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Sunday, December 29, 2013

Africa's Richest Man (Aliko Dangote) Inspires A Generation Of Young Entrepreneurs

Africa's Richest Man (Aliko Dangote) Inspires A Generation Of Young Entrepreneurs

Aliko Dangote Set to Spend $9 Billion on Refinery Project as Wave of Consumerism Sweeps the Continent

Africa's richest man sat barefoot on his new yacht in a lagoon here after another night of about three hours sleep.

The day was filled with meetings about his cement company and preparations for a polio-fighting trip with fellow billionaire Bill Gates. His BlackBerry buzzed every few minutes with messages from the president of Benin, and a former U.S. ambassador wanted some face time.

"You don't see any sign of stress on me," Aliko Dangote said with a tight smile. The 56-year-old businessman said he was getting an energy boost from a weeklong fast that limits him to six glasses of watermelon juice a day.

For two decades, Mr. Dangote (pronounced DAHN-go-tay) has turned his relentlessness, connections and entrepreneurial bets on the rise of Africa into a fortune estimated at about $22 billion.

Most of it comes from his controlling stake in a conglomerate of cement, sugar, salt and noodle factories sprawled across 16 countries. Profits in three publicly traded companies he controls (Dangote CementDangote Sugar and National Salt Company of Nigeria) hit $1 billion in the first nine months of 2013, up 43% from a year earlier.

Mr. Dangote now has a plan to quintuple his wealth—and become one of the five richest people in the world. He will spend $9 billion to build the largest privately owned refinery in Nigeria, which produces more oil than any other African country but must import most of the motor fuel and diesel it uses because existing refineries are dilapidated and inefficient.

Within about two years, the new refinery in a stretch of swampy shoreline outside Lagos could start piping in crude from roughly 7 miles offshore, bypassing a traffic jam of tankers often stuck for weeks. Competing against four government-managed refineries that run at barely 20% of their capacity, Mr. Dangote would double the country's maximum refinery output.

The refinery project is a bet that Africa's economy will keep growing much faster than the rest of the world, especially as a wave of consumerism sweeps the continent.

New airlines are taking off so quickly that some jet-fuel sellers, hurt by a shortage, have been caught trying to fill airplane tanks with kerosene instead. Car imports through Nigeria's main port have risen to about 300 cars a day.

As a result, Africa now is the world's fastest-growing oil user, and the International Energy Agency expects oil consumption in Africa to surge about 30% to 4.5 million barrels a day by 2018. The jump represents 15% of the world's projected rise in oil demand.

Mr. Dangote and his supporters, including Nigeria's president, see more than money in the new refinery. To them, it also defies centuries of Africa exporting its most precious resources—including gold, diamonds and humans—rather than putting them to work at home.
Nigeria's government has collected about $1.3 trillion in oil revenue since 1980, according to the Economist Intelligence Unit. Yet about 60% of the country's 170 million people live on less than $1 a day, according to the government. It says as much as 400,000 barrels of oil per day—or one-sixth of total output—are pilfered from pipelines by bandits. Most of the stolen crude is loaded onto barges at night and shipped abroad.

The refinery planned by Mr. Dangote will "change the economic and industrial landscape of Nigeria," said Doyin Okupe, senior special assistant to Nigeria President Goodluck Jonathan. The president thanked the billionaire and his bankers by inviting them to Mr. Jonathan's villa on a day usually reserved for government planning sessions.

The project faces daunting challenges. Competition will be fierce from U.S., Asian and European companies that also want to satisfy Africa's thirst for gasoline and other fuel products. Some energy firms are expanding operations in Africa, and American refineries are gaining an edge around the world as the U.S. shale-oil boom lowers their production costs.

Nigeria also subsidizes imported oil, keeping prices at the gas pump about one-third lower than they are in the U.S.

"I don't know how he's going to do it, but I do know it's going to be very, very tough," said Bismarck Rewane, managing director of Financial Derivatives Co., a research firm in Lagos. He has known Mr. Dangote since they lived near each other in the 1980s and attended middle-of-the-night house parties together.

Despite all his connections, Mr. Dangote hasn't won government approval for a license needed to build the refinery. That is not unusual. From 2000 to 2010, more than 100 refinery construction projects were announced in Africa. Only one was built, according to consulting firm Citac Africa Ltd. Others often fell victim to political interference or high borrowing costs.

"We will get it," Mr. Dangote said about the license. The ministry reviewing the license application declined to comment. Nigeria's next presidential election is scheduled for 2015.

In an interview on his yacht, named Mariya after his mother, the billionaire said his refinery will have no trouble competing because it will avoid Nigeria's costly and congested ports. He hasn't said if it will sell gasoline to retailers for less than they pay now.

He also expects Nigeria to eventually abolish foreign-oil subsidies, which cost the government $6.5 billion last year.

In the past decade, Africa's economy has grown by an average of 5.6% a year, compared with the world-wide growth rate of 3.6% per year, according to the International Monetary Fund. The surge has helped turn some of the richest businessmen in Africa into tycoons.

Africa now has 27 billionaires, up from 16 in 2012 and just two a decade ago, according to Forbes magazine. Those two were white South Africans.

Mr. Dangote was born into wealth. Near the dawn of British colonialism in the early 1900s, his great-grandfather, Alhassan Dantata, cornered the peanut market in drought-prone northern Nigeria. While other Nigerians chafed at colonial rule, Mr. Dantata exported tons of peanuts to feed Europe's growing appetite.

During the oil boom of the 1970s, an uncle of Mr. Dangote gave him a government-issued license to import cement. But few Nigerians had ever heard of him. Mr. Dangote spent much of his time and earnings in Brazil, usually enjoying the Carnival festival before Lent. In the 1990s, a friend talked him into flying to Atlanta, where he bought a house and then swung through every other month for jaunts at nightclubs.

He felt comfortable amid Atlanta's historically black colleges and restaurants, far away from a succession of military coups and botched elections in Nigeria. Startled by a snake in his basement one day, Mr. Dangote sold the house and bought a larger one.

But he started to feel the tug of his homeland, the most populous country in Africa. On trips to Brazil for Carnival, he saw signs of the economic progress the country had made: Desperate hustlers, touts and money changers didn't swarm him at the airport any more. And cement factories were popping up in the mountains.

“ 'If there is anything higher than the national honor that the president gave me two years ago…then he obviously needs to give me another national honor for building a refinery that we never, ever dreamt about.' ”

That gave him an idea to do something big, he said. He flew back to Nigeria, contributed to the upstart People's Democratic Party and made a promise after its presidential candidate won election in 1999. Mr. Dangote vowed to build one of the world's largest cement plants if the government restricted the flow of cement through the country's ports.

The businessman got what he wanted. The limits on imports of cement—the most common building material in Africa—lifted prices to twice the world-wide average. His business empire mushroomed. Dangote Group now makes a two-thirds markup on every bag of cement it sells.

In return, Mr. Dangote spent $1 billion on the cement factory and an adjoining, 1.7 mile-long airstrip, borrowing some of the money at an interest rate of 42%. They opened in 2008, and he vaulted onto the billionaires' list for the first time.

Dangote Group now employs about 25,000 people in Nigeria, is building cement factories in 14 countries in Africa and is buying mining licenses from Kenya to Zambia.

A pop song in Nigeria called "Aliko Dangote Special" includes the line "Cover of Forbes, he no be joke." The motivational book "Dangote's Ten Commandments on Money" cites the billionaire's advice "to make the best of your time because any time lost cannot be regained." No. 8: "Believe in Nigeria."

"It's something he said to me years ago: 'Only Africans will build Africa,' " said Kola Karim, chief executive of oil-exploration company Shoreline Natural Resources Ltd. Mr. Karim sells most of the oil from Shoreline's fields in the Niger River delta to India but would rather do business with Mr. Dangote.

The two men, who are friends, recently talked over the details on a dock next to the billionaire's yacht but haven't announced an agreement. "This is where my future lies," Mr. Karim said. "The market is in Africa."

Mr. Dangote will soon borrow $1.5 billion to lease about 740,000 acres, an area 50 times bigger than Manhattan. He wants to grow sugar and rice for Dangote Group's processing plants.

The area in northeastern Nigeria is swarming with fighters from Islamic insurgency Boko Haram, but the fields will put so many people to work that the insurgents will "leave us alone," Mr. Dangote predicted. Once the farm is thriving, "Boko Haram will not have guys to recruit."

The industrialist nudged Nigerian bankers for more than a year about his refinery plans. Then he started telling them how much they should lend—and at what interest rate.

"When he wants something, he gets it," said Edmund Boyo, a partner at law firm Clifford Chance LLP who worked on the deal.

In September, Dangote Group announced a $3.3 billion syndicated loan from banks led by Standard Chartered of the U.K. and Nigeria's Guaranty Trust Bank PLC. Terms of the $3.3 billion loan weren't disclosed, though he said it includes a penalty if he repays the banks too quickly.

Nowadays, banks sometimes charge him less than 6% interest, he added, a lower interest rate than Nigeria's government gets on its loans.

Yvonne Ike, chief execuitve of investment bank Renaissance Capital's operations in western Africa, said she has seen bankers' "eyes watering when they thought about how much they had lent" to Mr. Dangote at rock-bottom interest rates compared with other companies. Still, the bankers "couldn't stand not to be a part of the biggest debt deal in Africa," she said.

Mr. Dangote now is trying to line up oil to feed his refinery. Chevron Corp. and Royal Dutch Shell PLC are selling oil fields along Nigeria's coast after long battles with kidnappers and pipeline-bombing oil thieves.

The billionaire wants to buy the two companies' tracts of oil-rich swamp. To protect the oil from bandits, he will bury pipelines to and from the refinery. Chevron and Shell declined to comment.

The billionaire hasn't announced any deals to sell the gasoline, plastic and other fuel products that will be made by his refinery.

He likely will have to lure away customers from state-owned oil company Nigerian National Petroleum Corp. It controls the four rundown refineries that dominate Nigeria's oil industry. Government leaders have denounced the company as opaque and unscrupulous.

"It's a waste pipe of corruption," said Ken Saro-Wiwa Jr., a spokesman for Mr. Jonathan, Nigeria's president. An NNPC spokeswoman couldn't be reached for comment.

Mr. Dangote hasn't had a vacation since he took 18 children, grandchildren, nephews and nieces to Walt Disney World in Florida last year. That was his first vacation in 17 years, and he has no plans for another one. The refinery is keeping him too busy.

"If there is anything higher than the national honor that the president gave me two years ago, which I do appreciate very much, then he obviously needs to give me another national honor for building a refinery that we never, ever dreamt about," he said.

The billionaire's private jet was landing in Lagos at 1 a.m. last month when his pilot got a call from air-traffic controllers. Mr. Gates, the Microsoft Corp. co-founder and one of the world's richest men, had just spent two days with Mr. Dangote but was stranded 400 miles away by a broken-down plane.

Mr. Dangote told his pilot to turn around, pick up Mr. Gates and fly back to Lagos. Mr. Dangote got home at 4 a.m. and was at his desk by 7:30.

Aliko Dangote Values Time

He is a man who values time even more than money. Reason? To Dangote, time lost is gone forever but money lost can be made again. In the book Dangote’s Ten Commandments on Money, he explains, “Whoever wastes your time is your enemy and whoever does not respect your time, does not respect you. Try to make the best of your time because any time lost cannot be regained. To every good business man, every second counts… do not waste it. You waste your time when you engage in frivolities or unproductive things.”

So I don’t waste his time. I begin by asking him how it feels being the richest black man in Africa, and indeed, the world. Dangote will be the first to tell you that being rich is a daunting task and comes with its own “distractions.”

He gives an example of the day before, when he had to balance between an invitation from US President Barack Obama for breakfast and attending to his over half-a-billion-dollar cement manufacturing business in South Africa, and meeting one of South Africa’s richest men, Patrice Moetsepe.

“There’s definitely a lot of pressure and demand on your time. I get invited to many events, especially by African presidents, who would like me to invest in their country. There are also requests from philanthropic causes, opportunities to speak all over the world… I have to maintain a balance between all these and running my businesses.”

Dangote is rated by Forbes as the 25th richest man in the world, worth about $21 billion at last count — almost double what he was worth a year ago. According to Forbes rankings, Dangote is wealthier than Russia’s richest man, Alisher Usmanov, and India’s steel making guru, Lakshmi Mittal. He is at par with India’s richest man, Mukesh Ambani. He has long overtaken Oprah Winfrey and Facebook founder Mark Zuckerberg.

The story of his rise began about 30 years ago and is embedded in a rich history that spans at least four generations. Dangote’s maternal great grandfather, Alhassan Abdullahi Dantata, controlled the kola nut trade in West Africa from 1913. When he died, Dangote’s grandfather, Alhaji Sanusi Dantata, took the helm of the family business. In the mid-1950s, Dangote’s father, Mohammed Dangote, met and married his business associate’s daughter, Mariya Dantata. Mariya was Sanusi’s daughter.

Dangote was born on April 10, 1957, in Nigeria’s Kano state. His grandfather, Sanusi Dantata, named him Aliko, meaning, “The victorious one who defends humanity.” Sadly, his father passed away in 1965, when Dangote was only nine years old. Dangote was thus raised by his grandfather and maternal uncle, Usman Amaka Dantata.

Dangote’s entrepreneurial spirit began to show at the age of only eight, when he started his first business: Selling sweets to his fellow primary school pupils. He would have to wait to complete his education first, before he could pursue the passion he had for business. He graduated with a business degree at the Al Azhar University in Cairo.

In 1977, at the age of 20, Dangote got his first mega break during the FESTAC ’77 — the Second World African Festival of Arts and Culture, held in Lagos. Dangote received a N500,000 loan from his maternal grandfather for the construction opportunity FESTAC had brought to the city. This opportunity gave birth to his cement business, and laid a foundation for what we know today as the Dangote Group. The business flourished and he was able to pay his grandfather back in six months.
In a separate interview with a Nigerian publication, Dangote explains that while working with his uncle in Lagos, “squatting in his office,” he learnt a lot.

He said of those times: “I started with the business of cement, which was giving us a lot of money because at that time, Nigeria was making so much money and we were doing a lot of construction. On a vehicle which I normally got from my uncle, I was making about N1,350 to N1,400 per day including Saturdays and Sundays, and I had an allocation of about three to four trucks. Later, I realised I was making a lot of money though I didn’t have a lot of ideas of what to do. It was only the cement business that I knew and I stuck to it till 1980, when I started knowing Lagos, becoming a Lagosian, understanding where to go and finding people to buy import licences from. Within six months, I paid my grandfather back because I had no further need of his money.”

Later, in the 1980s, he diversified and started trading in commodities like flour and sugar. About 15 years later, Dangote started producing pasta, salt, sugar and flour and in 1997, his gateway to the billionaire club opened.

Those close to him will tell you that Dangote is not only hardworking, but also simple. A typical Dangote day begins at 5am with prayers. He then hits the gym until 6am, before reporting to his headquarters in Lagos. His first hour is spent with his staff. Dangote tries to avoid having external meetings on Mondays and Wednesdays. His day ends between 8pm and 10pm. He reserves the weekend for social activities; that is when he goes to the boat club in Lagos, and entertains friends on his yacht.

“I am what you see, a normal person like you. I value relationships. I have three daughters whom I love dearly, and five grandchildren. My close friends have known me and been with me for over 30 years. I also have a very close relationship with my 76-year-old mother.”

Dangote says that he is driven by hard work and successes. “There is no substitute for hard work, and success breeds success. You have to keep at it.”

Dangote has always been careful about the way he deals with governments, particularly in Nigeria, where most of his investments are based. His mantra as far as politics is concerned is not to take sides. This doesn’t mean lack of interest: “I am a friend with any government in power. I am an entrepreneur, and as a businessman you should have friends from all the places, we don’t take sides. The success of my business is affected by the stability of government.”

With such phenomenal growth, one would see nothing wrong if Dangote just retired; if anything, he has made enough money, to last the next 4-5 generations. But not Dangote. He has his eyes on Africa.

“There are quite a lot of opportunities in terms of doing business in Africa. Anyone serious about business should not miss out on Africa. There are a billion people living in Africa today compared with China’s 1.3 billion and India’s 1.2 billion. Africa is a huge market. Furthermore, when we look at the projection of the world’s population in the next few years, the only place that has enough arable land to feed the world is Africa.”

Dangote’s focus in Africa is expanding his cement business. The main incentive for cement demand in Africa is urbanisation, seen as the fastest in the world. As a result, demand for personal housing, commercial buildings and infrastructure, such as rails, road and ports has skyrocketed over the past decade.

Growing Interest

Dangote’s interests on the continent are growing fast. The Dangote Group has invested at least $5 billion outside Nigeria in the past two years.

Dangote says he has invested $580 million in Ethiopia, $500 million in Tanzania and $350 million in Zambia. Dangote is also reported to have business interests in Benin, Liberia, Sierra Leone, Cameroon, Kenya, Togo, and Ghana. His goal is to invest at least $15 billion over the next five years in Africa.

In East and Central Africa, Dangote has made significant investments in Congo-Brazzaville, Ethiopia and Tanzania, where he has set up factories producing 1.5 million metric tonnes of cement per annum.

When asked why he chose Africa, he answered: “It is to lead by example and demonstrate that doing business in Africa is not as terrible as people portray it. The future is great. Africa’s potential is underestimated by many. For example, about 10 years ago, I bought a company for $4 million. It is worth $21 billion today.”

Nigeria’s Minister of Trade Olusegun Aganga will be the first to testify about the impact business magnates such as Dangote have had on the country. Nigeria no longer imports cement, thanks partly to Dangote, who is Nigeria’s leading cement producer. That has saved Nigeria about $1.8 million.

Imagine what a similar move could do for the East African Community, where, according to a report by the Standard Investment Bank, all five anchor economies are import-dependent. Net cement imports into the region nearly doubled between 2005 and 2010 to nearly $14.84 billion.

Further, imports from the Comesa region are duty free. This builds a strong case for building local industries, an opportunity Dangote sees and one he is taking.

World Bank statistics show that over the past decade, the East African region has registered a GDP growth of 5.8 per cent, compared with 5.5 per cent for sub-Saharan Africa. Since 2005, per capita income growth in EAC countries has averaged 3.7 per cent compared with 3.2 per cent for SSA. The IMF estimates that between 2012 and 2017, the EAC region will grow by 6.3 per cent, compared with 5.4 per cent for sub-Saharan Africa.

According to Dangote, Africa is the place to be for business. “Everyone is upbeat about Africa, its growth and potential. There is enough space for different partners to engage.”

As a respected business leader across Africa, and the world, Dangote says that Africans need to begin creating opportunities for themselves. He believes that the key to realising Africa’s potential lies in entrepreneurship. The role of governments should be to create an enabling environment for business to thrive, and establish democratic institutions.

“The private sector is always looking forward to politicians doing what is right, so that we are able to invest in the long term. An entrepreneur also needs to believe in what they are doing, Foreigners are willing to invest but they want a lead from local people. They take their cue from locals. If we as Africans are confident in Africa, then so will they be.”

Monty Henry, Owner

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