Crusoe Osagie writes on Nigeria’s tentative steps towards enhancing its export market, highlighting Dangote Cement’s expansion drive and exports to many African countries
The reputation of being the largest economy in Africa is worth almost nothing, if Nigeria perpetually remains a consumer nation, not producing finished goods for export.
For decades, Nigeria was a pathetic case of a mass market providing socio-economic advantage for many foreign nations but none for itself.
Thailand, india and other nations in south-east Asia put millions to work in their countries taking advantage of the mass market provided for their rice in the 170 million strong Nigerian market.
Turkey, China among others also recorded significant industrial growth, exporting cement to Nigeria at a time when the largest nation in Africa held the ignoble reputation of one of the largest importers of cement in the world.
Nigeria suffered a similar fate in the case of furniture importation, despite being a nation with some of the largest rain forests in the world, with wood from trees in abundance. The case was not different for petroleum products importation, wheat, automobile, fish and vegetable oil.
It is therefore exciting news to learn that apart from become self-sufficient in cement production and consumption within Nigeria, the largest local manufacturer of the essential product, Dangote Cement plc, has also begun massive investment in other countries and exportation to foreign nations.
Cement Export to Gambia, Mali
A few weeks ago, Dangote Cement plc opened up the channel of cement exports to Mali, the Gambia and other African nations in that region. This initiative followed massive investment in cement production in many other African nations, after the investment in Nigeria had reached an advanced stage.
Country Head, Dangote Industries, Senegal, Luk Haelterman, who provided the information at the opening of the new $250 million Dangote Cement factory in Senegal, hinted that the initial volume of cement export was pegged at 2 million metric tonnes.
”Because of over capacity in the new plant in Senegal, Dangote Cement exports 2MT to Mali and the Gambia through rail,” Haelterman said.
According to Haelterman, the plant has taken roughly $250 million so far, while actual production and sales started January 10, 2015.
”In this country, Dangote will not only stop at producing cement, we also have helped beyond cement. Which is the idea of the owner, to become a pan-African enterprise.
”Senegal is a market with over-capacity of cement (only 14m people), because it had two cement factories before now. But today, Dangote has become the biggest and best because we have and produce the 42.5R only, which is better than what we met on ground, which is the 32.5R.”
Sales and Marketing Director, Serigne M. Dieng said: ”Senegal with 14 million people and a GDP of 4 per cent (2013) has cement market of 3MT pa and consumption rate of 230kg.
Haelterman said the market despite being a saturated one has potential for growth both for local consumption and export, with the introduction of the new cement grade in the region.
“The last few years has seen the company overcoming a lot challenges in the country, especially those related to the smear campaign on environmental impact of the factory in the country. It’s a saturated market with Dangote being the third entrant in the market after two other cement manufacturers. What has kept us going is the competitive edge that our 42.5 grade of cement has given us in offering consumers fine quality of cement.
“Our corporate social responsibility activities have improved and we believe that the plant would exemplary to community matters”, he added.
Also, Chief Operating Officer of the plant, Athanasios Bampos, said the location of the factory was not only rich in limestone but also in clay and laterite, which are the major components needed in cement manufacturing. ”The only component other Dangote cement plants import, gypsium is being sold by a local firm, ICS Chemical Company, which is about 45 kilometres from the factory,” he said.
Nigerian ambassador to Senegal and Mauritania, Katyen C. Jackden, used the opportunity to thank the Senegalese government and its people for the support and opportunity given to a foreign investor like Aliko Dangote, saying
”Dangote has been able to bring cohesion among African nations with his investments.”
New Development in Cameroun
Following the ban of cement importation in Cameroon, Dangote Cement Plc has expressed optimism of consolidating its Pan-African growth while effectively harnessing export opportunities to other regions.
Already, the company with a capacity utilisation of about 80 per cent in its cement plant in Douala, Cameroon, hopes to deepen its market penetration in the country as well as the Central African region through innovative product offering.
Unveiling the company’s plans, General Manager, Dangote Cement, Cameroun, Abdulahi Baba, noted that the plant has a production capacity of 1.5 million metric tonnes per annum with expectations to achieve full capacity utilisation by 2016.
He explained that the plant possessed one of the most recent facilities of ensuring that there are no dust emission during production.
The General Manager stated that the company put strategies in place to achieve 30 per cent market share, noting that there were also plans of achieving 30 per cent export of total production.
He stated: “We are set to achieve stability of operations in 2015 Q1, pursue aggressive market penetration and consolidation through appropriate above-the-line and below-the-line activities. 170 distributors have been selected after the interview process. 85 distributors will start, while the number will gradually increase with increasing production.”
“Mines at Tombel have been opened up and it is under exploitation. The Mines at Batoke would soon become operational. Exploration licence for Foumban deposit has also been secured. Environmental Impact Analysis (EIA) and other activities for securing mining lease are being being processed. About 5,000 MT of pozzolana is stockpiled at the living area,” he stated.
Baba noted that the company’s ex-factory price is the cheapest in Cameroun when compared to other products in the camerounian market, stressing that Dangote Cement’s 42.5 grade is cheaper than the 32.5 grade that is sold in the open market.
A distributor, Fonoggi Serge, noted that the product is of a very high quality but sold at a very affordable rate.
“Consumers and other dealers are already making demand for the commodity. I sell 20 tonnes daily and the acceptability of the product is rapidly increasing and it goes for between 4,000 – 4,500 CFA”, he stated.
A block maker, Kamdoum Rodrigue, certified that the product is of very good quality, stressing that it takes a shor period to dry when used for block making.
“Before now, we used to stay for one week waiting for the blocks to dry, but with this new product, we only stay for two to three days and our blocks are ready for supply. Now we meet our customers demand earlier than we used to,” Rodrigue stated.
Expansion to South Africa
Dangote formally increased its stake in Sephaku Cement Limited, which is based in South Africa, from 19.76 per cent to 64 per cent. The transaction, which comprises a R779 million investment into Sephaku Cement by Dangote, is the largest ever foreign direct investment (FDI) by an African company into South Africa.
The dea was concluded at the shareholder general meeting of Sephaku Cement in October 2010 and formally announced to the media and investors later.
President and Chief Executive of Dangote Industries Limited and the new Chairman of Sephaku Cement, Alhaji Aliko Dangote, commended the transaction as taking place “at a crucial moment in the history of cement demand and supply, and at a crucial moment in terms of Dangote’s pan-African ambitions.”
“We are immensely excited about the future prospects of this transaction and look forward to a long and prosperous relationship with Sephaku Cement,” he added. “This investment is an important milestone for Sephaku, for the Dangote Group of Companies and for South Africa, as the first clinker producing project since 1934.”
According to Dangote, the pace of development at Sephaku will increase in view of the project completion timeline set for 2012. He said the Dangote Group will bring its full experience and resources to the project, having completed other large scale cement projects in Nigeria and with similar projects currently underway in Tanzania, Ethiopia, Republic of Congo (Brazzaville), Senegal and Zambia.
“We are strong believers in the future growth of the South African economy and of continued growth across the whole of Africa,” he said. “The level of our investment here and in other markets is testament to that. We have embarked on an investment programme that will create modern cement plants in strategic locations as we seek to leverage both the local production deficit and increasing infrastructure investment.”
He said Africa is growing, as significant investments are being made to improve infrastructure, by both governments and the private sector, stating that the intention of the group is to consolidate its cement assets into one company that will have the scale and resources to compete globally.
“This growth in infrastructure will only increase demand for cement,” he said. “Our development plans are designed to address the current gap between supply and demand and provide additional capacity to ensure that the two remain closely aligned over the coming years.”
Also commenting on the transaction, Sephaku Cement CEO, Mr. Pieter Fourie, said: “Our partnership with Dangote reflects the attractiveness of South Africa to foreign investors and we are firmly committed to bringing a new entrant into the South African cement market for the first time in over 70 years. Construction is underway at both Aganang and Delmas we are on track to enter the market in 2012.”
With this development, Dangote is set to commence construction at its key projects. In terms of the agreement, Dangote has received 217,597,765 ordinary shares at an issue price of R3.58 per share, an agreement which increases the company’s interest in Sephaku Cement from 19.76 percent to 64 per cent, at an average price of R4.47 per share.
This further investment follows an initial R350 million of equity funding concluded in March 2008, making the R1.129 billion total investment the largest ever foreign direct investment into South Africa by an African company. The remaining 36 percent will continue to be held by Sephaku Holdings.
Congo Cement Project
The Republic of Congo and Dangote Group stated that the company’s cement project in the country was making good progress and would commence production soon.
Dangote Group recently extended its Pan-African cement investment to the Republic of Congo in Central Africa, with a $350 million Investment Agreement signed between the group and the Federal Government of Congo.
While President of Dangote Group, Aliko Dangote, signed the agreement on behalf of his company in Brazzaville, the Minister of Planning, Economy, Integration and Coordinator of the Economic Pole Mr. Pierre Moussa, the Minister of Industrial Development and Private Sector Promotion Mr. Rodolphe Adada, and the Minister of Mines and Geology, Mr. Pierre Oba, all endorsed the agreement on behalf of the Government of Congo.
Adada, who spoke on behalf of the government, hailed Dangote’s move to invest in the country and pledged full support of the government for the project. According to him, Dangote is a symbol of the emancipation of the African continent with this significant investment in to Congo.
“The Dangote project is important to our people and our economy as it enables us achieve President Denis Sassou Nguesso’s vision for a robust and diversified economy.
“The project will help the country significantly reduce the imports of cement and even enable us become a net exporter of cement while boosting economic growth, development, job creation and income generation”, he added.
“We are proud to have Dangote in Congo and it is a demonstration of an excellent relationship between the governments of the Federal Republic of Nigeria and the Republic of Congo,” he said.
Also speaking at the event, Dangote said the intention of the company in its foray into Congo was not just to make profit but also to further empower the people of Congo, create new jobs and wealth.
“We are committed to our business all over the world and Congo will be no exception. We are going to invest $350 million in the construction of a fully integrated cement factory with an installed capacity of 1.5 million metric tonnes per year within the next three years and transform Congo into a net exporter of cement,” Dangote said.
According to him, this investment would serve as a launch pad into other sectors of the Congolese economy.
The factory would be located in the territory of the administrative district of Bouenza in the southern part of the Republic of Congo. As a fully integrated plant the facility would process local limestone and other raw materials.
Dangote assured of a successful delivery of this project, which is one of many other successful projects in 14 other African countries, where the company has invested.
He said he believed that this investment would further strengthen the bilateral ties between both countries.
“This indeed, shows that Africa is gradually taking its destiny in its own hands rather than wait for investors from outside. Investment in the real sector of the economy is the only way that our continent can achieve the much desired accelerated growth and development that we have yearned for,” he said.
“It is obvious that African governments alone cannot hope to meet this demand due to the various competing needs in other aspects of the economy. This is why private companies are needed to complement the government’s efforts. It is in this light that we have decided to invest in Cameroon,” Dangote explained.
“We are motivated to create an African success story because we believe that entrepreneurship, especially our own home-grown African entrepreneurship, holds the key to the future economic growth of the continent. The fact that Africa offers one of the highest returns on investment (ROI) in the world is an additional incentive for any discerning investor, who can take calculated risks,” he added.
“As a company, we have always been conscious of the need to give a little of our profits back to the society as a guarantee for sustainable business success. This has been our guiding business philosophy. In all our host communities where we operate, we have a robust CSR strategy in place, for translating this philosophy into projects and actions that touch positively on the citizens,” Dangote noted.
“With the cooperation of our host communities, we will create employment opportunities and help small businesses to grow in Congo,” he assured.
He hinted that the long term ambition of his company is to develop 50 million metric tonnes of cement production and terminal capacity in Africa by 2015, stressing that they want to become a truly pan-African champion in the sector, capable of competing globally with the largest cement companies in the world.
“We quite understand the dynamics of doing business in Africa because we are Africans. We respect the people and their cultures anywhere we operate in Africa and for us this is an undeniable edge,” he said.