Aliko Dangote, president of Dangote Industries Limited, etches his name in history with a broad plan to conquer the world of cement manufacturing
Aliko Dangote, president, Dangote Industries Limited, DIL, is a serial investor in cement plants. Before completing one plant, he is already laying the foundation of another. President Goodluck Jonathan captured this trend last week at the commissioning of the 5.25-tonne capacity Line Three and the groundbreaking ceremony of Line Four of Dangote Cement, Obajana, Kogi State.
In 2007, as governor of Bayelsa State and vice presidential candidate of the Peoples Democratic Party, Jonathan had accompanied Olusegun Obasanjo, former president, to commission the Lines One and Two, 2.5 million tonnes each, of the Obajana cement plant. Shortly after that, Dangote acquired the Benue Cement Company, BCC, and increased its capacity from 900,000 tonnes to three million tonnes per annum. By February this year, Jonathan was called upon again by Dangote to commission his six-million-tonne cement plant at Ibese, Ogun State. Even before the commissioning of that plant, the cement baron had commenced work on additional six-million-tonne Lines Three and Four of the Ibese plant.
While the commissioning of the new Line Three was on at Obajana, to the delight of many, Dangote announced plans to establish yet another cement plant in Calabar in the South-south of Nigeria. He has already invited President Jonathan to perform the groundbreaking ceremony of the plant in the next three months.
With Line Three now operational, the combined capacity of Dangote Cement, Obajana, now stands at 10.25 million tonnes per annum. With that new capacity, the plant, according to Dangote, now ranks as the largest single cement factory in the world, and that feat was achieved in less than six years. By the time Line Four is completed in 2015, the total capacity of the Obajana cement plant will be 13.25 million tonnes per annum, and that will make the plant one of eight largest manufacturing concerns in the world. Expectations were, indeed, rife that by the time the fourth line of Dangote Cement, Obajana, comes on stream in 2015, Dangote, already iconic in Africa, would become a reference point in cement manufacturing in the whole world.
Apart from manufacturing cement, Dangote holds sway in bagging bulk cement in various locations in Lagos and Port Harcourt. Akin Adesokan, managing director, Dangote Cement, Lagos Cement Terminal, said the terminal operations account for six million tonnes per annum.
Dangote is a man on a mission, carrying out an aggressive investment drive across Africa to achieve a target of 50 million tonnes of cement production and terminal capacity by 2015. From Zambia through Tanzania, South Africa, Congo (Brazzaville), Ethiopia, Sierra Leone, Ivory Coast, Liberia, Senegal to Ghana, Dangote has planted either a cement manufacturing plant or terminal operation where bulk cement is bagged. The move, seen as a demonstration of the entrepreneur’s pan-African outlook and philosophy, is to ensure that Africa remains self-sufficient in cement production.
To many Nigerians, Dangote will be to cement what Steve Jobs was to electronic gadgets and Bill Gates to computer software, the number one name come 2015. At the rate at which Dangote is investing in cement, President Jonathan believes his will soon enter the Guinness Book of World Records as the biggest cement manufacturing company and be recognised in Nigeria as a net exporter of cement, just like crude oil. So far, the Dangote Group has invested over $6.5 billion in cement plants and plans to invest in another 17 million tonnes. Joseph Makoju, special adviser to Dangote, said by the time the new capacity is ramped up, Nigeria will become a cement exporting nation.
The magnitude of Dangote investment prompted a group of students of Stanford University, United States, US, on a visit to the corporate office of DIL, Lagos, recently to remark that “When Africans invest in Africa, friends of Africa will come and invest in Africa.” Dangote repeated what he told the visiting students at Obajana that he would continue to invest in Nigeria despite the challenges, because he believes that the country is the best place to invest. He said the support of the Jonathan administration made his company to invest heavily in cement without the fear of policy reversal. According to him, many foreign investors have since realised that Nigeria is the best investment destination and are now trooping into the country to invest in key sectors of the economy. Like the Stanford University students, Dangote urged Nigerians and Africans to take up the gauntlet and invest in their own countries to pave the way for foreign investors.
President Jonathan attributed the new cement manufacturing capacity of Nigeria, exemplified by Dangote, to the downward integration policy of the federal government. He explained that the policy, which was introduced in 2002 by the Obasanjo administration to encourage local manufacturing of cement and reduce importation of the commodity, has begun to yield fruits. According to President Jonathan, as at 2002, the entire manufacturing capacity of the country stood at barely three million tonnes per annum, but with all the activities of cement manufacturers, the country now boasts of a capacity of over 30 million tonnes. To Makoju, the attainment of 10.25 tonnes per annum capacity by Dangote at his Obajana plant, in a capital and technology intensive sector, is not a mean feat. He, however, hopes that the success story of cement can be used to catalyse success in other sectors, particularly infrastructure.
When cement becomes easily available with increasing local manufacturing capacity, the general expectation of Nigerians is that it will become cheaper. But that may not necessarily be the case if the federal government does not take appropriate steps to reduce the cost of production for the local manufacturers. The price of cement has remained high, hovering around the N2,000 per bag mark in different parts of the country, because the gap between the ex-factory price and the market price has refused to come down as distributors incur so much cost on transportation.
Ironically, Makoju said manufacturers have been absorbing the high costs of production and haulage, which have remained major impediments to bringing the price of cement down. Experts, therefore, say that the federal government must take decisive steps to reduce the cost of production and ultimately force down the price of cement. One of such steps is making the roads motorable and reviving the railway system. Makoju said the mere fact that 75 per cent of the roads are federal roads makes the federal government responsible for the initiative to reduce the price of cement. He counselled the federal government to consider options like concrete roads as against asphalt roads, because concrete roads are believed to be more cost effective and 30 per cent cheaper in the long run than asphalt roads.
Makoju insists that if the backward integration model is applied to road construction, Nigeria could be celebrating good road infrastructure in less than 10 years. Similarly, it is generally believed that a backward integration policy in the power and gas sectors would ultimately lower the cost of production for manufacturers and make cement and other products cheaper.
As a way of encouraging Dangote and other industrialists, Jonathan said the federal government would ensure that the railway begins to work soon to enable the Dangote Group and other manufacturers transport cement and other products with the aim of reducing their prices. The federal government has also established Cement Technology Institute to realise the full potential of the cement industry. President Jonathan revealed that all the stakeholders agreed to appoint Dangote as chairman of the institute, which is billed to commence operations this month.
Though a giant in cement production, Dangote’s business interest is not limited to cement manufacturing. He has his tentacles in other major business sectors, including food and beverages. Like King Midas, whatever he touches turns to gold. So, it is not only in cement manufacturing that Dangote is making waves. The Dangote Group also operates the largest sugar refinery in sub-Saharan Africa and second largest in the world. The company has a market share of about 80 per cent in the Nigerian sugar market. The group produces its own bags through Dangote Agrosacks, a division of Dangote Flour Mills. The flourmill too has one of the highest milling capacities in Africa with 2.67 million tonnes per annum. Its pasta mill, with 438,000 tonnes a year, is one of the largest in Africa. The company produces over 372 million woven bags per annum for commercial purposes as well as for use in bagging products, making it one of the largest in the world.
The group operates a transport fleet in excess of 5,000 trucks, considered among the largest transport companies in Africa. There is yet another uniqueness about the man some people call Mr Cement. Once he has grown a company to some height, he allows some degree of public ownership, thereby differentiating himself from the club of private businessmen in this region who hold tightly to operations of their companies and only bring in family members, thus frustrating efforts at bringing about an open management structure. That is why the Dangote Group is the only Nigerian company with four subsidiaries listed on the Nigerian Stock Exchange, NSE. They are Dangote Sugar Refinery; Dangote Flour Mills; National Salt Company of Nigeria, NASCON; and Dangote Cement. Dangote Cement is the biggest quoted company in Nigeria with about 30 per cent market capitalisation valued at N2.13 trillion.
Dangote Pasta, which produces spaghetti and macaroni, is also a force to reckon with. The pasta division, located at the Nigerian Ports Authority, NPA, Lighter Terminal in Ikorodu, Lagos State, operates under the Dangote Flour Mills. The spaghetti comes in Standard and Slim, and Gancillini varieties, while the Macaroni has three variants – Elbow, Spiral, Twist, Shell and Cut. For bakers, confectioners and even industrial uses, Dangote Sugar provides choice. Its Vitamin A fortified and unfortified industrial sugar are ideal for table use, baking and sweetening of beverages. The Dangote unfortified industrial sugar is specially processed for pharmaceuticals, food and beverage manufacturing companies.
Dangote is also into the salt business, controlling over 60 per cent of the salt market. Dangote Salt Refinery is engaged in the refining and marketing of kitchen, table and industrial salt as well as the importation and sale of Petti tomato paste. These are complemented by Dangote Noodles. It is so successful that its current fixed asset value stands at N2.1 billion. Added to all these is the Dansa range of fruit juice and milk packs.
President Jonathan highlighted the import of the exploits of Dangote Cement, saying that apart from saving the federal government foreign exchange, the cement sector alone has created two million jobs and that the 7.6 per cent gross domestic product, GDP, growth recorded last year was driven largely by the manufacturing sector, particularly the cement sector. The President has good reasons to celebrate the business mogul. To start with, he admitted that Dangote had made a great impact on the social lives of Nigerians. He is right.
The Dangote Group is known to have engaged about 20,000 Nigerians in direct and indirect employment. What the President did not say is that the Nigerian government is too glad to watch the businessman do exploits in other lands. For instance, apart from providing jobs in countries where he has investments, the authorities in Senegal are toasting him for providing electricity free for communities hosting his company. For that reason too, most communities are too eager to have him in their midst. The case of Joel Adeboyi Bamgbose, the Oba of Ibese, readily comes to mind. In a letter dated August 24, 2001, he invited Dangote to set up a cement plant within his kingdom. The consequence of that gesture is the six-million-tonne cement plant in the town.
Idris Wada, governor of Kogi State, excited by the commissioning of the world-class plant built by one of Africa’s biggest conglomerates, said: “He has been criss-crossing Africa through his multi-billion dollar investment and has shown that Nigeria is the best place to invest. If we have more Dangotes, Nigeria will develop. He has opened up his host communities to more infrastructural development.” Like Wada, Ibikunle Amosun, governor of Ogun State, said Dangote’s investment in his state would impact positively on housing development and job creation.
Recognition soon came pouring in for Dangote from home and abroad. The Boston Consulting Group, BCG, rated Dangote’s among top 40 African companies based on size, growth and international expansion in June 2010, while the International Corporate Research, ICR, rated it number one among 55 top quoted companies in the last quarter of 2010 world over. The Dangote Group won the Investor of the Year 2010 award given by the Nigerian Investment Promotion Commission, NIPC, and the Commonwealth Business Council, CBC, as part of activities to commemorate Nigeria’s 50th anniversary.
It was also in appreciation of his exploits that President Jonathan gave Dangote the Grand Commander of the Order of the Niger, GCON, Nigeria’s second highest national award. “People asked questions, saying why did I give an award usually reserved for vice presidents to a businessman. People who have not done up to five per cent in terms of importance compared to what Dangote has done were given GCON. So why not Dangote? Our greatest problem in Nigeria is employment but he alone has employed close to 20,000 Nigerians. We will continue to encourage people like Dangote who are committed to the transformation of the country. We can’t achieve Vision 2020 without industrialisation, we need to multiply people like Dangote in Nigeria,” explained President Jonathan. This kind of appreciation apparently inspires Dangote even more, with the result that the man is challenged to do more exploits.
Little wonder that the presence of the Dangote Group of companies is causing ripples in the capital market. For instance, Kafaru Atiku, managing director, Camry Securities, pointed out that the Dangote Group accounts for 34 per cent of the total market capitalisation, implying either positive or negative consequences for the market. According to him, in the event of any decline in the operations of the companies within the Dangote Group, the market could suffer a significant loss with far reaching implications for the economy. “If Nestle and Nigerian Breweries, blue-chip companies, record a loss in a day, the market may not feel it but if Dangote Cement records a loss, the whole market will feel it. The fact that he is a major supplier of cement and sugar among other products in the country, he has a large market, employs a legion of workers and if such a large empire crumbles, the economy may crumble with it. Such a leading role creates a concentration of risk and we hope a dilution would occur soon,” Atiku explained.
However, Adeleke Adebayo, general secretary, Independent Shareholders Association of Nigeria, and many others believe Dangote is godsend. There is no doubt that he has impacted the country positively through job creation, import substitution and his numerous humanitarian engagements. Beyond that, Dangote is also regarded as an ambassador plenipotentiary. The general belief now is that Nigeria needs many Dangotes to take its pride of place among the comity of developed nations.
Additional report by Abiola Odutola