Alhaji Aliko Dangote
Aliko
Dangote has always liked making things to sell. As a child he boiled up
sugar to make sweets he sold around town; these days he cooks up
limestone in factories that produce millions of tonnes of cement.
Dangote’s
entrepreneurial skills have helped make him Africa’s richest person,
with cement plants opened or under construction everywhere from Senegal
to Ethiopia to South Africa. He dreams of owning the largest cement firm
on the planet. By 2015, he hopes, his industrial conglomerate will be
worth four times its current estimated $15 billion.
“We’ve taken
the flag of Nigeria and flag of Africa and put them in places they never
expected to be seen,” beams the slightly greying, young-faced tycoon
sitting in his office in the commercial hub of Lagos. Behind him is a
map of Africa and a photograph of his cement plant in the town of
Obajana, set to have a capacity of 13.25 million tonnes a year by 2015,
which would make it the world’s biggest.
But the 55-year-old is
not without controversy. To some, he is an unassuming man whose quiet
demeanor stands out in a nation where success is usually marked by
talkative swagger; to others, he is a monopolist who uses aggressive
tactics and political ties to beat competitors.
Critics accuse him
of using his influence with successive governments to ban imports by
his competitors, pushing port authorities to halt rivals’ shipments, and
using sharp price drops to put them out of business.
Dangote
admits he has been friends with several recent presidents of Nigeria and
has enjoyed lucrative tax breaks, though he denies receiving any
special favors.
However he got there, there is little doubt his
success in manufacturing is a rarity in a continent seen as too
dependent on exports of raw materials – minerals and cash crops – with
no added value. By contrast, the Dangote Group refines sugar, mills
flour, processes salt, and produces cement.
At present only 5
percent of Dangote Cement and 25 percent of his flour and sugar
companies are publicly traded; almost all of the other shares are held
by Dangote. His total annual pay cheque isn’t public, but Dangote
Cement, Dangote Flour Mills and Dangote Sugar are all hugely profitable.
Dangote
Cement’s pretax profit for the first half of 2012 grew by 23 percent to
71.3 billion naira ($443 million). The sugar refiner nearly doubled its
profits to 8.5 billion naira over the same period.
When Dangote
floated the cement firm in late 2010, it boosted his estimated personal
wealth five-fold to $13.8 billion, making him the fastest riser on the
Forbes rich list. After a bad year on the Nigerian stock market, he is
still worth $11.2 billion.
Dangote now wants to list 20 percent of
the cement company on the London Stock Exchange late next year, at a
price that would value it at $35 billion to $40 billion. That would make
it the world’s top cement firm by market capitalization, bigger than
Lafarge of France, and surpassing mobile phone operator MTN as Africa’s
top stock.
Hurdles remain. The tycoon will have to convince
investors and regulators that his personal empire can be a FTSE 100 firm
with the necessary corporate governance standards. That would be a rare
feat for a Nigerian company. Guaranty Trust Bank and Diamond Bank have
secondary listings in London, but both are too small to make the top
FTSE index.
“NOT IN IT FOR THE MONEY”
Born in April 1957 in
the northern Nigerian city of Kano, Dangote comes from a family of
wealthy Muslim merchants. After demonstrating his early entrepreneurial
spirit selling sweets, he headed to Egypt to study business at Cairo’s
Al-Azhar university.
In 1977 he borrowed about 500,000 Nigerian
naira from his uncle to trade basic foods: cooking oil, sugar, pasta.
Four years later he bought trucks to start a transport firm and within a
decade was importing bulk goods, including cement. By the time he
turned his hand to manufacturing the stuff – buying a defunct cement
plant in 2000 and reviving it – he was a rich man.
Dangote, who
married young and has three daughters – he and his wife are now
estranged – says he has never been motivated by wealth.
“I’m not
in it for the money. No, no,” he says. “I like to run a business that’s
successful … I’m a very creative person.” He says he eschews conspicuous
consumption.
“I have a very simple life.”
Up to a point.
Like many billionaires, he owns a yacht as well as large properties in
Ikoyi, a leafy Lagos suburb, and neighboring Victoria Island, home to
Africa’s most expensive real estate. Then there’s the private jet, which
he says he bought to avoid hangers-on who used to book first class
tickets on the same flight as him.
Still, by the standards of Nigeria’s champagne-swigging, sports car-collecting rich, he’s not that extravagant.
Old
friend Bismarck Rewane, CEO of Lagos-based consultancy Financial
Derivatives, remembers a business dinner at the palm-fringed Eko Hotel
in the city. When he and Dangote left in Dangote’s black Mercedes, hotel
staff charged 5,000 Nigerian naira ($32) for parking – excessive, but
peanuts for a man of Dangote’s wealth. Indignant at the attempted
rip-off, the cement king negotiated it down to 1,000 naira.
“He
spent a good few minutes doing it. I said to him: ‘let’s just go. Our
time is more valuable than a few thousand naira.’ But he wouldn’t let it
go,” Rewane said of the tycoon. “He smiled afterward. He was so happy
he’d got a good deal.”
Dangote is not always so frugal.
“He
dreams big, some might say too big. In 2004-5 we owed 80 billion naira
(about $500 million),” recalled Uzo Nwankwo, a fund manager who was
Dangote Cement’s executive director of corporate finance from 2005 to
2007. “The banks were nervous, but they couldn’t stop the money. We were
too big to fail.”
POLITICAL CONNECTIONS
Dangote’s success
has not been without controversy. In a 2007 diplomatic cable that ended
up last year on the WikiLeaks website, the then U.S. Consul General in
Lagos, Brian Browne, wrote: “To detractors, he is a predator using
connections in a corrupt political economy to tilt the playing field in
his favor.”
Critics say Dangote owes as much to political favors
as business acumen. His fortunes blossomed when his close friend
Olusegun Obasanjo became president in 1999, Browne wrote in the cable.
Browne could not be reached for comment.
Obasanjo
– whose 1999 election ended years of kleptocratic military dictatorship
– gave Dangote exclusive import rights to cement, sugar and rice, the
cable suggests, in return for Dangote’s support, including funding
Obasanjo’s re-election campaign in 2003.
“It is no coincidence
that many products Nigeria’s import ban lists are items in which Dangote
has major interests,” Browne wrote. “He has had success in blocking
trade and investment that might compete with his enterprises.” He
concluded that Dangote is “harmful to Nigeria’s interests”.
Dangote
frowned, visibly annoyed, when Reuters read him the cable during an
interview. Building relationships with presidents is a normal part of
being a business leader, he said, denying he had used connections to
stifle competition.
“We’ve been close to almost all the presidents
that have passed,” he said, naming military dictators Muhammadu Buhari,
Ibrahim Babangida and the notorious Sani Abacha as examples. But, he
insists, “we have never taken advantage … and we were not even always
treated fairly.”
These days, Dangote’s relationship with presidential power has become symbiotic: presidents need to court him too.
He
is on President Goodluck Jonathan’s economic management team and the
government’s job creation committee, which effectively enables him to
help shape trade and economic policy. Jonathan, who last year awarded
Dangote Nigeria’s second-highest honor, Grand Commander of the Order of
the Niger, attended a ceremony for the opening of a production line at
the Obajana plant in June.
When asked if he would run for
president, Dangote is adamant: “Never, never. I don’t want to go beyond
my life ambition … Most of the presidents, I’ve been giving them advice,
whether they solicit it or not. So far they always listen to me. If I
have an idea, I can actualize it through our political leaders.”
But
Dangote’s methods don’t just involve political connections. One tactic
for protecting his virtual monopolies is the use of temporary price
drops – lawful in Nigeria where anti-trust legislation is scant.
In
2010, for instance, as Lafarge set up a packing plant in Ogun state,
Dangote dropped its prices to 27,000 naira from 30,000 naira, enough to
squeeze its rival’s margins. A few weeks later Dangote put its prices
back up, says an executive in Nigerian industry.
“It sent out a strong message, that he’s in control,” said the executive, who would not be named.
Nor
does Dangote shy away from using litigation. He is currently embroiled
in a legal tussle with one of his arch-rivals in the cement business,
Cletus Ibeto.
Former president Obasanjo shut down Ibeto’s cement
plant for allegedly claiming investment tax breaks on false pretences.
When Umaru Yar’Adua became president in 2007, he reopened Ibeto’s
business and gave him preferential import duties and zero VAT to
compensate him for losses under Obasanjo.
Now Dangote is asking a
court to cancel those tax breaks. And in a country where the bigger fish
tend to win, few think Ibeto stands a chance. Ibeto did not return
calls for comment.
Dangote says he always acts lawfully, and that
one particular source of irritation to competitors – the five-year tax
holiday he got on all his factories – is available to any Nigerian
business if they promote domestic industry. Such tax breaks are open to
companies that receive ‘pioneer status’, which dozens of Nigerian firms
have. To get it, a company has to prove it has made substantial new
investments, which none of Dangote’s competitors in the cement business
have been able to do.
GOING GLOBAL
Supporters say Dangote
demonstrates that Nigeria can succeed internationally in sectors besides
fossil fuel extraction or online fraud, and that Africa can succeed in
industry without having to rely on foreign investment from the West
or China.
“He’s an African investing in Africa, creating jobs in
Africa that will eventually build a sustainable middle class,” says
Nigerian Stock Exchange Director General Ade Bajomo. “The wealth created
by Africans is the wealth that tends to stay onshore.”
The other
lesson – that Africa must process the minerals it digs up if it wants to
create jobs – chimes with what African leaders such as Uganda’s Yoweri
Museveni have said for years.
With an annual turnover of $2.5
billion, the Dangote Group contributes nearly 1 percent of the GDP of
Africa’s second biggest economy, and employs 23,000 people in a country
with massive unemployment.
Dangote also makes cement domestically
on a continent with a booming population, dilapidated infrastructure and
a chronic housing shortage.
“We are putting these cement
facilities in sub-Saharan Africa where there is need,” he says. “The
market is already there, so we are closing the gap between supply and
demand.”
A London listing would mean replacing the board of
Dangote Cement, of which he is chairman, as it is currently made up of
Dangote’s relatives and close associates. Dangote says he is seeking an
independent board; colleagues doubt he’ll find it easy to step back.
GOING GLOBAL
Analysts
say the speed at which Dangote is building his pan-African empire is
risky, citing project delays and management issues as their greatest
concerns.
In a report in May, Renaissance Capital warned that his
factories may struggle to get the gas supply they need, which would
lower projected margins.
Another worry is that Dangote’s success
in a corrupt, closed economy like Nigeria may not be easily reproduced
in countries with a more level playing field.
“The question is: if
you are good at doing business in Nigeria, does that mean you have a
business model that can adapt to an environment outside Nigeria?” asks
Antony Goldman, head of London-based PM Consulting, who lived in Nigeria
in the 1990s. “Can he make it a global brand?”
Dangote clearly
thinks so, though for the time being he wants to focus on sub-Saharan
Africa. He says expansion is being financed by profits so that, when
it’s completed, “we’ll not owe any bank money.”
“For now, we don’t
want to have too many balls in the air, but of course we have ambition
to expand (beyond Africa),” he says. Then, pausing to smile, he adds:
“If you don’t have ambition, you shouldn’t be alive.”
Source: Reuters
