Blackstone’s Steve Schwarzman on Dangote and investing in Africa

“He is a smart guy, and he always has something informative to say.”

Stephen Schwarzman, CEO of Blackstone

Stephen Schwarzman, CEO of Blackstone

This is how Stephen Schwarzman, CEO of US-based private equity and investment banking giant Blackstone, describes Nigerian industrialist Aliko Dangote, believed by many to be Africa’s richest man. His Dangote Group has interests in a number of industries, including cement, food and property.

Black Rhino, a company backed by Blackstone, recently announced a joint venture with Dangote that will see the two entities invest up to US$5bn over the next five years in power generation and distribution ventures across sub-Saharan Africa.

According to Schwarzman, some of this electricity will be used by Dangote’s businesses, while the rest will be sold on.

This is however not Blackstone’s first transaction in the region. Through its portfolio companies it has invested in the Bujagali Hydroelectric Power Station in Uganda as well as in Ghana’s oil industry.

Speaking at the recent Africa Global Business Forum, held in Dubai, Schwarzman highlighted the importance of working with local partners in Africa. “When you’re from out of town, you don’t know as much as the people who live there. If you think you do, you are actually delusional.”

He described the fact that a large number of Africans live without access to electricity as “shocking”, and said the continent has an “insatiable need” for energy.

While investing in African infrastructure has clear social benefits, Schwarzman explained that such projects also need to provide attractive returns for investors.

However, large-scale infrastructure projects often take years to complete. Schwarzman said equity investors such as Blackstone typically want to see returns as quickly as possible.

“The faster people can see a return, the more enthusiastic they are about putting their money to work… Five years is fine, ten years is really a stretch… There isn’t enormous patience for profits to take 20 years.”

He pointed out that President Barack Obama’s recent US-Africa Leaders Summit in Washington DC was a “highly atypical thing for America to do”. The Summit, which took place in August, was one of the largest ever gatherings of African and US government officials, business leaders and other stakeholders. The meeting was generally seen as an effort by the US to boost its business interests in Africa.

Schwarzman said for many US companies the Summit was a “wake-up call” to the opportunities on the continent.

While the US may be late to the party in Africa, especially compared to countries such as China, Schwarzman doesn’t see this as a problem.

“I’ve learnt in life that being first isn’t always necessary for success,” he said.