Dangote Group president outlines reasons for its investment in Zambia

Zambia’s high level of urbanisation as well as the government’s efforts to reduce dependence on copper, has motivated Nigeria’s Dangote Group to build a cement factory in the country.

Alhaji Aliko Dangote

Alhaji Aliko Dangote

The Group at the end of 2010 announced an Investment, Promotion and Protection Agreement between Dangote Industries Limited (DIL) and the Government of Zambia.

“The agreement marked a significant milestone in Dangote’s quest to establish a cement plant in that country. The value of the investment is estimated at US$400 million,” the company said in a statement.

The Investment Promotion and Protection Agreement is a requirement for all major investors in Zambia, which offers them additional incentives and safeguards their investments in case of changes in legislation.

“DIL’s choice of Zambia for this multi-million dollar investment is strategic, noting that the World Bank had in 2010 named Zambia as one of the world’s fastest economically reforming countries,” said Alhaji Aliko Dangote, president of the Dangote Group.

Zambia, he recalled, is also rated as one of the most highly urbanised countries in sub-Saharan Africa with 44% of the population concentrated in a few urban areas. He said this high level of urbanisation poses a challenge to the government in terms of how to provide adequate infrastructure for the people.

Citing a report by the McKinsey Global Institute issued in June 2010, which stated that Africa would require at least $46 billion in spending annually to meet infrastructural needs, Dangote said it has become quite obvious that African governments alone cannot hope to meet this demand.

“It is in this light that we have decided to invest in Zambia. We are motivated to create an African success story because we believe that entrepreneurship holds the key to the future economic growth of the continent. We are spurred on by the fact that the rate of return on foreign investment is higher in Africa than in any other developing region. We are also particularly encouraged with the Zambian government’s robust economic diversification programme designed to reduce the reliance on the copper industry, which is the mainstay of the economy,” Dangote said.

He said DIL is currently increasing the capacity of its existing plants and building new ones in line with the trends in the industry, projecting that by July 2011, the group would be in a position to produce 20 million metric tonnes of cement annually, which will surpass local demands.

According to him, the long term ambition of the Dangote Group is to develop 46 million tonnes of production and terminal capacity in Africa by 2015. He explained that Dangote is embarking on this venture because it wants to become a truly pan-African champion in the sector, capable of competing globally with the largest cement companies in the world. He added that DIL is currently consolidating its cement businesses across Africa to reap the benefits of scale, disclosing that the listing of Dangote Cement Plc on the Nigerian Stock Exchange in October 2010 was part of this strategy.

Outside of Nigeria, DIL also formally increased its stake in South Africa’s Sephaku Cement (Pty) Limited, from 19.76% to 64% in October in a transaction estimated at R779 million ($113 million), making it the largest ever foreign direct investment by an African company into South Africa.

He assured that DIL strongly believes in the future growth of the African economy and of continued growth across the whole of Africa, stating that the level of its investment in Zambia and in other markets, was a clear proof of this.

The Dangote Group has recently also announced that it will invest over $100 million in building a new cement manufacturing plant in Cameroon.

The company said that it also plans to expand to other sectors of Cameroon’s economy.

“We have reached an agreement with Cameroonian officials. If the cement business succeeds, our group will move into other domains of the Cameroonian industry,” said Dangote.

Cameroon currently has only one cement producing company, CIMENCAM, with annual output of about a million tonnes from two plants.