 times the price of the raw material needed for the product-
would recur for centuries in European literature on economic policy. Between
raw materials and finished product lies a multiplier: an industrial process
demanding and creating knowledge, mechanization, technology, division of labour,
increasing returns-and above all employment for the masses of underemployed and
unemployed that always characterizes poor countries”
What Aliko
Dangote grasped from his visit to Brazil in the 1990s can be summed up in a
simple sentence and I hope it is prescient for policy makers to utilize:
The manufacturing multiplier was the key to both
progress and political freedom and economic knowledge is the key to
industrialization and development.
To Aliko Dangote I say three hearty cheers for taking
the lead let others now follow in these paths and other paths too.
Like
Prometheus Aliko Dangote has shown how it is done; what others make of it is
entirely left to them!
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