Dangote Group: Key factor in Nigeria’s import-substitution ambition

No country has successfully transformed from poor to middle/high-income economy without an advanced, diversified and efficient industrial sector.

Economic histories of Europe, North and Latin America, Asian Tigers, China and even India buttress that countries at the middle or top ends of the global ladder today got to these heights by adopting home-grown policies targeted at making manufacturing industries key growth drivers.

Central to these policies were industries, which, against all odds, opened up latent sectors or sub-sectors, and, in many cases, galvanised growth and pointed the way for others.

The United States had Ford Motors and Mc Cormick Harvesting Machine Co;  while Europe had DuPont and Friedrich Krupp AG.

Nigeria’s government is currently planning to go the way of Europe, the Americas, the Asian Tigers and China, having already accepted to implement the much awaited import-substitution industrialisation, which aims to replace foreign imports with domestic production.

Key to this industrial strategy is the Dangote Group, which has traversed areas where even angels feared to tread.

“You cannot talk about manufacturing today in Nigeria without Dangote Group,” Matthew Ibeabuchi, managing director of MD Services, a firm specialising in the production of chemicals, told Real Sector Watch.

“One key thing the Group has done for Nigeria is to show investors the way,” Ibeabuchi said.

An objective analysis of Dangote Group must begin with its transition from import to manufacturing conglomerate. Dangote Group started in May 1981 as an importer of most of the goods it currently produces. But this took a dramatic turn in 1999 after the country’s transition to civilian rule.

Real Sector Watch was told that the Group’s philosophy changed after a tour of Brazil, which focused on studying the emerging manufacturing sector of the country.

The visit clearly opened the eyes of the Group to opportunities yet untapped in Nigeria’s manufacturing sector, prompting it to transit into a full-fledged manufacturing operation.

The Group consequently embarked on an ambitious construction programme, initially focused on the construction of flour mills, a sugar refinery and a pasta factory. In 2000 it acquired the Benue Cement Company from the Federal Government and in 2003 commissioned the Obajana Cement Plant, which is Sub-Saharan Africa’s largest cement plant.

Currently, the conglomerate is reputed as Nigeria’s biggest investor and most diversified Group, with products such as cement, sugar, noodles, salt, water, beverages, flour, fish, sacks, rice and tomato, among others, on its catalogue.

Checks show that Dangote Group opened up the cement industry through innovations and heavy investments, building plants in Obajana, Ibese, Gboko and recently Okpella and Itori. As a pan-African investor, the Group has spread investments to more than 14 African countries, ranging from Ghana to Angola and Cameroon, among others.

With the Okpella and Itori’s plants’ six million metric tonnes (MT) each coming, Dangote Group could soon hit well over 40 million MT.

At the commissioning of the Okpella plant, Aliko Dangote, Africa’s richest man and president of Dangote Group, highlighted that the new cement plant would increase the $3 billion the country had been saving from import-substitution in cement yearly.

According to Dangote, the new investment would raise the Group’s cement capacity to 41 million MT in Nigeria alone, vowing to keep up investments in Africa’s largest economy.

Apart from Dangote Group’s exploits in cement, which also includes price slash, its investment in sugar opened up the once latent industry, earlier characterised by abandoned industries.

The National Sugar Development Council (NSDC) said in 2014 that investors were pumping $2.6 billion into the sugar industry. Out of this Dangote Sugar led with $2 billion, investing in six states in the country, through its Savannah Sugar in Numan, Adamawa State, North-East Nigeria.  The Group targets 1.5 million MT and expansion from current 6,500 hectare (ha) to 21,000 ha, to produce 100,000 tonnes sugar annually by 2018.

Aliko Dangote has been emphatic that Africa’s biggest economy would end sugar importation between 2017 and 2018, once good policies that would continue to foster investments remained.

It is a shame that Nigeria still spends N3.6 trillion annually on salt importation.  It is also worrisome that there are still few players in the industry, mainly Royal Salt, Union Dicon and Dangote’s National Salt Company of Nigeria.

An analysis by TechNavio’s, a research firm, said few years ago that the salt market had grown considerably, though with little local production. The analyst said one key reason for the growth of the salt market was rising demand from chemical processing firms in Nigeria and other African countries.

“But one thing should not be overlooked. Dangote opened up the salt industry. A good investor takes calculated risks, and these the Group has done. But more importantly,  the Group goes where an ordinary investor thinks there won’t be profit,” said Patrick Egbuna, a UK-based market watcher.

Apart from recently launching a $20 million tomato processing plant in Kano, which is currently suspended on the back of fresh tomato scarcity, the Group has also pumped $1 billion into rice production.

Sani Dangote,  president of the Nigerian Agribusiness Group (NABG) and group vice president of Dangote Industries Limited, told BusinessDay recently that investors like Dangote Group needed better policies, criticising past policies which mixed backward integration and importation.

Exactly two months ago in Johannesburg, a South African millionaire and off-shore investor told this writer that if  Nigeria had had five corporate entities like Dangote Group before now, so many of its socio-economic problems would have been over.

The investor cited job creation, import-substitution, tax revenues to the government, foreign exchange earnings and increased manufacturing capacity as areas where Dangote Group has supported Nigeria.

Analysts generally say Dangote Group has created more jobs than any private investor in the country, advising that with its doggedness in investing in virgin or abandoned industries, Nigeria needs to encourage the Group and other investors willing to help the country achieve import-substitution, self-sufficiency and job creation drive.

 

ODINAKA ANUDU