Africa has emerged a sure-footed and high yielding region for investment, but its transformative change in investment possibilities is driven, not by foreigners, but by Africans, spearheaded by Nigeria’s industrialist Aliko Dangote. Aside boosting Africa’s cement market with an investment of over $16 billion, he has invested substantially in other critical sectors, such as oil and gas, agriculture and telecoms. Now, he is even trying to acquire Arsenal. Assistant Editor CHIKODI OKEREOCHA reports
For years—and with good reason—investors around the world perceived Nigeria and indeed, economies of Africa as high-risk investment destinations. The continent’s huge infrastructure gap, unbridled corruption and political instability, among others, combined to make it a nightmare for investors looking to generate high returns on investment. This was why most investors held back, preferring to look elsewhere for investment opportunities. But things have changed. Like the rejected stone that became the cornerstone of the builder, Nigeria and indeed, economies in Africa are now the toast of investors.
The recent spurt of investment in Africa, The Nation learnt, is not unconnected with the increasing political stability, a rising middle class, and access to better technologies, increased consumption and higher rates of growth in most economies of Africa. The rapid growth is being spurred by massive investments in critical sectors such as manufacturing, oil & gas, agriculture, telecoms, and the fast moving consumer goods sector, among others.
But it is not the fact that economies in Africa have become beautiful brides to investors that makes the development heart-warming; rather, it is that much of the investments in Africa are made by Africans, not just foreigners. It is even more exciting considering the fact that the massive investments are being spearheaded almost single-handedly by Nigeria’s foremost industrialist and President, Dangote Industries Limited (DIL), Alhaji Aliko Dangote.
In doing so, the Pan-African investor is buoyed by what he sees as the continent’s economies’ bright future and is willing to invest in it. His confidence is exemplified in the growing number of sectors and businesses across Africa where he is investing heavily. “….for me this is no longer just for profit, it is also to make a statement and to teach Africans that there is no limit to what can be achieved through diligence and to tell the world what they are missing for not believing in Africa and trusting it with their investments,” Dangote said, on the sideline of the commissioning of Dangote Cement Plant, Ethiopia some weeks back.
Running a ring round Africa’s cement market
In the cement sub-sector alone, Africa’s largest independent cement producer, Dangote Cement Plc, is investing a staggering $16 billion in new projects and existing cement plants across Africa in the next three years. Dangote explained that the investment was in line with the company’s long term vision to become one of the world’s biggest cement producers.
Hear him: “We envisage that by the time we complete all our ongoing African projects, we will be on track to achieving our target.” The target, The Nation learnt, is to develop a 50 million metric tonnes per annum (MMTPA) of cement production and terminal capacity before the end of this year. To make that happen, the company is currently simultaneously setting up new cement plants and terminals across 16 African countries, including Ethiopia.
The Ethiopia cement plant located in Mugher Village, about 85 kilometers from Addis Ababa, the Ethiopian capital, has 2.5 Million Metric Tonnes Per Annum (MMTPA) capacity, but plans are afoot to double the capacity of the newly-opened $480 million plant. According to Dangote, expansion work would begin before the end of this year. The cement factory, which lies on 134 hectares of land, was built by Sinoma International Engineering, a Chinese construction firm. Sinoma is a leading cement factory construction contractor.
Dangote said the cement plant is the sixth offshore plant that has commenced operations in Africa outside Nigeria. Other countries where the company’s plants are currently running thus, adding to Dangote’s relentless investment drive across Africa include Senegal, Cameroon, Ghana, South Africa, and Zambia. His $500 million cement plant in the East African country of Tanzania inaugurated in May 2013 is set for commissioning in few months time. The Nation learnt that baring last minute hitches, the 3 MMTPA gas-fired plant in Mtwara, Tanzania, will roar into life in October this year.
Other plants in other African countries are said to be in various stages of construction, and are scheduled for completion next year. The company’s 1.5 MTPA cement plant located in Pout district of Senegal, about 75 kilometres East of Dakar, the country’s capital, was commissioned earlier this year. The billionaire businessman invested over $307 million into the project, which elicited so much excitement by the government and its estimated 14 million people over the prospect of providing over 5, 000 direct employments.
The Ethiopia plant alone would create direct employment for about 2, 000 people in the main plant operations and logistics with a fleet of about 600 trucks, as well as over 5, 000 indirect jobs. “The project will, in addition, substantially boost the supply of cement to the Ethiopian market. With the envisaged increase in the availability of cement in the market, the entire construction industry, which creates thousands of jobs, will receive a boost,” Dangote announced.
He noted that with youths constituting about 55 per cent of Ethiopia’s 95 million population, youths will benefit most from the project. “It is also our hope that successful completion of a project of this magnitude will motivate other foreign investors to invest in Ethiopia. Our investment is a sure and solid step in the journey of the transformation of Ethiopia from an agricultural-based economy to an industrial economy,” he added.
Yet, the goodies are not for Ethiopia and its people alone. Since last year when Dangote’s cement plant in Cameroon commenced operations, it has also been spewing thousands of direct and indirect jobs for the locals. The plant, which churns out the premium 42.5 grade cement, which has extra strength, extra yield and extra life in line with the standard in all its factories across the world, has also been adding immense benefits to the local economy. The company invested over $140 million in the 1.5 MMTPA plant, located within the premises of the country’s largest sea port in Douala, Cameroon’s commercial capital.
Dangote has also spread his tentacles to South Africa. His 1.8mt cement plant in Aganang and another 1.5mt plant in Delmas, both in South Africa, have since been operational. Dangote’s acquisition of 64 per cent equity in local company Sephaku Cement is said to have given him a foothold in the Rainbow nation’s cement market. The deal, according to experts, represents the single largest foreign direct investment in South Africa by an African company.
Similarly, the 1.5 MMTPA Dangote Ndola plant in Masaiti, Zambia, is also operational. Although, the 1.0mt cement plant in Tema, Ghana, is operational, there are plans to double the capacity to 1.5mt by 2016. Others are the 1.5 MMTPA grinding plant in Abidjan, Ivory Coast; the 1.5mt facility in Madingou, Republic of Congo; the 0.7mt facility in Freetown, Sierra Leone, and the 0.75mt plant in Monrovia, Liberia’s capital.
For Dangote, charity must begin at home. Before his offshore investments, he had invested substantially in his home country Nigeria, Africa’s largest market. “We are not only self sufficient in cement production in Nigeria, where Dangote Cement accounts for over 60 per cent of the market, but we now export cement,” he told a crowd of appreciative Ethiopians and some members of the Nigerian business community at the commissioning of the Ethiopia cement plant.
The Pan-African investor was right. The current total production capacity in Nigeria from the company’s three existing cement plants in Nigeria namely, Obajana, Kogi State (13.25 MMTPA), Ibese, Ogun State (12.0MMTPA), and Gboko, Benue State (4.0MMTPA) is 29.25MMTPA. The Obajana Cement Plant is reputed to be one of the single largest cement plants in the world. It is also one of the eight largest manufacturing concerns in the world.
Foray into oil and gas… a game changer
Interestingly, cement is not the only sector where the savvy investor has sent a strong message to the world that they are missing a lot for not believing in Africa and trusting it with their investments. For instance, the Dangote Refinery and Petrochemical Company, for which Dangote is committing a whopping $9 billion, about N1.5 trillion, has raised the bar on investment in Africa by Africans.
Construction work on the biggest petroleum oil refinery and petrochemical/ fertilizer plant in Nigeria is expected to commence in 2016. Located at the Lekki Free Trade Zone, Lagos, Southwest Nigeria, the project said to be the biggest and most ambitious investment by any single African investor, has refining capacity of about 400,000 barrels of crude oil per day. By producing a variety of refined fuel products from local crude resources, the refinery will help Nigeria cut its current volumes of imported fuel products by a massive 50 per cent.
According to Dangote, the fertilizer plant, which will produce 2.8 million tonnes of urea, will be channelled into growing the local agriculture sector, which is essential in producing healthy crops and promoting Nigeria and West Africa’s agricultural development. The petrochemical plant, he said, will also produce polypropylene, which is a common component of most plastic and fabric products. ”This plant will further entrench Africa’s role on the global map as not only a valued contributor for natural resources, but also a competent manufacturer of refined products and fertilizer,” he stated.
Vice President of the Joe Ajaero-led faction of the Nigeria Labour Congress (NLC), Comrade Issa Aremu, could not agree less. He said Africa’s natural resources should be for the welfare of all Africans, not for the profiting of a few, especially foreign capitalists, adding that the refinery will definitely decrease Nigeria’s scandalous and unacceptable dependence on oil imports.
Comrade Aremu lamented that although Africa is a resource rich continent, it has low level of industrialisation, with materials being exported in their raw form. He said this was why labour is excited that Dangote is changing the narrative of the continent from that of ‘resource curse’ to resource beneficiation, value addition and mass employment through industrialisation and internal articulation of the African economy.
According to him, with a projected daily production output of 400,000 barrels a day, the same capacity of the combined four Nigerian government-owned refineries in Port Harcourt, Warri and Kaduna, which operate at less than 30 per cent of their installed capacity, it is hardly surprising why millions of private sector workers, organised in national and global unions in Africa, identify with the investment.
It could not have been otherwise. By the time the project is completed, it would probably dwarf the job creation potential of Dangote’s investments in other sectors, particularly cement. The refinery project is expected to provide jobs in excess of 85,000 for Nigerians. It will also turn the tide, as it will become a major foreign exchange earner in the export of refined petroleum products.
Revolutionary investments in agric
Dangote has never hidden his intention to revolutionalise the agric sector through aggressive investment in agric and food processing business. He has never seized to tell whoever cares to listen that his vision is to help realise the country’s agric potential such that every Nigerian would have food on the table. There is hardly any geo-political zone in the country where the billionaire businessman does not have either a completed or ongoing agricultural project. He is currently investing in fertiliser, rice, tomato paste and sugar production, among others.
For instance, he recently invested $1 billion (about N165 billion) on rice production and processing in five Nigerian states of Edo, Jigawa, Kebbi, Kwara, and Niger after acquiring farmland in those states totalling 150,000 hectares for the project. It is expected to become the largest single investment ever made in rice production in Africa. A Memorandum of Understanding (MoU) has since been signed between DIL and the Federal Ministry of Agriculture and Rural Development (FMARD).
Under the MoU, the indigenous multinational will also establish two state-of-the-art large-scale rice mills with a capacity to mill 120,000 Metric Tons of rice paddy each. This brings the total capacity to 240,000 Metric Tons, with plans to double the capacity within two years. The rice plant is estimated to produce 960,000 metric tons of milled rice, representing 46 per cent of rice imported into Nigeria. “Our goal of making Nigeria a net exporter of rice will be achieved faster by this significant investment,” Dangote said, at the MoU signing.
The investment would save Nigeria an estimated N360 billion spent yearly on rice importation, a fact not lost on Nigeria’s former Minister of Agriculture and now, President of African Development Bank (AfDB), Dr. Akinwumi Adesina. Hear him: “This investment by DIL is transformational for Nigeria and the rest of Africa. The 150,000 hectares of rice farms and the planned 240,000 Metric Tons processing capacity of international quality grade rice is guaranteed to turn Nigeria away from being a rice importing country to a major rice exporter.
“Through this billion dollar commitment, Dangote has clearly attested to the policies and approach that the Federal Government has undertaken to transform the nation’s agricultural sector.” The Minister noted that the rice self-sufficiency policy of the Federal Government was directed at saving Nigeria N356 billion annually and putting this into the hands of Nigerian rice farmers and rural communities.
Rice is not his only preoccupation in agric. Dangote, in a bid to replicate the success in the cement sub-sector in agric, is also investing massively in sugar cultivation as part of the national sugar master plan that would put Nigeria on the world sugar map and end importation of raw sugar.
Dangote Sugar, a subsidiary of the Group, is a key player in the sugar backward integration policy. The Nation learnt that the company is working towards producing one million tons of white sugar this year, cultivating 100,000 hectares in about six states of Sokoto, Kebbi, Jigawa, Taraba, Kogi and Kwara State. He is also said to be investing in tomato paste production in Kano.
Just like his investments in other sectors, Dangote’s intervention in agric has ignited a revolution in the employment market where thousands of jobless youths are now earning their livelihood.
How African economies found their rhythm
Experts say that going by the upsurge in investment across Africa, the continent holds the promise for the global economic turn-around. That is not an empty claim. According to World Bank’s recent report, Africa is the second fastest growing region in the world. Nine out of 15 countries in the world with the highest rate of economic growth are in Africa.
The report said despite worldwide economic slowdown, African economies have averaged growth rates of five per cent over the last ten years. Most of them are said to be aiming for double-digit growth in the next decade. In Rwanda, for instance, President Paul Kagame recently said the country is targeting 11.5 per cent annual growth in the next five years.
Similarly, Ethiopia has seen a period of significant and inclusive economic growth, with official Gross Domestic Product (GDP) growth rates surpassing 10 per cent over the past decade. The country projects a 10.6 per cent growth rate this year. This explains why today Ethiopia ranks among the fastest growing economies in the world, and has become a driving force for opening the African economic region.
“This makes Ethiopia the largest economy by GDP in East and Central Africa. The government is also investing massively in several large scale infrastructure projects, including construction of the continent’s largest hydro-power dam. All these make Ethiopia a beautiful bride to investors,” Dangote said, while explaining his decision to invest in the east African country.
Minister for Industry, Ethiopia, Mr. Ahmed Abitew, also said government of Ethiopia has put in place the right socio-economic policies and strategies that have created new opportunities for investment. He said the manufacturing sector has been given priority to ensure increase in its share of contribution to the country’s GDP from the current four per cent to 18 per cent.
Other factors driving aggressive investment in Africa include a rising middle class, access to more robust technologies, increasing political stability, unmatched agricultural potential and rapidly growing consumer markets, among others. While countries in East Africa, for instance, are key suppliers of commodities such as flowers, coffee and tea, and other agro-allied products, Nigeria has experienced significant growth in her emerging middle class.
Experts say that access to better technologies, for instance, has increased income per capita on the continent by 40 per cent in the past decade. According to recent surveys, 27 African countries have already reached middle-income status and by 2025 that number will rise to 40.
Perhaps, more importantly, there is increasing political stability and better governance across Africa. In Nigeria, for instance, there has been 16 years of uninterrupted democratic rule, a development that has been a shot in the arm of existing and prospective investors in the mould of Dangote.
As Kagame pointed out, many countries in Africa have undertaken reforms that ensure macro-economic stability and create a better climate for businesses to thrive. “In my own country, Rwanda, it takes only six hours to register a business,” he said, adding that countries have also taken deliberate steps to invest in areas that are most sustainable – its people.
According to him, over the past few years there has been significant effort to invest in human capital, specifically education and health. This investment, he said, has resulted in increased human capacity, a growing middle class and rising urbanization, all of which translate into greater and diversified domestic demand that in turn spur economic growth.
Infrastructure still bone in investors’ throat
For Central Bank of Nigeria (CBN) Governor Mr. Godwin Emefiele, Dangote’s investments underscore the importance of intra-African investment. “It confirms that Africans have the capacity to drive Africa’s economic integration rather than depend on foreign investors,” he said, adding that apart from engendering economic growth and development and creating employments, the investments would spur lots of positive externalities, as well as encourage bilateral economic ties.
But there is a snag: dearth of infrastructure particularly power, which Nigeria’s former Minister of Finance/Coordinating Minister for the Economy, Mrs. Ngozi Okonjo-Iweala calls “the single largest constraint on investment.” Although, there are several other challenges such as multiple taxation, policy inconsistency, unfriendly visa and regulatory policies, corruption and insecurity, among others, power appears to be the greatest pain in investors’ neck.
But, using electricity generating sets and power plants, he has been above to rise above this.
The Arsenal bid
Dangote’s latest love is the Premier League club Arsenal. The businessman is worth an estimated $18.4billion (£11.69bn), far in excess of current Arsenal majority shareholder Stan Kroenke (£4bn) and minority owner Alisher Usmanov (£9.28bn).
Speaking in May, Dangote told Bloomberg that “I still hope, one day at the right price, that I’ll buy the team.”
The 58-year-old said the building of a new oil refinery would give him enough wealth to make a bid for the Gunners.
“When we get this refinery on track, I will have enough time and enough resources to pay what they are asking for,” said Dangote.
He was close to buying the 15.9 per cent stake that Lady Nina Bracewell-Smith eventually sold to Kroenke, but pulled out.
For now, the Arsenal bid has to wait for the completion of the refinery at the Lagos Free Trade Zone.
