© The Financial Times Ltd 2016
FT and 'Financial Times' are trademarks of The Financial Times Ltd.
The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice.
October 11, 2013 1:07 pm
There is something of Fitzcarraldo about the way Aliko Dangote has set about bringing industry to sub-Saharan Africa. In Werner Herzog’s film, the protagonist, Fitzcarraldo, engineers the seemingly impossible passage of a 300-tonne ship from one tributary of the Amazon, over a hill, to another. He is in pursuit of a cargo of rubber to finance construction of an opera house. While the would-be rubber baron fails on the first front, he succeeds on the second, after a fashion, overcoming the setbacks thrown up by hostile terrain to stage an unlikely opera in the jungle. Dangote’s aspirations may be less operatic. One of his main ones is to become the richest man in the world. “It’s an ambition. Yes, of course,” he says. But Nigeria’s foremost multi-billionaire has at times defied odds as vertiginous as Fitzcarraldo to transform his commodities trading empire into one of Africa’s leading industrial conglomerates. He stands out among Nigeria’s elite class of super-wealthy for having done so, not by flipping contracts and securing concessions in the oil industry – which brings in the vast bulk of export earnings – but by securing a dominant share of trade in much humbler fare. In some of the most difficult operating environments for manufacturing in the world, he has built sugar refineries, flour, pasta, salt and other food processing plants. His cement division – the main driver of the group – is spread across 14 African countries. It includes one of the biggest plants in the world, in a remote stretch of undulating Nigerian savannah rich in limestone but, until he came along, bereft of power and roads.
Today, at the age of 56, and having only recently begun the journey beyond national and regional prominence to the global stage, Dangote is by far the most successful black African businessman in history. His net assets, as tracked by the likes of Forbes, have shot from a value of $3.3bn in 2007 to $22bn this year (several billion more according to the man himself).
It is a trajectory explained partly by the incomplete way such things are estimated, partly by the exponential growth of his businesses over the past decade and a half. Serendipity may also have played a role. “He hasn’t just accumulated capital, he has accumulated success. Success begets success,” Olusegun Obasanjo, Nigeria’s former head of state, told me.
Like the pioneers of African mobile telephony, Dangote has taken a punt on industry in places few industrialists dare to tread – seemingly at just the right time. Since the turn of the millennium, mobile phone companies such as Mo Ibrahim’s Celtel and South Africa’s MTN exploded the myth that the continent was too poor and unstable to be worth investing in. In doing so they blazed a trail for other service industries to profit from Africa’s fragile emergence from stagnation and conflict.
Dangote could be in a position to be an even more significant catalyst – by proving that labour-intensive manufacturing can also thrive on the world’s poorest continent, as freight costs for imports rise, power supplies improve and markets deepen. Nigerians have a reputation for stashing their cash abroad: Dangote has made a commitment to investing his at home, and hopes by doing so to persuade other investors to follow.
. . .
As policy makers across the continent reflect on a decade and a half of accelerating but relatively jobless growth, Dangote’s businesses provide one answer to the universal concern of the day: how to stave off potentially explosive frustration and create opportunity for the 70 per cent of the African population that is under the age of 30.
Last month, local and international banks announced their backing for his biggest project yet – a $9bn investment in an oil refinery, petrochemicals and fertiliser plant on Nigeria’s Atlantic coast. It seemed the right moment to ask what drives this enigmatic and deceptively self-effacing tycoon, what got him where he is, and whether he could one day overtake the likes of Bill Gates, Warren Buffett and Carlos Slim to build the biggest fortune in the world from south of the Sahara.
For a few uncertain days in Lagos it seemed those answers would have to be deferred. On one occasion, we were due to fly to Senegal to visit a cement project stalled by the angry descendants of a celebrated, early 20th-century cleric, Amadou Bamba, who claim ownership of the land. But, under obligation to the community he grew up with in the ancient trading city of Kano, in Nigeria’s predominantly Muslim north, Dangote went to the wedding of a state governor’s daughter instead.
On another day, when we were due to visit his vast Obajana cement plant in central Nigeria, he was diverted by a phone call from White House staff. A planned video conference with Bill Gates on a joint philanthropic venture also failed to materialise at the set venue, in Kano.
Over the course of a recent week, however, I did manage to trail the peripatetic billionaire across African skies from Lagos to Lanseria outside Johannesburg, where he shared 15 minutes with President Obama; to Obajana and then his sugar refinery at the Apapa docks – where Brazilian cane transits on its way into Coca-Cola bottles.
I also tracked down a cast of fellow travellers who have witnessed at close hand Dangote’s evolution from the sharp, DeLorean-driving scion of a Muslim merchant family to the workaholic industrial mogul he is today. All the while I was attempting to fill in gaps with the man himself, in executive lounges and 40,000ft up.
Dangote has private jets for different occasions – bush strips and international runways. But he is far from being your brash and bling tycoon. His impeccable manners are exemplified by the way he apologises to present company each time he answers his mobile phone. That is not a trait he shares with many big or small men from his country.
He is also Nescafé rather than Nespresso, as I discovered on his otherwise-tasteful motor yacht, moored on the lagoon that gave sub-Saharan Africa’s biggest city its name. What luxury he does enjoy appears curiously functional, less showmanship than props for the main act – which is leveraging his existing businesses to create a virtuous cycle of ever-expanding wealth and jobs.
The boat, I’m told, is a convenient place to entertain visitors, rather than a toy for the kind of watery excursions Dangote’s timetable ill affords. The planes? Well if you have to zip frequently from one poorly connected African city to another, and can afford to avoid accident-prone airlines, having your own makes sense.
His personal life is something of a mystery. He has three daughters, has been married twice, and is known as one of Nigeria’s most eligible, if otherwise preoccupied, men.
Fifteen years ago, he told me, he sold off a raft of properties abroad, including a sprawling 10-hectare estate next to the governor’s residence in Atlanta, Georgia, where he used to go on leave. In 2006, he ploughed the money back into his companies. He has taken just one week’s holiday since – in Miami this January. “As he grows older, whatever he buys has to add value to his business,” says Niyi Adebayo, a long-time friend.
. . .
Certainly, he has not gone overboard decking out his rented company headquarters, my first stop. They are situated by the Falomo bridge in the old colonial district of Lagos, facing a mishmash of commercial buildings, hotels and flats that have sprouted up on reclaimed swamp. On the lower floors, wires hang down from broken ceiling panels. Musty smells emanate from somewhere.
Some of Dangote’s top lieutenants wear the kind of baggy, ill-fitting suits more familiar to the country’s once all-pervasive public sector than to the Zegna-clad Lagos executives of today. But there is no dragging of feet in the corridors. There is a palpable sense of purpose among bright-eyed young employees who have risen early for another day in a much-coveted job.
The big man’s own office is expansive but simple. A large map of Africa on one wall is reminiscent of the type that 19th-century colonialists once stuck flags in as they expanded their dominions. Another wall is covered by a billboard-sized photo of the Obajana cement plant in central Nigeria that propelled him to the big league, lights illuminating a maze of pipes and steel against a dark night sky.
“The most dangerous thing is to be surrounded by people who tell you what you want to hear,” Dangote remarks, as I attempt to burrow a way into his ever-mobile schedule. It is not clear whether that comment is a reflection of the reality around him. As one Lagos-based broker comments: “Dangote is an entrepreneur, investor and manager all in one.” By nature he is not a delegator, nor someone who welcomes criticism readily, soft-spoken as he may appear to be.
“Working with him as a banker is extremely challenging. If you don’t know his business at an extremely detailed level you don’t stand a chance – he will unravel you in seconds. He does not suffer fools gladly,” says Yvonne Ike, West Africa CEO of Renaissance Capital.
Dangote’s great-grandfather on his mother’s side, Alhassan Dantata, was one of West Africa’s richest merchants. He brought kola nuts from Ghana and exported groundnuts from Nigeria. That was before oil was discovered, when the country was one of the world’s leading groundnut producers.
Imbued with an early instinct for commerce, the young Aliko got his first real taste of trading during the infamous cement armada in the late 1970s. Nigeria was rushing to convert surging income from its oil into the building blocks of a new, industrialised economy. Cement was ordered in such volumes that ships loaded to the gunwales sank as they awaited berth, prey to the Atlantic swell, or were deliberately submerged when demurrage fees exceeded the value of their cargo.
A well-placed uncle in the cement business owed him cash, Dangote recalls, as we weave past cumulonimbus clouds in his smaller Lear jet on our way to Obajana. When he travelled from Kano down to Lagos to collect it, his uncle gave him an import licence in lieu of payment. At the time such documents were the much sought-after preserve of well-connected men. Aliko sold it at a 60 per cent profit without even touching a fleck of gypsum.
It is tempting to see a formative experience in that trade. Dangote’s success has many roots but it owes something to his ability to play the system to his advantage – AGIP, or “any government in power”, as Nigerians call the trait.
It is no secret that in Nigeria the system was on a slippery slope for much of the 1980s, when Dangote cut his teeth, and 1990s, when he achieved market domination in the products he traded. There were three military coups during the period. There was a fourth in 1998, if you count what Nigerians dubbed the “coup from heaven” – when the sudden death during a sex act of the penultimate and most brutal of the country’s military rulers, Sani Abacha, paved the way for a return to civilian rule.
Any businessman hoping to prosper in those times needed both access to power and ways of negotiating the bureaucratic bottlenecks that its holders used for rent-seeking. “You had to be a general merchant,” Dangote said of those early days. “Whatever licence they give you then you go and import it. Or if we don’t have the licence, other people have the licence, and we now finance them under a sharing formula.”
Other early experiences made their mark. The cement bonanza did not last and Nigeria wound up chronically indebted when world oil prices fell. The crash exposed a mixture of poor central planning and corruption that has clouded the country’s promise as Africa’s largest and most dynamic market, to varying degrees, ever since.
“The market was flooded. So I moved into sugar and flour,” Dangote says. On his journey from small-time haulier to Nigeria’s leading private-sector employer, he has thrived by spreading risk across a range of basic commodities.
. . .
Dangote was also imbued with a deep fear of squandering the proceeds, say some of his closest associates of the time – a fear born of the profligacy of some of his Dantata relatives. Sam Iwuajoku, a steel magnate who was a close partner at that time, said of one of Dangote’s uncles: “When they played cards sometimes in London he would send his jet to Kano to pick up suya [stripped beef]. Money is like women. If you don’t treat it well, it will leave you. Aliko saw him fall. That put fear in him.”
The fear has endured, but Dangote has had to temper it as he has spread his business. “We are always scared of borrowing too much money. We do that once in a while, but then after we will try and wash it away,” he says.
At Obajana, overextending almost brought him down. “People thought we were crazy, even ourselves. We didn’t know what we were building because we couldn’t even envisage the scale. It was off the map,” he says, as we drive parallel to a pair of 8km conveyor belts carrying limestone from his quarries to the plant.
The industrial landscape we eventually reach dwarfs the hills around. A new town has sprouted alongside the factory, with accommodation for staff. One of the challenges of manufacturing on this scale in Nigeria is the paucity of state infrastructure and the cost of bridging the gap. To supply the plant’s own electricity generators, the group had to finance a 90km gas pipeline. The cement plant also has its own airport, equipped to host a 737.
“If I’d actually conceptualised everything in my head I wouldn’t have done it. We jumped into something at the top end. It tested our financial capacity … I was scared. There was a time when we finished spending all the money, and then operating the place became a problem. There was a time I didn’t want to live. I was so unhappy I didn’t know how it would end,” Dangote says.
As things turned out, soaring world oil prices and a global surge in demand for cement coincided with the onset of production. This enabled him, after a tense period when Chinese contractors failed to complete on time, to pay off a seven-year loan in just 18 months. His biggest bet had worked, and on cement Dangote has never looked back. Using Chinese contractors he has built plants across Africa, while reducing his stakes in less profitable businesses, such as noodles.
Above all, it is the market dominance he enjoys in most of the commodities he trades, and the resulting sway he has over prices, that has given him the leverage to invest in manufacturing. It is also this aspect that unsettles some of his compatriots, who believe his modest manner masks the ruthless instincts of a monopolist, ready to influence markets and milk political connections to force out rivals. On this front, one anecdote he tells me from the time of Sani Abacha’s regime is revealing: “When I watched his children trying to do sugar, we actually crashed the price. Not because of wickedness. It was part of business.”
After Abacha died and elections were held, Dangote played a prominent role in funding the campaigns of Olusegun Obasanjo, the former president who saw the emergence of business champions as central to transforming Nigeria’s economy. Finding a space in Obasanjo’s timetable is also tough. The gruff former general has kept himself relevant since stepping down in 2007. But I managed to catch him getting off a flight from South Africa. As we swept through the teeming multitudes at Lagos airport he pressed my hand while discussing the role he played in the emergence of Africa’s most successful businessman. “He [Dangote] has been an enterprising man no doubt,” he said. “But he was always mainly in buying and selling.
“I got up one day and I was thinking, we started producing cement in 1956. Egypt started about the same time or ahead of us. Now they are all exporters. So I called Aliko and I said, why are you not producing cement? Why is everyone importing? He gave a straightforward answer – it is more profitable to import and sell than to produce.” There followed a critical change of policy, when cement imports were only licensed to those companies investing in production.
Dangote is unapologetic. Anyone prepared to risk the kind of money he has, in an environment where the state can prove so fickle and long-term capital so hard to find, is compelled to seek influence over policy and markets. Now that his conglomerate has become so critical to the pricing and distribution of basic necessities, he barely needs to try – it is government that seeks him. Moreover, he says, where other investors are sitting on the fence waiting, he is putting his money where his mouth is.
“I am accused constantly of being a monopolist and criticised for my relationship with government, but government is happy if anyone can save their neck. And it’s not because I’m close to President Jonathan that I’m doing this.”
Emboldened by his own track record and inspired by other role models from the developing world, Dangote’s ambitions are only getting bigger. A few years ago, he spoke obsessively about his own empire; now he is thinking far more strategically, like a state. Nigeria will have over 200 million people by 2020, he remarks at another session, this time on his boat. Meeting demand for basic supplies will become an ever more complex logistical operation; and unless opportunities are created elsewhere, everyone will be flocking to Lagos where the bulk of economic activity now resides. Already the city is groaning, with more than 14 million people. So Dangote is planting sugar cane and rice and building mills across thousands of hectares of Nigeria’s troubled and economically declining north, with a view to making the country self-sufficient. He believes this will create three-quarters of a million jobs. Nor has he finished with cement. Obajana is on course to become the largest plant in the world. “By the time we finish we will be filling one 30-tonne truck every 30 seconds,” he says.
Meanwhile he projects revenues for his planned $9bn oil refinery, petrochemical and fertiliser plant at $24bn a year, saving the country an equivalent amount in foreign exchange, and propelling his own fortune closer to the likes of Gates and Slim. Overall he has $16bn of investment planned in the next five years. Soon, he says, his companies will be contributing as much as 10 per cent of Nigeria’s gross domestic product, proportionately far more than J D Rockefeller did for the US economy in his early 20th-century heyday.
Some close allies detect in these designs a whiff of hubris. Dangote sometimes speaks of swallowing up Lafarge, the world’s leading cement company by production – an asset that would land him in unfamiliar developed-world markets with diminishing returns. Others question his ability to let go of day-to-day management of his empire as it expands.
Dangote is unfazed on both fronts. He says he draws his inspiration from models such as India’s Ambani family, who have won long-term by betting big. As he gradually cedes control of management and shares, he sees himself becoming more of a Warren Buffett type figure.
“The face of the chairman will not be Aliko Dangote. We will be like an incubating machine, starting up companies and nurturing them.”
Obasanjo’s view is informed by the homespun Yoruba philosophy for which he is renowned. “When a number of things work for you, then you are brilliant. When they work against you, you are a fool. For Aliko a lot of things have gone well.”
William Wallis is the FT’s African affairs writer.
To comment on this article, please email email@example.com
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.