HOW I BECAME THE RICHEST MAN IN AFRICA – ALIKO DANGOTE
At the age of 21, Aliko Dangote borrowed $3,000 from his uncle in order to import and sell agricultural commodities in Nigeria, his native country. His business venture quickly became a success, and as a result, he managed to repay the entire loan within three months of starting operations. Today, Dangote is the wealthiest man living in the African continent with an estimated net worth of $17 billion. The business empire that he began to build more than three decades ago, Dangote Group, is one of the largest private-sector employers in Nigeria as well as the most valuable conglomerate in West Africa.
Dangote’s business interest encompass many industries, including oil and gas, consumer goods and manufacturing. About 80% of his conglomerate’s revenue comes from Dangote Cements, which is expected to realize a 40% increase in profits this year. According to Forbes magazine, the subsidiary supplies 53% of the cement market in Nigeria. Dangote also owns the world’s second-largest sugar refinery, and together all of his publicly traded companies make up a quarter of the market capitalization of the Nigerian Stock Exchange. Here is an overview of how Aliko Dangote turned a local commodities trading businesses into a multibillion-dollar corporation.
Early Life and Schooling
Born in 1957, Dangote grew up in an entrepreneurial household in Kano State, Nigeria. He was raised Muslim and had been exposed to an upper-class lifestyle since his birth. Dangote’s grandfather, Sanusi Dantata, was once named one of the wealthiest people living in Kano. He made his fortune by selling commodities such as oats and rice. Dantata became Dangote’s guardian in 1965, following the death of his father.
Having spent much of his childhood with his grandfather, Dangote quickly became interested in the world of business. He once said, “I can remember when I was in primary school, I would go and buy cartons of sweets [sugar boxes] and I would start selling them just to make money. I was so interested in business, even at that time.”
At age 21, Dangote graduated from Egypt’s Al-Azhar University, one of Islam’s prestigious universities. It was there the budding entrepreneur furthered his education in business. During an interview this year with Forbes, Dangote explained, “When you are raised by an entrepreneurial parent or grandparent, you pick that aspiration. It makes you be much more aggressive–to think anything is possible.” (See also, Interested In Investing In Africa? Here’s How.)
An Empire Is Born
After graduating from college in 1977, Dangote managed to convince his uncle to lend him $3,000 to start a business. The funds from the loan allowed him to import soft commodities at wholesale prices from international suppliers. Two of his main imports were rice from Thailand and sugar from Brazil. He then sold those items in small quantities, and at a lucrative markup, to consumers in his village. The venture quickly became successful and turned into a cash cow. Dangote claims that on some of his best days, he was realizing a daily net profit of $10,000. That allowed him to repay his uncle in only three months.
Cutting Out the Middleman
In 1997, Dangote realized that acting as a middleman was a very costly endeavor, and so he built a plant to produce what he had been importing and selling for the previous 20 years. His company began to produce pasta, sugar, salt and flour. Around the same time, Dangote was awarded a state-owned cement company. Dangote significantly expanded the operations of the company in 2005 by constructing a multimillion-dollar manufacturing plant. The construction was financed with $319 million of Dangote’s own money in addition to a $479 million loan from the World Bank International Finance Corporation.
Each of his manufacturing divisions has since been separated into different publicly traded companies. Dangote Sugar Refinery Plc., for example, was listed on the Nigerian Stock Exchange in 2007. As of September, the company’s market cap was ₦82 billion ($411 million). Dangote subsequently took his salt, flour and cement segments public. Those businesses became the National Salt Company of Nigeria Plc., Dangote Flour Mills Plc., and Dangote Cements Plc., respectively.
Expanding the Empire
Dangote has always reinvested the majority of his profits back into his businesses, which is one reason the company has grown so much since inception. During an interview with Al Jazeera News, he explained,‘‘We [Dangote Group] are not doing like other Africans who keep most of their money in the bank. We do not keep money in bank. We fully invest whatever we have and we keep on investing.’’
Dangote has also recently entered the oil and gas industry, a sector that he purposely avoided for most of his career. Unlike many wealthy Nigerians who made their fortune in oil, Dangote chose to go down a different path. ‘‘If we [Dangote Group] had followed the trend of dealing with oil, we would have tainted our name. People would have thought ‘You [Dangote] made so much money because you did a lot of unethical dealings in the oil industry,” he said once.
In an effort to put some of his cash reserves to work, Dangote purchased an oil refinery in Lagos in 2007. He hopes that the refinery, which is scheduled to be commissioned in the third quarter of 2017, will significantly reduce Nigeria’s reliance on international suppliers for oil and gas. The plant is expected to produce half a million barrels of oil a day. (You might also like, Key Ratios For Analyzing Oil And Gas Stocks.)
The Bottom Line
Aliko Dangote’s journey to fortune is not a rags to riches story. He came from a wealthy family that was able to provide financial assistance to start his business. For many years, Dangote imported soft commodities and resold them in his community. He eventually ceased importing items and began to manufacture his own products. Over the years, Dangote has expanded into new business segments, including telecommunications, real estate and steel manufacturing. Today his holding company, Dangote Group, is the largest conglomerate in West Africa.