African Manufacturers will never be competitive globally unless … – Dangote

Industries, Trade and Investment

 

By Industrial Digest

 

LAST WEEK, the Manufacturers Association of Nigeria (MAN) held a High-Level Roundtable Discussion on Industrialization in Africa, with the theme: ‘Positioning African Industries for Economic Transformation and Continental Free Trade,’ as part of activities to mark its 50th anniversary.

In this conversation with Doyin Salami who moderated the event, Alhaji Aliko Dangote, Africa’s foremost industrialist, shares his insights on how manufacturers on the continent can change the narrative of the continent’s low contribution to world manufacturing output of 2.0% compared to China’s 28.7%, and America’s 16.8% … and total exports of manufactured products 26% compared to South Asia’s 71%, America’s 60% and EU’s 79% (World Bank data 2019).

He also bore his mind on how to make the African Continental Free Trade Area (AfCFTA) workable, among other issues.

Moderator: A very good afternoon, and welcome Alhaji, to this fireside chat.

Aliko Dangote: Good afternoon, Doyin Salami. It’s great to be here, and I stand on the existing protocols.

Moderator: Well, looking at you as someone who has the Pan-African experience of industrialization, but also of trading across Africa, let me begin by asking you – as you draw on your own experience of operating in 17 Africa countries, let’s start from the point I just made of African development of a globally competitive manufacturing industrial sector, what did you think-where are we in industrialization, and how can Africa compete globally in manufacturing?

Aliko Dangote: Thank you very much Doyin Salami. You know, really to be globally competitive, we must produce very high-quality products, and we have to produce them at the cheapest costs possible. This is not easy because others have been there before us if you look at the Asian Tigers.
It’s never late because this can be done, so what I think we need to do is to concentrate first on meeting our domestic demands by producing high-quality products at the lowest price, and if we do that, we will be able to export to other countries and get their market, and that’s exactly what the Asian Tigers did. They concentrated on their domestic markets. They kept on improving on the quality of their products and also the cost of whatever they were producing.
Of course, initially, we might need the governments’ support until we stabilize to be able to compete anywhere in the world.
So, I think the government has to remove most of the hurdles in terms of poor infrastructures, unfriendly regulations, our ports, and electricity.

There are so many things I think we need to look at. For example, when we decided to make Nigeria self-sufficient in cement, what we did, first of all, was to invest heavily in technology to make sure that whatever we want to produce is of quality.
I knew people would challenge us in terms of quality, and in case the market is opened up, we will be able to compete and then also about the pricing.

That has given us a lot of edge by being able to go to markets where there are competitors like in Cameroun where the competitor had been there for fifty years, we have been able to take the market position in that country because of quality and price.
So, I think we need to do a lot in terms of quality and price because without which no matter what you do, nobody is going to buy your product. We have already built that business case in our cement, and we are extending it to fertilizer, oil, and gas and in all other products, we want to export to other African countries.

Moderator: Thank you very much. Let me draw now specifically on your experience across countries on the various businesses. Your Group has several diverse interests in manufacturing in several countries with very different political and economic regimes and objectives. Indeed, issues around protections are very rife across the continent. Now that we have gotten the AfcFTA, some of the managers of this framework are in the audience. What is your advice to the managers of the AfcFTA in terms of ensuring we can establish very rapidly cross-border collaboration and also meaningful competition across the continent?

 

Aliko Dangote: Given the potentials of the AfCFTA, I think my advice is that I would like to have everybody – all the people who are involved to speed up the implementation, and what they need to do is to sit down and see how do we implement this, because there are issues which we are still battling with and they needed to address those issues, and we need to also find out how come the other regional agreements were not working because if they had been working, we wouldn’t have been at the 15% intra-trade within Africa.

We need to look at those issues to know why and what happened.
And if you look at it, it is to do with a lot of issues like the ones you mentioned earlier.

Today it takes our trucks two weeks to go to Ghana which we are supposed to go in about 10-12 hours; and if you want to go to Togo which is 8km, it takes about 10 days, and so, if that is the case, we are not going to be competitive. And we are talking about gas- our gas price here has almost doubled.

So, the governments have to do a lot in terms of having the political will to remove all these bottlenecks at the borders. Knowing that we have already signed the agreement, why do you still hold somebody when you know that these are goods that are allowed to pass?

Today if I want to go through the ports, they will charge me $10 per ton, and if I am exporting a very relatively cheap product to the next country, why should I pay $10 /ton in terms of ports charges?
So I think these are some areas we need to look at, to make our products completive.

The border crossing is the most urgent important one; we must make sure that crossing our borders doesn’t take time because it doesn’t make sense at all. Again, at every border that you go to, there are different charges – so the governments need to focus on removing all these barriers so that we can have a very good flow of business. If we don’t do that, we will never be competitive.

The whole idea is for us to improve and have the intra-trade to be almost about 55-60 percent. So to have 55-60%, we all need to work with the governments to be able to remove these impediments that need political will.

As you know, some of the governments just go there and signed agreements without the political will to implement them.
Let me give you a typical example-a lot of countries have signed in preparation for the AfCFTA to have one African passport.

Yes, I have that passport but then, the President of one country invited me to come and see. I went there but they didn’t recognize that passport, but they recognized it in South Africa but not far away from South Africa, they said No… so, the movement of goods, services, and people is so tough, and for the AfCFTA to work, we have to remove all these impediments, and these need a lot of political will.

ModeratorOne of the key issues that you have mentioned, especially in referring to cost, almost goes to the heart of Africa’s current economic thinking because when you said that the gas prices have doubled than what you could get them in anywhere in the world, you go to the heart of revenue-raising as far as Africa is concerned.
A lot of the governments see these charges in terms of revenue-raising than they see them as obstacles to industrialization and economic development. I think that is one of the areas that an association like MAN could make some impact. Speaking about the Dangote Group and the Afcfta, how ready is the Dangote Group in terms of the AfCFTA, how ready is the Dangote Group to be a participant in the AfCFTA?

Aliko Dangote: Long before the AfCFTA, we have always designed and planned to be an export-based company.

If you noticed, we used to import wheat to produce flour and pasta but we folded that business. We are not going to be competitive because we rely on the international price of wheat.

So anything that we cannot do a backward integration or we are not going to export, we are not going to touch it. I kept telling people that it is not that we are not interested in the AfCFTA; we are interested in it because we are going to be the major beneficiary.
Number one, we have the largest fertilizer plant in Africa. We will supply the fertilizer all over, and we are building the largest petrochemical plant with a capacity to produce 900 thousand polypropylene, and 650,000 barrels per day of oil and refining per day.

Today it takes our trucks two weeks to go to Ghana which we are supposed to go in about 10-12 hours; and if you want to go to Togo which is 8km, it takes about 10 days, and so, if that is the case, we are not going to be competitive.


All these products are not only for the Nigerian market, they are meant for Sub-Saharan Africa because we don’t produce these goods, and all the other countries in Sub Sub-Saharan are also importing their petroleum products.

And then, when you look at cement, we have created huge capacity in terms of export. We already have two terminals – one in Lagos and the other in Port Harcourt, and they both have a capacity of 8 million tonnes for us to be able to export cement or clinker to other countries that don’t have limestone as we have here.
So despite our gas prices, and ports charges, we are still okay in terms of being competitive.

So, Dangote Group is very competitive because as we speak, if we start all our export we will be able to export more than $10-12 billion worth of goods, and that has put us as one of the highest in Africa if not the number one.

Moderator:  I can continue with this chat for a long time but lend me end it with this question: I dare say trading would be an easier proposition. Why did you engage in manufacturing giving the challenges that we can see?

Aliko Dangote: Indeed, some manufacturers and entrepreneurs have not been successful because, in manufacturing, you need very stable government policies, you need to have electricity.

These two things are very important. For me, it is better that I go into manufacturing than trading because trading is a very temporary thing; you can trade today and tomorrow, you could decide to shut down your office, and so trading is not adding any value; manufacturing is where you can create massive jobs, and not only that, it enables you to leave a legacy.

So, the onerous is for me to leave a legacy. For example, there was a time Nigerians was importing almost 90 percent of what it consumed in cement.
At the Dangote Group, we took it upon ourselves to make sure Nigeria is self-sufficient, not only self-sufficient in cement but also to export cement. And so today if we can export the excess that we have, we are going to earn $200-300 million.

And so, for me, trading is not the right way to go. I know that yes manufacturing is very difficult, yet we have to work together with the government and make it much easier so that we can add value. For somebody who is trading, you order goods, you sit in your office, the goods arrive and then you sell them, but in manufacturing, you are creating value not only for yourself, you are creating value for the society, the country, and everybody.

 

 

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