THE INTERESTING CASE OF ALIKO DANGOTE

Last week Nigerian conglomerate, The Dangote Group started testing their $2b fertilizer plant in Lagos.

The plant, with the capacity to churn out three million tons of fertilizer annually is the biggest in the world and will not only sate Nigeria’s demand but also leave a lot more over for export to the region and beyond.

The plant has powerful backward and forward linkages to the Nigerian oil and agriculture sectors .

The plant is part of a $15b complex that will include 650,000 barrels a day oil refinery and extensive pipeline infrastructure from the oil fields of the Niger Delta.

Nigeria, a nation with a $450b economy and a population of about 200 million can absorb such numbers.

"As if Aliko Dangote still needed to stamp his mark on history, this project will be testament to his penchant for thinking scale. Until the next project, of course....

His company has extensive interests in cement, sugar and flour in the process turning a trading company into the largest industrial concern in West Africa and on the continent.

In explaining his wealth the critics will point out that he had a head start in life. His great grandfather Alhassan Dantata was the richest man in West Africa at the time of his death in 1955. That was useful I am sure, but it takes a special kind of individual to build a multibillion-dollar empire, more so if he doesn’t start from scratch.

They say wealth is built in one generation and squandered by the third generation, Dangote has flipped that script.

To accumulate that kind of wealth requires two essential factors, a large economy, which Nigeria is and government support.

The complex mention above is situated in the Lekki Free Zone Corridor, situated on 60,000 hectares with ambitions to a modern industrial megacity. Its development is a collaboration between the Chinese and Nigerian governments.

By locating it in the free trade zone, the Dangote group projects benefit from numerous concessions, which some critics would thumb their noses at as subsidies to a man who does not need charity.

"The issues of subsidies to big business is an emotive issue wherever you look. If done properly can stimulate economic growth and development and if not, become an avenue for political patronage and crony capitalism...

Dangote employs 11,000 people across the breadth of his empire – mostly Nigerians. A drop in the ocean in relation to Nigeria’s joblessness figures but a commendable achievement in itself.

For government and business to work together there first has to be credible business entities.  We have seen it before. Attempts to seed or prop up some connected individuals have ended in tears – for the tax payer. If you are lacking in business acumen this inadequacy is magnified by money. The more money pumped in, the bigger the disaster...

Another necessary ingredient is that the government officials need to understand business beyond the theory of their high school text books. But also that the government has a well thought out strategy to intervene in businesses. A strategy robust enough to ensure positive results while flexible enough to be adjusted to whatever sector is in need of support.

In Uganda one gets the sense that concessions are dished out to individuals rather than to industries, their output, if any goes unmeasured and there is no framework for determining what is too much or when to stop supporting an enterprise.

Governments’ slap dash attempts at supporting the private sector then fall flat on their face and they do the next worst thing, government decides to go into business on its own.

The thinking being that they shouldn’t be enriching the private sector and that the government should have all the benefits accruing to them. The promoters of such schemes slide in justifications like job creation, foreign exchange saving and technology transfer to win over the gullible politicians.

The fallacy of this thinking soon show themselves in poor project design and white elephants. Needless to say disaster falls close behind but not before a few technocrats who managed to skim off the top on every procurement.

There are very valid concerns for supporting the private sector grow to create more jobs and provide more and more goods and services. A few of the supported cases can become spectacularly successful. Two things happen then, they get more and more support, you want to keep betting on the winners and very soon they become lightening rods for criticism and their success a hot political potato for the powers that be...

It’s funny how governments don’t suffer for throwing money down the black holes of state enterprise but when a supported business or industry succeeds all the detractors come crawling out of the wood work.

Dangote’s story is a fascinating one, which should be studied in greater detail by students of development and business.