 |
| ALIKO DANGOTE |
Two years ago, I wrote a brief update on my social media page to
praise the business ingenuity and nationalist economic instinct of
Africa’s richest man, Aliko Dangote. The recent revelations of how the
Dangote Group has enjoyed privileged, almost exclusive access to
government-subsidized foreign exchange to the tune of hundreds of
millions of dollars has compelled me to take a second look at my
previous endorsement of the Dangote business model.
This new analysis is more critical, but it rejects the notion that
there are no redeeming qualities or constructive comparative benefits to
Dangote’s business practices. Dangote is a reflection of a deeper
political and economic dysfunction in Nigeria. This foundational
dysfunction makes it possible for oligarchic wealth accumulation to
occur, creates a fait accompli of indispensable, monopolistic oligarchs,
and then compels a pragmatic observer like me to choose the least
objectionable oligarch.
Dangote’s Unfair Advantage
There is no sugarcoating it: Dangote is the poster child for
patrimonial monopoly capitalism in Nigeria. Whether you favor or oppose a
capitalist trajectory for Nigeria and Africa, patronage capitalism
should offend your sensibilities. It is morally, economically, and
legally wrong. It distorts Nigeria’s financial and economic terrains.
More devastatingly, it amounts to a huge transfer of public wealth to
favored businessmen. It is an insidious form of corruption.
Dangote gets unfettered, guaranteed access to dollars, any amount of
dollars he claims he needs to finance the importation of industrial
inputs or the expansion of his operations, at the official exchange rate
from the Nigerian Central Bank. The Nigerian people basically sell him
their oil revenue dollars at the heavily subsidized rate of 199 Naira,
taking an instant loss of at least 100 Naira for every dollar they sell
to him. It is undeserved instant profit at the expense of Nigeria. To
compound this skewed deal, other businessmen with equally legitimate
business needs do not enjoy this guaranteed Forex access.
This is not the first revelation of Dangote being embedded in a
cocoon of governmental favors. During the Obasanjo administration, the
former president granted a series of import duty waivers and subsidies
to the businessman as the latter expanded his investment repertoire into
cement production. Under Obasanjo, Dangote’s quest to buy up poorly
performing competitors such as Benue Cement was made easy by a friendly
government peopled by allies in power.
The businessman’s desire to establish a virtual monopoly in the
cement sector became a reality under that government. His competitors,
such as Ibeto Cement, which lacked access to power, languished and
hibernated under the weight of the competitive edge granted Dangote by
subsidies, waivers, and cheap acquisitions facilitated by his friends in
government.
Dangote lubricated his privileged access to power by donating
lavishly to the campaign funds of the then ruling party, the PDP. By so
doing, he secured and expanded his access to concessions and breaks that
his competitors and business peers could only dream of. He remained in
government’s favor for three successive PDP administrations and he
continues to enjoy special access to taxpayer subsidized Forex to the
detriment of other businessmen and to the peril of Nigeria.
Apart from distorting the market, stacking the playing field in
Dangote’s favor, these government favors reduce competition. Competition
is critical to efficiency, innovation, and consumer-friendly product
pricing.
Competitors Kick
Dangote’s long period of leveraging political access to win
monopolistic concessions and protections from government has drawn
protests from some of his competitors. None of these protests is more
pointed than the one published last month as a newspaper advertorial by
Abdulsamad Rabiu, the billionaire chairman of BUA Group, a cement
manufacturer and commodity trading firm. Rabiu was unsparing in going
after Dangote in the wake of recently published documents detailing the
sweet Forex deal the Dangote Group enjoys. Here is Rabiu in his own
words:
It is rather ironic that a similar competitor in the same industry,
who incidentally is the market leader, is allocated huge amount of
Nigeria’s hard earned and scarce FX from the official market for its
operation in Congo. I do not know if there is an official policy to that
effect but I was baffled, as were numerous Nigerians, to learn through a
publication of FX allocation returns by First Bank of Nigeria in
Thisday Newspaper of Tuesday, February 16, 2016 (page 11) of that
allocation whilst other operators in the industry have received far less
or nothing at all during the same period for verifiable and viable
investments within Nigeria. It begs the question, “were other plants by
that operator across Africa built with Nigeria’s money?
Rabiu is of course a competitor to Dangote and probably covets the
government-bestowed privileges that Dangote enjoys. But let’s separate
the message from the messenger and the motive from the points raised.
Rabiu raises several weighty issues regarding the wider implications of
the Dangote business model.
There is nothing wrong with government offering strategic concessions
and breaks to certain players in certain strategic sectors of the
national economy — sectors with the capacity to solve a strategic or
pressing national infrastructural problem or sectors critical to a
strategic national product or industry. Incentives of this kind are
sometimes necessary to lure risk-taking, well-financed investors into
sectors that require significant capital outlays and initial
infrastructure beyond the financial ability of the government and other
investors.
Such concessions are usually given to pioneers in a strategic sector,
and smart governments do this all the time. I would rather see local
investors like Dangote, Rabiu, Femi Otedola, Mike Adenuga, or Tony
Elumelu get these kinds of concessions and strategic breaks than
expatriate firms. There is nothing wrong with a little economic
patriotism. Even in the United States, “buy local” laws and “local
contractors” provisions have proliferated across many states as a way of
domesticating returns on investment (ROI) and increasing returned value
(RV).
Crony Capitalist or Strategic Pioneer
The problem is, Dangote’s government privileges in the cement sector
were not a reward for being a risk-taking pioneer. Nigeria already had a
fairly vibrant cement sector before Dangote swooped in and secured a
virtual monopoly in a short time, aided by government protection and
patronage. The government’s indirect investment in Dangote’s cement
monopoly left his competitors reeling and enabled him to control supply
and thus pricing, hurting consumers.
While Dangote’s refinery project qualifies as a strategic investment
critical to our economic recovery and growth and would thus be a good
candidate for certain government breaks, Nigerians are yet to be told
the terms, if any, or extent of the government’s commitment to Dangote
in exchange for setting up a refinery that would transform the
downstream sector of the Nigerian oil industry.
The project meets the condition for government breaks under the
“pioneer status” and “strategic investment” logics. However, secrecy and
the failure to disclose what, if any, government waivers, Forex access,
and other breaks it enjoys has given birth to a cottage speculation
industry centering on the many ways in which Mr. Dangote is purportedly
being coddled and pampered with largesse in order to complete the
project and save the government from the perennial embarrassment of fuel
scarcity.
If the project is being given government support because of its
strategic importance to the economy, a simple, honest, and compelling
explanation will assuage the criticism. There is as yet no official
response to the mounting criticisms of the subsidies allegedly offered
to the Dangote Group. In the absence of such transparency, some people
have gone so far as to suggest that Dangote is leveraging his refinery
project to blackmail and wrangle subsidies from a government desperate
to end fuel shortages. Who can blame such cynics?
The published documents regarding Dangote’s access to subsidized
Forex, moreover, do not mention his refinery project. Instead, they
specify a routine business expansion to the Democratic Republic of
Congo, a project that the Nigerian people should not be subsidizing for
Mr. Dangote.
There is another reason why Dangote’s situation may be a reflection
of a culture of corrupt entanglement between political actors and a few
favored allies in the private sector. When smart governments dole out
breaks to attract investors into particular sectors, they usually do it
on a case-by-case basis, as occasion demands, and as a one-off incentive
package, not as a never-ending gravy train of government-funded
largesse and advantages. Mr. Dangote has enjoyed an unbroken stream of
government patronage for at least 16 years. To the extent that these
breaks are not extended to other intending investors and to Dangote’s
competitors, it lacks the incentivizing capacity to produce the kinds of
strategic outcomes that targeted and finite breaks, waivers, and
subsidies are usually designed to achieve.
The Paradox
Dangote is a paradox. Having written in the past to eulogize his
entrepreneurial genius and his economic patriotism and pan-Africanism,
the truth of Dangote’s centrality to Nigeria’s sinewy circuits of
cronyism, corruption, and patronage capitalism leaves me in a dilemma.
I still like several aspects of the Dangote business paradigm. All
his investments and holdings are in Nigeria and Africa, a pan-Nigerian,
pan-African investment strategy that I fully endorse. He raises most of
the capital for his projects from Nigerian and African financial
sources. It is a model that disavows Euro-America as the only source of
large investment capital. Departing from the dominant narrative of
“attracting” Foreign Direct Investment (FDI), a euphemism for letting
expatriate investors flex their financial muscle to dictate the terms of
investment on the continent, the Dangote model leverages Africa’s own
resources and funds to make investments by outsiders supplementary, and
marginal to outcomes. Dangote is of course not the only Nigerian
businessman to adopt such a pan-African business blueprint. Mr. Tony
Elumelu, another billionaire investor and chairman of Heirs Holdings,
has a similarly expansive pan-African business portfolio.
Africa needs more indigenous entrepreneurs, big and small, and such
business innovators, regardless of which country they are based, should
see Africa as their natural business habitat and field of play. That is
the spirit of Africapitalism, a philosophy of business developed by Mr.
Elumelu.
I was one of the participants in a scholars’ retreat organized by the
Tony Elumelu Foundation to harmer out the guiding principles of this
business philosophy. I can say that there is or should be a consensus
that African investors enjoy certain cultural and comparative advantages
when they invest in their own countries and in other parts of the
continent. There is also what one might call an economy of emotional
commitment that produces a uniquely empathetic business ethic, making
African investors on the continent unique critical partners in solving
Africa’s economic and infrastructural problems.
Given my commitment to these ideals, I am a believer in Dangote’s
deliberately pan-African business strategy as well as in his willingness
to invest against the grain of stereotypical narratives of Africa’s
governmental, social, and infrastructural dysfunction. Mr. Dangote has
gone into countries and sectors that foreign investors said were hostile
to investment and not profitable. There is, as I see it, a certain
dare-devilry in his business decisions, which include but transcend the
raw, mechanistic quest for profits. I suggest that whatever that
motivation is, whether it is a form of pan-Africanism or
pan-Nigerianism, it is worth celebrating and replicating.
Dangote’s businesses continue to employ thousands of Nigerians,
easing Nigeria’s unemployment crisis and helping to reduce the so-called
youth bulge. In other African countries where he has invested, similar
multiplier benefits have accrued to the host nations.
Dangote continues his pan-Nigerian pattern of investing. Today there
is no zone of the country without Dangote’s investment. What’s more, Mr.
Dangote is on the verge of solving Nigeria’s perennial fuel shortage
with his refinery, a project that when fully operational will render
moot the debate on the price and supply of petroleum products as well as
the debate on the corrupt, inefficient national institution called
NNPC.
A complex situation calls for a complex analysis and conclusion. In
that vein, I believe that if some members of Nigeria’s notoriously
complacent wealthy class had emulated Dangote’s restless investing
methodology, warts and all, Nigeria would be in much better shape today,
her economic prospects much brighter.
In this sense, Dangote, for all his complicity in Nigeria’s crony
monopoly capitalism, and for all his unearned privileges and subsidies
financed by the commonwealth, is still a more tolerable model than the
alternatives. These alternatives include mindless political corruption;
parking stolen state funds in foreign banks; unimaginative investing;
and investing in isolated provincial markets.
In Nigeria, the wealthy are notorious for packing their wealth in
unproductive and in many cases unused properties. They hardly put their
money to use to innovatively disrupt an industry, to use a Schumpeterian
idiom, or to solve a critical problem in a value-creating manner. When
they invest, they do so in a predictably vulgar manner with an emphasis
on showy, conspicuous consumption rather than on intelligent
profit-making and multiplier social benefits.
For continuing to operate outside this regressive paradigm and for
consistently demonstrating that vast investment fields remain unexplored
across Africa, Dangote for me remains an imperfect entrepreneurial
nationalist/pan-Africanist.
That does not mean that the Dangote Group should continue to enjoy a
Forex largesse financed by Nigerians’ hard earned oil revenue. That
anomaly should cease right away. But it means that the businessman’s
success, however tainted it may be, points to the possibility that one
can pursue both personal profits and nationalist economic aims at the
same time. The two impulses can coexist, and Dangote, whether that is
his intention or not, embodies that duality.
0 comments:
Post a Comment
PLEASE BE POLITE