ALIKO DANGOTE AND WHY YOU SHOULD KNOW ABOUT HIM

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000364

SIPDIS

STATE FOR EXIM, OPIC, USTR

E.O. 12958: DECL: 03/07/2015
TAGS: ETRD EINV ECON NI PINR BEXP PGOV
SUBJECT: ALIKO DANGOTE AND WHY YOU SHOULD KNOW ABOUT HIM


Classified By: Consul General Brian Browne for reasons 1.4 (b) and (d).


1. (C) Summary. Alhaji Aliko Dangote (Dangote) is Nigeria's
most well known businessperson and may be its wealthiest
citizen. He has taken on the aura of an economic folk hero
for some, villain for others. To supporters, he symbolizes
that Nigeria can do more than barter and trade. It can
succeed in manufacturing. To detractors, he is a predator
using connections in a corrupt political economy to tilt the
playing field in his favor and sideline potential competition.
The truth resides somewhere between these caricatures.
Dangote is counted among President Obasanjo's inner circle of
business advisors. It is no coincidence that many products
on
Nigeria's import ban lists are items in which Dangote has
major interests.


2. (C) Summary Cont'd: Although an undiluted success in terms
of wealth accumulation, Dangote personifies the duality in
Nigeria's economy. This duality presents a dilemma for US
economic policy. On one hand, Dangote imports significant
amounts of US produce and equipment for his manufacturing
ventures. On the other, he has had success blocking trade
and investment that might compete with his enterprises.
Weighing everything in the balance, we believe the Dangote
model is harmful to Nigerian and American interests in the
long run. Unfortunately, the Dangote model will likely be
the one most emulated until its beggar-thy-countrymen
contradictions become more apparent. End summary.

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DANGOTE THE COMPANY
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3. (U) Alhaji Aliko Dangote (Dangote) is founder, president
and CEO of Nigeria's largest national company, Dangote Group
of Companies (the Group). Dangote's wealth and prestige are
based on his family connections and political friendships
yet he is esteemed by many Nigerians for his business
acumen. He has led the Dangote Group of Companies (the
Group) to unprecedented success in Nigeria, starting the
company as a trading entity in 1977 and growing it to an
estimated USD 700 million manufacturing or semi-
manufacturing behemoth that it is today.


4. (U) The Group is a household name in Nigeria and comes
closer than any Nigerian company to market domination in
many sectors. The Group employs roughly 10,000 Nigerians
and turns over a profit estimated at USD 1.3 billion. It
runs 15 manufacturing and bagging facilities nationwide and
has operations in industries as wide ranging as cement,
sugar, wheat, textiles, polypropylene sacks, and property
leasing. Part of the Dangote business strategy is to focus
on provision of basic human needs: food, shelter, and
clothing.


5. (C) In each industry, the Dangote Group has been able
to climb from zero production at market entry to become a
top producer in a relatively brief period. Sugar refining
began in 1999 and today the Group manufactures an
estimated 100 percent of Nigeria's sugar consumption needs.
In cement, the Group reports it started from zero
importation of production inputs five years ago to today
importing between 3.5 and 4.0 million tons each year,
comprising 50 percent of imported cement into Nigeria and
40 percent of the total cement market in Nigeria. A
Dangote manager told AgAttache and Econoff the Group's goal
is to dominate every sector in which it operates. He also
proclaimed its willingness to play hardball to reach its
goal.

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FROM TRADING TO MANUFACTURING -- THE DANGOTE AND GON
SHARED DREAM
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6. (U) Most Nigerian businesses and businesspeople focus on
trading. Until about five years ago, Dangote was no
different. As the Group developed, however, Dangote saw
that if he could build manufacturing capability he could
gain control over a larger portion of what went into
Dangote products, and thus a larger portion of the profits.
Adding value to imported inputs (what we deem "semi-
manufacturing") became a lucrative niche for the Group.


7. (C) Dangote's shift toward manufacturing accords with
the GON's nationalistic economic policies, which place a
premium on domestic manufacturing and production. What we
don't know is whether Dangote and others like him helped
drive the policy or whether their actions were driven by
the government policy. Reality is probably a mixture of
both.


8. (C) In part, because of this shared dream, the Government
has been very supportive of Dangote. We know the company
at one time or another held exclusive import rights in
sugar, cement, and rice using such advantages to do volume
business and undercut competitors. In a December 1996
interview, Aliko Dangote admitted that a government mandate
once forced him to import so much rice that the local
market crashed by almost 80 percent. The direction of GON
trade barriers also suggests preferential treatment. High
tariffs or outright bans on imported items favor the Group
in nearly all areas in which they do business including
wheat flour, cement, certain textiles, sugar and pasta.


9. (C) Further, the GON is normally slow in privatizing
state-owned production facilities. Yet the Dangote Group
swiftly won bids on GON-owned manufacturing installations
such as the Benue Cement Company and the Savannah Sugar
Company, and constructed its own berth at GON-owned Apapa
port in Lagos where ships with production inputs offload
directly at the Dangote Group factory.

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Early and Easy Access to Political Favoritism
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10. (U) Dangote is revered for his assumed rise from rags
to riches but his family connections reveal a privileged
beginning. Dangote is from the prominent Dantata family of
Kano State. The Dantata family made its name and wealth in
commodity trading. When in his early twenties Dangote
showed promise as a young businessperson, his uncle Sanusi
Dantata loaned him naira 500,000 (at the time worth USD
500,000) to start out on his own.


11. (C) Because of their influence in the Hausa and Muslim
communities, Dangote and Dantata have always been useful to
both the civilian and military leaders who ruled Nigeria.
Dangote enjoyed GON favoritism in the form of importing
rights throughout the military regimes and coups of the
1980s and 90s. Though he has connections with political
figures throughout the country, his link to Obasanjo (OBJ)
paid off when OBJ was elected president in 1999. Since
then, Dangote's market advantages and growth have
multiplied.


12. (C) Dangote purportedly contributed 200 million naira
(about $1.5 million at the time) to Obasanjo's first
election campaign, and in 2003 at least another one billion
naira (about USD 7.5 million) for the second term.
Dangote is a known contributor to the PDP party. He is a
close friend with the governors of Kwara, Kogi, and Ogun
states. He also enjoys support from the Sokoto Caliphate,
the spiritual and political seat of power of Muslims and
members of the Hausa tribe.

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Nigeria's Dangote Paradigm Stands in the Way of Economic
Liberalization and Democracy
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13. (C) The special relationship Dangote holds with the GON
defines the Dangote paradigm. The paradigm demonstrates
how easily one powerful person can disrupt Nigeria's
floundering democratic and economic liberalization
processes. Along with outright money laundering and
corruption, the Dangote paradigm is arguably one of the key
factors making Nigeria a politically and economically
volatile country and a risky place to do business.


14. (C) Dangote openly asserts the GON should do more to
manage the economy through protectionist measures to assist
what he calls the "Nigerian Industrial Renaissance." He
has no qualms about "alerting the government" or "giving
direction" in industrial policymaking. Dangote and some
members of the GON justify this protectionism with examples
such as US corporate and railroad barons and the gilded
era of the late 1800s. This, they say, is the way to lay
the foundation for economic growth, particularly in the
manufacturing and industrial sectors. However, these
alleged historic parallels do not mask the fact that the
chummy relationship between Dangote and the GON, while
superficially promoting manufacturing in some sectors, is
causing destructive and derailing economic activity and
democracy in other areas.


15. (C) Dangote's obvious unfair advantage and support from
the GON are disturbing for US companies wanting to enter a
market with over 130 million consumers. Conversely, some
US companies indirectly benefit from GON restrictions
protecting the Dangote Group of Companies, adding
complexity to the Dangote paradigm. For example, Dangote
allegedly receives unfair, preferential treatment to
import bulk commodities. However, he is a loyal U.S. wheat
customer and buys millions of dollars worth of other US
products. General Electric makes much of Dangote's
machinery and the Group will buy about 300 used trucks
(mostly made by International) from the US this year.
Further, the Group secured a USD 310,000 grant from the
Trade Development Agency in 2000 and aspires to a future
Export-Import Bank loan.

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Comment
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16. (C) Dangote's tremendous popularity and acceptance is
not likely to diminish. The average Nigerian considers
him, and more importantly, his way of doing business, a
model to be emulated. The fact is, however, the myriad
preferences the GON has bestowed on the Dangote Group have
distorted the market in ways that do more harm than good
over the long haul. However, the Nigerian Government
rarely takes a long-term perspective into account. The
GON-Dangote relationship has been, at minimal, very chummy
and mutually accommodating. Critics of this relationship
would state that it smacks of insider trading. Dangote does
not epitomize the free market at work in Nigeria. What
his story reveals is that he is one of the few free-
wheeling actors in a relatively and artificially closed
economic environment.


17. (C) Comment Cont'd: Herein, lies the dilemma for the
U.S. in working with Dangote and, by extension, with the
Nigerian economy overall. One the one hand, it makes
extremely good business sense for U.S. firms to work with
Dangote and for our agencies such as EXIM and OPIC to do
so as well. This promotes U.S. exports and foreign
investment in Nigeria. However, the more successful
Dangote becomes, the more his operation becomes a national
business paradigm. Dangote's evolution, to some degree,
represents progress from the almost mercantile
perspective of many Nigerian businesspeople. However, he
still stands a long way from the free market policies we
espouse. The question is whether Dangote is a
transitional figure to a more free market mentality or
will he remain the paragon of business practice here. To
improve the chances that he will only be a transitional
figure we need to continue to work with him but exercise
caution in the relationship while also seeking to work
more closely with Nigeria's more authentic economic
reformers. End comment.

BROWNE
BROWNE