Dangote Cement’s rising expansion profile in Africa’s frontier markets
In 2011, pundits predicted the emergence of sub-Saharan Africa as the world’s last cement frontier going by the rising demand for the commodity in the region, especially in the face of infrastructural development. With a strategic investment that would later see its profile rise towards a Pan-African growth, Dangote Cement has defied odds to ensure that the demand-supply gap of the commodity is addressed in the continent through a shift in investment drive that will see the company raising stakes in cement production across 13 other African countries aside Nigeria. With the commissioning of its Ethiopian cement plant, Dangote unveiled plans to double the plant’s 2.5 million tonnes capacity within the year. FEMI ADEKOYA examines how Dangote Cement hopes to maintain its edge in the frontier markets.
For Dangote Cement, its Pan-African investment drive is a bet that the fast pace of economic growth in Africa will continue and that rising prosperity will create demand for housing, offices, roads, bridges and other concrete structures.
Statistics show that Africa has fairly low per-capita consumption of cement. Nigeria, for instance, gets through around 125kg a person each year compared with 500kg in some richer countries in North Africa.
With a sustained GDP growth rate of five percent yearly in the past decade, demand for cement is projected to grow in Africa at 7-10 per cent in the years to come.
Already, governments have been prioritising increasingly larger portions of their budgets on growing their infrastructural capacity in order to increase trade and ease unemployment, and donors too have played an important role.
This is clearly visible in Angola, Botswana, Nigeria, Rwanda, South Africa and Uganda, where government sponsorship has been the main catalyst for infrastructural development.
Similarly, the demand side too is looking positive as improved political stability, fiscal management and lower sovereign debt levels have availed funds for capital investment, while post-2008 commodity price shock, economic fundamentals, for the larger part, are improving.
According to the IMF, in the last decade, real GDP growth in Sub-Saharan Africa has grown by an average rate of 5.8% while population growth has averaged 1.75% over the same period. In effect, per capita incomes are increasing, and Africans, on the whole are getting wealthier, albeit from a low base.
With a sustained growth profile in Nigeria, the need to extend its presence to sub-regional markets in Africa has become a driving force for Dangote Cement Plc after it commenced operations in its new plant in Pout, Senegal; Doula, Cameroon; South Africa and Ethiopia.
According to Dangote Cement, Africa’s quest for self-sufficiency in quality cement is on course as indicated in its stakes in cement manufacturing plants in Zambia through Tanzania, Nigeria, South Africa, Congo (Brazzaville), Ethiopia, Sierra Leone, Ivory Coast, Liberia and Senegal to Ghana.
Indeed, if all goes to plan, Dangote will triple its cement output to 61m tonnes a year by the end of 2017 when almost half of its cement bags will roll off production lines outside Nigeria.
Dangote, while commissioning his 2.5million mtpa cement plant in Ethiopia last week, unveiled plans to double the capacity of the plant by the end of the year
He charged African leaders to make the environment conducive for the growth of real sector, noting that this remains a sure way of creating jobs to reduce poverty in the continent.
Dangote, who noted that the plant, with a prospect of creating about 7000 job opportunities in Ethiopia, would be expanded to cater for growing development needs in the country as well as bridging the demand gap in the export market.
He also stressed the need for a genuine collaboration between the private sector and governments at all level for the much needed real sector growth, noting that there must be deliberate efforts to encourage Africans, not just foreigners alone, to invest in Africa.
“Take for example, my company, the Dangote Cement is currently investing in 16 African countries, with plans to invest in many more over the next few years. There are a number of other successful pan-African brands today such as MTN, Shoprite and Ecobank. We need to encourage this trend to see more investments in Africa by Africans.
“Above all, there is the need to encourage the private sector to collaborate with governments across Africa, to address the issue of infrastructure deficit, which has plagued the continent for decades”, he advised.
He said further: “I believe that manufacturing, and not trading, is the best way to grow an economy. This event, which we are witnessing today, attests to the fact that we took the right decision when we decided to transit from trading in our home country, Nigeria, into manufacturing, in 1996.
“Dangote Cement is currently simultaneously setting up new cement plants and terminals across 16 African countries, including Ethiopia. This is in line with our long-term vision to become one of the world’s biggest cement producers. We envisage that by the time we complete all our ongoing African projects, we will be on track to achieving our target.”
He explained that the various developmental projects, including the construction of the continent’s largest hydro-power dam, make Ethiopia a beautiful bride to investors.
While commending the government and appreciating the country’s remarkable economic achievement, Dangote said that the favourable investment climate together with abundant raw materials and sustainable peace attracted him to invest in Ethiopia.
According to him, in addition to supplying 2.5 million metric tonnes of cement per annum to the market, Dangote Cement Plant has also created direct employment for about 2,000 people in the main plant operation and 5,000 indirect job opportunities.
Inaugurating the Dangote Cement Plant established with over $600 million direct investment in Mugher Town, Prime Minister, Hailemariam Desalgn said Ethiopia represents a lucrative market and is a destination of choice for investors with a population of well over 95 million people and a growing middle class.
According to the Premier, with the government’s focus on harnessing the competitive and comparative economic advantages of the country, Ethiopia is ready to host more and more quality investments that leave a positive mark on its non-stopping development journey.
He said his government has been taking all the necessary measures to make the country suitable for foreign investment and adequately conducive for local investors.
“I am hopeful that the continued interest and presence of self-made industrialists such as Alhaji Dangote in investment projects in Ethiopia’s diverse sectors and their successful experience can and should go a long way in encouraging local investment”, Hailemariam enthused.
Ethiopian Industry Minister, Ahmed Abetew said the importance of industry for sustainable development could not be over emphasized and that was why the government has accorded the sector a priority.
He expressed the hope that the involvement of Dangote in the cement industry in Ethiopia will play a significant role in cement production.
On his part, Governor, Central Bank of Nigeria (CBN), Godwin Emefiele noted that Dangote Cement’s Pan African investment would advance the continent’s cement self-sufficiency and ability to export the commodity among African countries.
“$600 million was staked on this project and we are rest assured that such a fund would deepen financial markets, engender Ethiopia’s GDP, regional growth and address unemployment as well as poverty. Dangote has shown capacity to invest in Africa and it is believed that intra-African investment would be encouraged”, he added.