NIGERIA

HANDY WITH CEMENT: Aliko Dangote, founder of the Dangote group and friend of several presidents. REUTERS/Akintunde Akinleye

Africa’s richest man has global ambitions for his cement business. Can he succeed on the world stage? In Nigeria, a concrete get-rich scheme

BY Tim Cocks Lagos, september 11, 2012

liko Dangote has always liked making things to sell. As a child he boiled up sugar to make sweets he sold around town; these Adays he cooks up limestone in factories that produce millions of tonnes of cement. Dangote’s entrepreneurial skills have helped make him Africa’s rich- est person, with cement plants opened or under construction every- where from Senegal to Ethiopia to South Africa. He dreams of owning the largest cement firm on the planet. By 2015, he hopes, his industrial

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conglomerate will be worth four times its Foundations of a fortune current estimated $15 billion. “We’ve taken the flag of Nigeria and flag How cement production is shared worldwide. Though Africa’s share is modest, Aliko Dangote dominates there of Africa and put them in places they never expected to be seen,” beams the slightly CHINA EUROPE AFRICA greying, young-faced tycoon sitting in his 57.3% 7.6% 4.7% office in the commercial hub of Lagos. Be- hind him is a map of Africa and a photo- graph of his cement plant in the town of Obajana, set to have a capacity of 13.25 ASIA AMERICAS million tonnes a year by 2015, which would 23.0% 7.1% make it the world’s biggest. But the 55-year-old is not without con- troversy. To some, he is an unassuming man Profits at Dangote Cement Dangote’s estimated net worth: despite whose quiet demeanour stands out in a na- have been rising sharply a dip, he remains Africa’s richest person tion where success is usually marked by talk- $750 ative swagger; to others, he is a monopolist million $15 who uses aggressive tactics and political ties billion to beat competitors. Critics accuse him of using his influence 500 with successive governments to ban imports 10 by his competitors, pushing port authorities to halt rivals’ shipments, and using sharp 250 5 price drops to put them out of business. Dangote admits he has been friends with several recent presidents of Nigeria and has 0 0 enjoyed lucrative tax breaks, though he de- ’08 '09 '10 '11 ’08 '09 '10 '11 '12 nies receiving any special favours. Note: Profit figures converted from Nigerian naira at rate of $1=158 naira However he got there, there is little doubt Source: Cembureau (cement production); The companies (profit after taxes); Forbes (net worth) 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 Dan- firm in late 2010, it boosted his estimated with the necessary corporate governance gote Group refines sugar, mills flour, pro- personal wealth five-fold to $13.8 billion, standards. That would be a rare feat for a cesses salt, and produces cement. making him the fastest riser on the Forbes Nigerian company. Guaranty Trust Bank At present only 5 percent of Dangote rich list. After a bad year on the Nigerian and Diamond Bank have secondary listings Cement and 25 percent of his flour and stock market, he is still worth $11.2 billion. in London, but both are too small to make sugar companies are publicly traded; almost Dangote now wants to list 20 percent of the top FTSE index. all of the other shares are held by Dangote. the cement company on the London Stock Born in April 1957 in the northern Ni- His total annual pay cheque isn’t public, but Exchange late next year, at a price that gerian city of Kano, Dangote comes from a Dangote Cement, Dangote Flour Mills and would value it at $35 billion to $40 billion. family of wealthy Muslim merchants. After Dangote Sugar are all hugely profitable. That would make it the world’s top cement demonstrating his early entrepreneurial spirit Dangote Cement’s pretax profit for the firm by market capitalisation, bigger than selling sweets, he headed to Egypt to study first half of 2012 grew by 23 percent to 71.3 Lafarge of France, and surpassing mobile business at Cairo’s Al-Azhar university. billion naira ($443 million). The sugar re- phone operator MTN as Africa’s top stock. In 1977 he borrowed about 500,000 Ni- finer nearly doubled its profits to 8.5 billion Hurdles remain. The tycoon will have to gerian naira from his uncle to trade basic naira over the same period. convince investors and regulators that his foods: cooking oil, sugar, pasta. Four years When Dangote floated the cement personal empire can be a FTSE 100 firm later he bought trucks to start a transport

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firm and within a decade was importing He’s not in it for the money fortunes blossomed when his close friend bulk goods, including cement. By the time or the opulent lifestyle; he’s in it to Olusegun Obasanjo became president in he turned his hand to manufacturing the win. It’s all like a game to him. 1999, Browne wrote in the cable. stuff - buying a defunct cement plant in Browne could not be reached for comment. 2000 and reviving it - he was a rich man. Bismarck Rewane Obasanjo - whose 1999 election ended Dangote, who married young and has CEO of Financial Derivatives, years of kleptocratic military dictatorship - three daughters - he and his wife are now on his friend Aliko Dangote gave Dangote exclusive import rights to ce- estranged - says he has never been moti- ment, sugar and rice, the cable suggests, in re- vated by wealth. turn for Dangote’s support, including funding “I’m not in it for the money. No, no,” he Obasanjo’s re-election campaign in 2003. says. “I like to run a business that’s success- “It is no coincidence that many products ful ... I’m a very creative person.” He says he Nigeria’s import ban lists are items in which eschews conspicuous consumption. Dangote has major interests,” Browne “I have a very simple life.” wrote. “He has had success in blocking Up to a point. Like many billionaires, he trade and investment that might compete owns a yacht as well as large properties in with his enterprises.” He concluded that Ikoyi, a leafy Lagos suburb, and neighbour- Dangote is “harmful to Nigeria’s interests”. ing Victoria Island, home to Africa’s most Dangote frowned, visibly annoyed, when expensive real estate. Then there’s the pri- Reuters read him the cable during an inter- vate jet, which he says he bought to avoid view. Building relationships with presidents hangers-on who used to book first class is a normal part of being a business leader, tickets on the same flight as him. he said, denying he had used connections to Still, by the standards of Nigeria’s cham- stifle competition. pagne-swigging, sports car-collecting rich, “We’ve been close to almost all the he’s not that extravagant. presidents that have passed,” he said, nam- Old friend Bismarck Rewane, CEO of ing military dictators Muhammadu Buhari, Lagos-based consultancy Financial De- Ibrahim Babangida and the notorious Sani rivatives, remembers a business dinner at Abacha as examples. But, he insists, “we the palm-fringed Eko Hotel in the city. CLOSE FRIEND: Former Nigerian president, have never taken advantage ... and we were When he and Dangote left in Dangote’s Olusegun Obasanjo, granted Aliko Dangote not even always treated fairly.” black Mercedes, hotel staff charged 5,000 exclusive import rights on key products. These days, Dangote’s relationship with Nigerian naira ($32) for parking – exces- REUTERS/Ray Stubblebine presidential power has become symbiotic: sive, but peanuts for a man of Dangote’s presidents need to court him too. wealth. Indignant at the attempted rip- He is on President Goodluck Jonathan’s off, the cement king negotiated it down to “The banks were nervous, but they couldn’t economic management team and the gov- 1,000 naira. stop the money. We were too big to fail.” ernment’s job creation committee, which “He spent a good few minutes doing effectively enables him to help shape trade POLITICAL CONNECTIONS it. I said to him: ‘let’s just go. Our time is and economic policy. Jonathan, who last more valuable than a few thousand naira.’ Dangote’s success has not been without year awarded Dangote Nigeria’s second- But he wouldn’t let it go,” Rewane said of controversy. In a 2007 diplomatic cable highest honour, Grand Commander of the the tycoon. “He smiled afterward. He was that ended up last year on the WikiLeaks Order of the Niger, attended a ceremony so happy he’d got a good deal.” website, the then U.S. Consul General in for the opening of a production line at the Dangote is not always so frugal. Lagos, Brian Browne, wrote: “To detrac- Obajana plant in June. “He dreams big, some might say too big. In tors, he is a predator using connections in a When asked if he would run for president, 2004-5 we owed 80 billion naira (about $500 corrupt political economy to tilt the playing Dangote is adamant: “Never, never. I don’t million),” recalled Uzo Nwankwo, a fund man- field in his favour.” want to go beyond my life ambition ... Most ager who was Dangote Cement’s executive di- Critics say Dangote owes as much to of the presidents, I’ve been giving them ad- rector of corporate finance from 2005 to 2007. political favours as business acumen. His vice, whether they solicit it or not. So far they

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Africa’s wealthiest people The routes to riches: cement, luxury goods and telecoms

Aliko Nicky Nassef Johann Mike Naguib Dangote Oppenheimer Sawiris Rupert Adenuga Sawiris Nigeria South Africa Egypt South Africa Nigeria Egypt

Interests in Fortune from Heads Runs Richemont, Heads oil Built up Orascom cement diamonds, sold construction luxury goods firm company Conoil Telecom, then manufacture , family stake in De company, has with brands such Producing, owns sold family stake. sugar refining and Beers in 2011 stakes in cement as Cartier Globalcom, Now pursuing flour milling producers Nigeria’s second other investments largest telecom and politics

$11.2 billion $6.8 billion $5.1 billion $5.1 billion $4.3 billion $3.1 billion

Source: Forbes 2012 list of billionaires always listen to me. If I have an idea, I can he reopened Ibeto’s business and gave him industry without having to rely on foreign actualise it through our political leaders.” preferential import duties and zero VAT to investment from the West or China. But Dangote’s methods don’t just in- compensate him for losses under Obasanjo. “He’s an African investing in Africa, volve political connections. One tactic for Now Dangote is asking a court to cancel creating jobs in Africa that will eventually protecting his virtual monopolies is the use those tax breaks. And in a country where build a sustainable middle class,” says Nige- of temporary price drops - lawful in Nigeria the bigger fish tend to win, few think Ibeto rian Stock Exchange Director General Ade where anti-trust legislation is scant. stands a chance. Ibeto did not return calls Bajomo. “The wealth created by Africans is In 2010, for instance, as Lafarge set up a for comment. the wealth that tends to stay onshore.” packing plant in Ogun state, Dangote dropped Dangote says he always acts lawfully, The other lesson - that Africa must its prices to 27,000 naira from 30,000 naira, and that one particular source of irritation process the minerals it digs up if it wants enough to squeeze its rival’s margins. A few to competitors - the five-year tax holiday to create jobs - chimes with what African weeks later Dangote put its prices back up, says he got on all his factories – is available to leaders such as Uganda’s Yoweri Museveni an executive in Nigerian industry. any Nigerian business if they promote do- have said for years. “It sent out a strong message, that he’s mestic industry. Such tax breaks are open With an annual turnover of $2.5 billion, in control,” said the executive, who would to companies that receive ‘pioneer status’, the Dangote Group contributes nearly 1 not be named. which dozens of Nigerian firms have. To percent of the GDP of Africa’s second big- Nor does Dangote shy away from using get it, a company has to prove it has made gest economy, and employs 23,000 people litigation. He is currently embroiled in a le- substantial new investments, which none of in a country with massive unemployment. gal tussle with one of his arch-rivals in the Dangote’s competitors in the cement busi- Dangote also makes cement domesti- cement business, Cletus Ibeto. ness have been able to do. cally on a continent with a booming popu- Former president Obasanjo shut down Supporters say Dangote demonstrates lation, dilapidated infrastructure and a Ibeto’s cement plant for allegedly claiming in- that Nigeria can succeed internationally in chronic housing shortage. vestment tax breaks on false pretences. When sectors besides fossil fuel extraction or on- “We are putting these cement facilities in Umaru Yar’Adua became president in 2007, line fraud, and that Africa can succeed in sub-Saharan Africa where there is need,” he

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says. “The market is already there, so we are may not be easily reproduced in countries pleted, “we’ll not owe any bank money.” closing the gap between supply and demand.” with a more level playing field. “For now, we don’t want to have too many A London listing would mean replacing “The question is: if you are good at do- balls in the air, but of course we have am- the board of Dangote Cement, of which he is ing business in Nigeria, does that mean bition to expand (beyond Africa),” he says. chairman, as it is currently made up of Dan- you have a business model that can adapt Then, pausing to smile, he adds: “If you don’t gote’s relatives and close associates. Dangote to an environment outside Nigeria?” asks have ambition, you shouldn’t be alive.” says he is seeking an independent board; col- Antony Goldman, head of London-based leagues doubt he’ll find it easy to step back. PM Consulting, who lived in Nigeria in the Editing by Richard Woods, Sophie Walker and Analysts say the speed at which Dan- 1990s. “Can he make it a global brand?” Simon Robinson gote is building his pan-African empire is Dangote clearly thinks so, though for risky, citing project delays and management the time being he wants to focus on sub- FOR MORE INFORMATION issues as their greatest concerns. Saharan Africa. He says expansion is being Tim Cocks, chief correspondent, Nigeria In a report in May, Renaissance Capital financed by profits so that, when it’s com- [email protected] warned that his factories may struggle to Simon Robinson, Enterprise Editor, get the gas supply they need, which would REUTERS TV Europe, Middle East and Africa [email protected] lower projected margins. See the video on: Michael Williams, Global Enterprise Editor Another worry is that Dangote’s success http://link.reuters.com/quw52t in a corrupt, closed economy like Nigeria [email protected]

MAKING A PILE: Limestone at the Obajana cement plant, which is a key part of Aliko Dangote’s business empire. REUTERS/Akintunde Akinleye

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