Monday, April 15, 2013
Africa's richest man speaks about the future of Nigeria
Dressed in a black suite with a black shinny cock shoe to match, Aliko Mohammed Dangote kept his appointment for 9am.
Unlike the rambunctious entry of Nigeria’s men of means and power, Dangote walked in with just a few of his executives. After the informal handshake and introduction, he grabbed the microphone to make some opening remarks which turned out not to be mere remarks. He made earth-shaking revelations about his person, the conglomerate he runs (Dangote Group), the Nigerian economy and how things can get better in a very competitive environment of clashing political and socio-economic interests.
At first, the tempo was cool – the usual compliments of not having time to rub minds, examine developments in the country with a view to proffering solutions – and the usual pleasantries, until Dangote explained that the real danger confronting the Nigerian state is the infrastructure deficit in a country where the population growth has choked existing facilities. He made it clear that the problems confronting Nigeria today did not just start – they are a cummulation of many years of misgovernance and lack of vision. Shall we blame President Goodluck Jonathan? No!
On the Economic Management Team of President Jonathan, Dangote explained that the team is working hard to ensure that good policy frameworks are put in place with a view to building a more prosperous nation. The EMT is as bothered as President Jonathan to bequeath a better economy to Nigerians.
But, at the point when Dangote said the danger posed by infrastructure deficit is far graver than the Boko Haram threat, all heads turned in his direction.
Mind you, his audience was a group of select senior journalists in Nigeria.
“Why should we in Nigeria, blessed with many mineral resources, be where we are”, he asked? “The mineral resources we have can replace and be better than the crude oil. “Some ask where the minerals are but they are there.
“Even in the Economic Management Team, EMT, we ask and look for ways to make it possible to clear goods from the ports within 48 hours.
“But I say it would not be possible and the cost adds to everything. “To clear a container in Lagos it would take about $1000 but in Brazil where they are not even efficient, it costs less than $100 to clear the same container.
“The issue which people seem to forget is that the last port we built in Nigeria, the Tin Can Island Port, was built in 1978 – look at the population of Nigeria at that time, the size of the economy, crude oil was being sold for about $9 and compare with the expansion of the economy and the population and people think we should still manage with the same facility?
“God forbid, some people were expressing fears about Third Mainland Bridge; God forbid I say, should something happen to that bridge, how would people move around in Lagos? Look at how difficult it is for people to move around now and it is being said that by 2020 Nigeria’s population would be about 200 million”.
Our Investments, Our Vision
“Before we were making money from our other businesses like sugar, salt, flour and putting the money in cement but by 2010 we were able to pay all the banks.
“I don’t have any issue with government raising money, that is, loan, so long as it is spent well. Beyond the issue of Boko Haram and insecurity, the greatest threat that confronts us is the threat of decaying and decayed infrastructure. And this is not just in Nigeria but in all of Africa, the greatest threat is infrastructure”.
Decayed Infrastructure, The Greatest Threat
“Somebody was asked how he would operate in government and the person said he would face only two things – infrastructure and education. And he was asked what about the rest. He said with infrastructure, other things would follow. “This is what I think confronts us as the greatest danger even beyond Boko Haram”.
His audience laughs but he charges back with bluntness: “No! It is true.
“The biggest problem of anybody is when you taste money; you were once rich and then you become poor. It is very bad. Nothing can be worse than that.
“It is when that money goes that you’ll see the true colour of everybody – your wife, your children (a round of raucous laughter)
Alternative To Crude Oil
“If today oil prices collapse, do we have alternatives?
“I tell people that we do. Some of us may be manufacturing in our own little way, but in a very big country like Nigeria with its population, that is simply not enough.
“We are heavily into cement – meanwhile limestone is the cheapest of all the mineral resources we have. There are other minerals that are even more lucrative and more profitable that government is looking to exploring.
“The problem is that even when you begin to explore, how do you move the goods around.
“We’ve also been talking about new ports but there are challenges”.
Scavengers On The Loose
“Look, let me tell you what we have in Nigeria: We have scavengers who hold licenses but wait and do nothing. People just grab opportunities and wait to see what happens rather than operate with the licenses “Government has issued 19 licenses for refineries and everybody is holding the licenses and claim that they are waiting for foreign investors. Mind you, the foreign investors are not fools”.
The Role of Foreign Investors
“Foreign investors did not build South Korea – South Koreans developed their country; the Germans built their economy, an economy that was once in ruins. The Germans suffered a lot but now they are the best.
“What foreign investments are we getting?
“Meanwhile, Sanusi Lamido has done his best by holding inflation down, holding exchange and interest rates down; because in an economy that does not export much, the best you can do is to have a strong currency so that life would be a bit easy. Though interest rates may be high but that should not stop a business from operating.
“When we were building Obajana Cement factory, we were paying as high as 42% interest rate at some point in 2004/2005 – some banks charged that much and we didn’t pay dividends for some eight or nine years; but after sorting out our loans we paid the accumulated dividends. “The foreign investor I would prefer is the one that goes to Ekiti for instance and sets up a factory because even if the investor wants to leave Nigeria, he would sell off his investment but the ones investing in our bonds can just wake up one day, re-discount it and just leave because our rates are fine”.
“If you concession, it is not a bad idea because government can not do everything. In Dubai and some other more developed economies, that is what is happening. I was reading some paper in Dubai during the week and the leader of the country was thanking the transport authority for saving the government $60 billion over a period of five years – meanwhile, the savings was calculated in form of man hours.
“If you look at those who work with us for example, the drivers, they bear so much. Imagine someone who leaves his house by 4 or 4:30 am and does not return home until 10 or 11pm! How would he have time for himself and the children – and these things come round to create an environment that is not overall conducive for upbringing of a child. “There is hope if we do the right things. “It does not matter who provides the service; the people would be willing to pay”.
The Future Is Brighter
“If you ask me whether the future is brighter than today, I would say yes; but the people must be ready to pay for services and pay their taxes. A simple example! At Obajana where we are producing at a current capacity of 10 million tonnes per year, which is $1.7 billion, we can continue to produce cement for the next 100years with the same capacity but you do not rest – mind you, limestone is the cheapest mineral resource in Nigeria, so if people look inward they would see the opportunities for greatness”.
An Example From Lula of Brazil
“Look at the example of Lula Da Silva of Brazil, the country used to be heavily indebted. “By the time he left he cleared the debt. But the policies he put in place for education and housing engendered serious development. He said people in government were bringing proposals which were lies to him but he was resolute and he stood his ground. “By the time he left office, he had built 18 standard universities. Before he left office, Brazil had $467 billion in reserves. “These things can only be possible when people pay their taxes.
“Nobody is perfect. “We need to come out and pay our taxes. “Today I’m conscious about the concerns of other shareholders.
“If where there were no shareholders, the people in the office may allow me some leverage because I am the boss and owner but when there are shareholders, those who would have to process the papers that would grant me undue privilege but who are now shareholders would raise questions because that act would not be in line with best practices so the company is quarantined from such indulgences and fraud. Once the people know that you’re cheating, they too will begin to cheat. Listed companies are more open to transparency”.
The Negative Paradigm Shift
“There is a world of difference between our parents and this generation. “Our parents were more caring within the capacity they could muster because they cared for the children, the wife, their own parents, their farms and uncles and even neighbours; but this generation is more self-centred and cares only about themselves, the ‘me’. If people really care about their children they would work to make the future better. “Without good infrastructure, the future is bleak”.
Between Vision And Planning
“You must have a vision and not just a vision but you must have a plan that would make you fulfill that vision. For us at Dangote, for instance, just conception and planning alone sometimes takes two years. You must also put in place processes of how to execute the plans. Our vision in the next fives years is to be a company that has about $75billion in market capitalization, be number one in Africa and one of the first 100 in the world”.
The Scourge of Subsidy
On the issue of subsidy and the education that Nigerians really need, Dangote became very passionate. He said as Nigerians, there is need for an understanding of the issues and a proper place for government policies and the commitment of Nigerians too.
At lunch with one African president, “he told me how his country dealt with the issue of subsidy and how people resisted. When they had subsidy on diesel, some people changed their cars to cars that ran on diesel; that when they removed subsidy on diesel, the bills went down but kerosene which still enjoyed subsidy had its bills going up. He said it was not easy but he prayed over it and went ahead to do it in a systematic way such that funds which would have gone into subsidy were dedicated for some specific projects. Now that president even charges 10% on PMS and diesel”.
When President Jonathan tried removing the subsidy on petrol, Nigerians went wild in anger.
Dangote continues: “Would you believe that in 2011 and 2012, Nigeria paid $30 billion in subsidy, money which would have been used to build at least 20 refineries – that was the finding of a report! How can we say that people are stealing crude and we are running about, going to night clubs and we are happy as a people?
“The total tax collected in Nigeria is just about $10 billion. How much is that in a country as big as Nigeria”.
In response to a question on the building of refineries even in a regulated environment like Nigeria, he said “may be we at Dangote now would be referred to as being insane because we are going ahead to build a refinery very soon in Nigeria.”
To this, a question was immediately thrown at him: “What are you going to do with it”?
“We would sell”, Dangote immediately responded.
“If you build the refinery alone you might not make so much money but you’ll need to build a petro-chemical plant because of the by-products. “The investment is going to be about $8billion. “Meanwhile the fuel they import for us is the worst and we pay them for the best. “When we have our refinery, we would sell to them here and we can even cut the cost – no shipping, no demurrage. “We cannot continue to behave the way we are behaving now.
“Look, by 2020, Nigeria’s population is expected to hit 200million. So, how would you handle cargo or shipping of products for 200million people with the existing facilities that we have today? How would you distribute?
The pipelines are not functioning; the roads are not good. The ports are not there. We should make up our minds on what we want to do. Something drastic needs to be done.
“What I think we should do is that we should attain self-sufficiency instead of this 20:2020 thing.
“Government should encourage Nigerians as it is doing to invest in Nigeria but some times we are the architect of our problems.
Part of the problems we had about Benue Cement was that the people said Obasanjo hated them that was why he sold the other cement companies to foreigners and sold BCC to a Nigerian. When you go to deal with some officials the first thing they ask for is technical partner and we tell them we do not have because we have the technical know how – this is what we do. “We’ve already commissioned a company to help us build a factory for the production of Urea and Ammonia and it would not only provide employment but in the area of fertilizer production it would serve some purpose.
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Posted by Naijafeed at 4/15/2013