As part of The Africa Business Agenda 2013 report, PwC interviewed president and CEO of Dangote Group in Nigeria, Aliko Dangote.
The Dangote Group is one of the most diversified business conglomerates in Africa. The group’s activities encompass cement manufacturing, sugar and salt refining, flour and semolina milling, pasta and noodle manufacturing, poly products manufacturing, port management and haulage logistics, real estate and the Dangote Foundation.
How confident are you about growth prospects going forward, in Nigeria and sub-Saharan Africa?
Our business strategy has really paid off. The year 2012 was particularly good for us in terms of our record of excellent performance. In 2012, we launched a number of projects, including a fertiliser plant and an oil refinery. These are big-ticket projects. We are also looking at establishing more cement plants and expanding our sugar business in line with the new federal government backward integration policy.
Our business strategy has been to look at the country’s imports and invest in critical areas of need. By so doing, we have helped to make Nigeria self sufficient in some commodities such as cement, and also a net exporter of these products, specifically within the Economic Community Of West African States.
There are a lot of investment opportunities in Nigeria and Africa. Discerning investors know this and are trooping in to have a piece of the pie. The only thing keeping others back is the issue of the negative perception that some people have about the continent. But things are changing fast. Africa is one of the fastest growing regions in the world. The return on investment in Africa is also one of the highest.
So, the potential for growth is there. We need to transform this potential into reality. In addition, you have to be innovative in this market. If you bring a textbook solution and try to apply it here, it won’t work. To tell you the truth, the best market today is sub-Saharan Africa and I have not seen any country where you can make money like in Nigeria and I say it to anyone who cares to listen. The opportunities here are so tremendous.
How do you balance growth trajectories with profitability?
We are currently diversifying our business. Some businesses will have greater or lesser profitability, depending on the industry. In petrochemicals or refining, for instance, the refining margin is low, perhaps no more than 10%-12%, but what we are doing is not just refining, we are also extracting a lot of high-value items out of the import pool. That requires a huge investment.
For example, today, I don’t control all of the costs in my sugar business because I don’t grow my own sugar. I only add value. If the cost of raw sugar goes up too high, I can’t make much money, but if it falls, I can make more money. By producing sugar, you end up with excess capacity. When you crush the byproduct, you end up with a shell which can power high-pressure boilers to produce power, which you can pass through the national grid. You produce ethanol which you can mix with diesel for fuel and other byproducts can be used for animal feed. So there is no waste and it is about value distribution and putting things back into the economy, including employment.
What are some of the risks to growth that worry you?
The biggest issue that we have that really worries me is the lack of infrastructure. Our leaders are beginning to understand this. Without infrastructure, no one will come to your country to invest.
I also have a phobia about debt. The way we operate the company is this: we take on debt and we go through our trajectory to deliver what we promised to deliver. We accumulate cash and after two years or so we have more money to invest. Once you do your numbers right and know what you are doing, everything falls into place.
There is risk in anything. What you need to do is make sure that you minimise those risks and that they are calculated risks.
Corruption and oil theft in Nigeria are two other areas that I am more worried about. When you create jobs and people have disposable income, there is less restlessness, particularly among the youth. It is very simple. We have abundant resources, but we need the right attitude to get there.
This interview was published as part of PwC’s The Africa Business Agenda 2013 report.