Profit-making idea: Backward integration the ‘secret’ to Dangote’s success

Aliko Dangote

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Speaking at yesterday’s Financial Times Africa Summit, Nigerian businessman Aliko Dangote, founder of Dangote Group, outlined self-sufficiency and backward integration as key to his success.

Backward integration is when a company owns other businesses in its supply chain, thereby extracting value from the entire production process. “In Nigeria we are learning how to produce the entire value chain,” he said during the event held in London.

Dangote, one of Africa’s richest people, started the company almost four decades ago as a trading enterprise, and later ventured into full-scale manufacturing. Today the group is a behemoth with interests in cement, sugar, salt, pasta, beverages and real estate, to name a few.

Dangote further highlighted import substitution opportunities in Nigeria’s agriculture sector, saying large quantities of dairy and rice are still brought in from abroad. His company is in the process of rolling out rice outgrower schemes across Nigeria, through which seedlings will be distributed to local farmers to plant and grow. At harvest time Dangote will recoup the input costs and purchase the rice for milling and final processing.

“Soon we will be able to feed not only Nigeria, but the entire 320-million-large West African market,” he commented.

He also noted that Nigeria is preparing itself to become a major producer of fertiliser, a product that has traditionally been imported. “We are not going to import anything any longer.”