The business empire of Africa’s richest man is expanding. Dianna Games analyses the Dangote Group’s moves into oil and its growing operations in food production
We are competing with the best in the world and we are surviving,” is the bullish message from Dangote Group executive Devakumar Edwin, who sat down with African Business to talk about the conglomerate’s projects across Nigeria. The group executive director for strategy, portfolio development and capital projects at Dangote Industries says the group is progressing on several fronts. The biggest of many projects on the go is the $12bn refinery under construction just outside Lagos in Lekki.
When complete, it will have the capacity to refine 650,000 barrels of crude oil a day. This could result in savings of an estimated $7.5bn in foreign exchange for Nigeria, which currently imports fuel and sells it at subsidised prices, despite being Africa’s biggest oil producer.
Dangote president and CEO Aliko Dangote has been vocal about the need for Nigeria to move away from its dependence on imports. He argues that a 60% decline in import substitution will create millions of jobs and drive inclusive growth, and says that many of the company’s projects have at their core the need to build local value chains and create self-sufficiency.
The refinery project will create an estimated 1600 permanent jobs and 100,000 indirect jobs. Jobs could be created in the project’s slipstream, in new housing, shops, transport companies and filling stations across the country. Mega projects of this size are a catalyst for extensive growth in other sectors.
But the project has not been plain sailing. The refinery project has been delayed by a year, says Edwin, because of the need for the company to build two new jetties from scratch near the plant to enable the shipment of massive equipment for the refinery and to bypass congestion at the main port in Lagos. Problems importing steel and other equipment mean that the project is currently due to be finished at the end of 2020.
Ports in Lagos offer challenges, he says, with long delays incurring huge demurrage costs. Dangote has three quays at the port complex and the group is rebuilding a 35km road from the port to the city, assisted by a tax break from the federal government for undertaking what should be public work.
Adjacent to the refinery site is the massive $2bn fertiliser plant that began testing in February ahead of full-scale production expected later this year. The biggest in the world, it is expected to meet local production and drive exports.
The company’s cement business, which has been the backbone of the group’s success in Nigeria, and the wider continent, continues to play a key role. New plants are under way in Cameroon, and construction is about to begin in Gabon, Liberia and Togo. Yet export volumes in 2019 were hit by Nigeria’s closure of land borders with its neighbours in a bid to combat smuggling.
Move into agriculture
Such protectionism has also benefited the company. Dangote has moved into agriculture on the back on the government’s efforts to make Nigeria self-sufficient in food production. One of the focuses is on backward integration, in which production plants for tomato, sugarcane and rice will be powered using biomass technology.
Farmers are being supported with seeds and the fertiliser plant will back up the vast agricultural holdings, increasing self-sufficiency. “We want to build a full value chain with end to end integration in our agriculture businesses,” says Edwin.
The group is also going into oil and gas. It has acquired two oil blocks and production is due to start in 2020, while the firm also has plans in coal and bitumen mining. Production of locally made trucks is also in a trial phase, with an eye on exports to West Africa.
Self-sufficiency is a key driver of the group’s industrial strategy. Some new businesses are the result of its efforts to solve operational challenges to ensure the difficult operating environment doesn’t affect the business. “We believe we can do a lot on our own. It is often small problems that can grind the business to a halt. So, we are always thinking about how we can be independent and this is driving a lot of our business too.”