Dangote: Why I Dumped Trading for Manufacturing

The President of the Dangote Group, Mr. Aliko Dangote, explains why he jettisoned the easy way of making money from buying and selling of commodities to venture into the much challenging business environment of manufacturing Nigeria. He also speaks on what the African Continental Free Trade Area (AfCFTA) agreement means to the group in a fire chat with an Economist, Dr. Doyin Salami, during the High-Level Roundtable Discussion on Industrialisation in Africa to heralds the 50th-anniversary celebration of the Manufacturers Association of Nigeria (MAN). Dike Onwuamaeze brings the excerpt:

From your Pan Africa experience as an operator in 17 African countries, what is your thought about Africa developing a competitive manufacturing sector?

FThank you very much. To be really globally competitive we must produce very high-quality products and we have to produce them at the cheapest cost possible. Others have been there before us if you look at the Asian tigers but I know that it is never late because this can actually be done. But what I think we need to do is to concentrate first on meeting our own domestic demand, by producing high quality at the lowest price. If we do this we will be able to export to other countries and get their markets. That was what the Asian tigers did. They first concentrated on their domestic market and kept on improving on the quality and the cost of whatever that they were producing. Of course, initially, we might need government support to stabilise and be able to compete anywhere in the world. But I think that government has to remove most of the hurdles in terms of poor infrastructure and unfriendly regulations and improve our power and ports environment. When we decided that we want to make Nigeria self-sufficient in cement, what we did, knowing that people will challenge us in terms of quality, was to start by investing heavily in technology to make sure that whatever that we want to produce in terms of quality is possible so that if the foreign markets open up we will be able to compete both in terms of quality and pricing. So, we did these investments and that has also given us a lot of edge by as we are able to go to markets like Cameroun, that even though a competitor has been there for 50 years, we were able to take the market because of quality and price of our products. I think we need to do quite a lot in terms of pricing because if your pricing is not right there is nothing you can do because no one is going to buy your product. We have already built that case in our cement and that is the business case we want to build in our fertilizer, our oil and gas, and in all other products that we want to export to African countries.

You group has diverse interests across countries in the continent and the issue of protectionism is very rife in the continent. What is your advice to the managers of the AfCFTA to ensure that we achieve cross border collaboration that can engender meaningful competition across the continent?

My advice to everybody when you look at it from the AfCFTA’s perspective and the potentials that it has, is to speed up its implementation. What are the things that we need to do? They need to sit down and ask themselves how we implement this because there are still issues that they are still battling with and I believe that they need to address those issues. And we need to also dig down to know why previous regional agreements in Africa have not worked? If they are working we wouldn’t be at about 15 per cent intra-African trade with Africa. We need to look at those issues and ask why and what happened? Today it takes us two weeks to go to Ghana from Nigeria, which is something we are supposed to do in 10 to 12 hours.

You invest in trucks to take cement to Ghana and it takes you two weeks and going to Lome in Togo, which is about 270 kilometers from Lagos, is taking us 10 days today as we speak. If that is the case we are not going to be competitive. You are talking about gas? Our gas prices here are almost double than other normal areas. So, how can we be competitive? Government has to do quite a lot in terms of having the political will to remove all these bottlenecks at the borders. Why will they want to hold somebody going through the borders when they know that these goods have to pass under the signed agreement? There are quite a number of issues that we need to address.

For example, today, if I want to go through the ports the government will charge me $10 per tonne even though I am exporting a very cheap product to the next country. So why should I pay $10 per tonne in terms of port charges? So, I think that there are quite a lot of areas we have to look at to make this thing competitive. The border crossing is the most important one for us. We must make sure that crossing our borders does not take time. It will not make sense at all if it is going to take time. People would rather ship from China straight into their markets. So, we need to be very, very, careful. Similarly, when you look at it today, every single border you go to has different charges. So, I think that governments need to focus on this by removing all these impediments and barriers and make sure that we have a very free flow for businesses. We will never be competitive if we do not do that.

The whole idea for us is to improve and get this intra-African trade to be almost about 55 to 60 per cent. We actually need to work with the government to remove these bottlenecks, which will need a lot of political will by governments. Let me give you a typical example. A lot of countries signed in preparation for the AfCFTA take off to have one single Africa passport. I have gotten mine.

A President in Africa that I will not like to mention invited me to come and see him and I went there but they did not recognise that passport. It was recognised in South Africa but not far away from South Africa, they said that I still need to have a visa to travel. So the movement of goods, services and people is still so very tough and for the AfCFTA to work we have to remove all these impediments and this needs a lot of political will.

How ready is the Dangote Group to be a participant in the AfCFTA?

Thank you. You know that long before the AfCFTA, we have always designed and planned to be an export-based company. If we had relied on importing wheat to produce flour and pasta, that business would have folded because we are not going to be competitive relying on the international price of wheat.

So, we are not touching anything that we cannot achieve through local backward integration to produce and export. This is what I keep telling people. At first, people thought that we (Dangote Group) were not interested in the AfCFTA. No! We are interested in the AfCFTA because we are going to be the major beneficiaries. Number one, if you look at it today, we have the largest fertilizer plant in Africa so we will supply fertilizer all over the continent.

We are building the largest petrochemicals on the continent. We are also building 650,000 barrels per day petrol refinery. All these are not for the Nigerian market alone. They are actually for Sub-Saharan Africa because all the Sub-Saharan African countries are importing their petroleum products. When you look at it today, in cement we have created huge capacity in terms of exports. We already have two port terminals that have the capacity for eight million tonnes, one in Port Harcourt and another in Lagos for us to be able to export cement. Despite our gas prices, despite even the port charges we are still okay in terms of being competitive. So, if we start all our exports, we will be able to export more than $12 billion worth of goods, and that has actually put us as one of the highest in Africa, if not the number one.

Trading seemed an easier proposition. Why did you go into manufacturing giving all the difficulties that you have listed?

Before I started manufacturing I do not have a single gray hair. But you have to check why other entrepreneurs before us that tried manufacturing were not really very successful? For manufacturing, you will need very stable government policies. You need to have electricity. These two things are the most important. And I am glad that today we have a good relationship between the government and the MAN. The government’s own is to listen as we tell them areas that are not implementable. Then back to your question on how I got into manufacturing. For me, it is better that I go into manufacturing than trading. Trading does not add value and is just a temporary thing because one can be trading today and tomorrow decides to shut down his shop.

But manufacturing is where you will create massive jobs and also leave a legacy and the whole thing for me is to build something that I should leave as a legacy to future generations. At a time Nigeria was importing almost 90 per cent of the cement consumed in this country. But we took it upon us to make sure that we will make Nigeria self-sufficient and also export the excess that we have. For me, trading is really not the right way to go. I know, yes, that manufacturing is really difficult but we have to work together with the government to make it much easier so that we can add value. Somebody who is trading has a simple lifestyle: he sits in his office and order goods, they arrive and he sells without adding any value. But for manufacturing, you are creating value for yourself, for the society, for the country, and for everybody.

“The border crossing is the most important one for us. We must make sure that crossing our borders does not take time. It will not make sense at all if it is going to take time.”