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Cutting Out the Middleman
In 1997, Dangote realized that acting as a middleman was a very costly endeavor, so he built a plant to produce what he had been importing and selling for the previous 20 years: 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 International Finance Corporation, a sister organization of the World Bank.
Each of his manufacturing divisions has since been separated into publicly traded companies: Dangote Sugar Refinery PLC., National Salt Company of Nigeria PLC., Dangote Flour Mills PLC., and Dangote Cements PLC.
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, Aliko Dangote 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 the bank. We fully invest whatever we have and we keep on investing. (sic)’’
Unlike many wealthy Nigerians who made their fortune in oil, Dangote initially chose to go down a different path, but he has since entered the oil and gas industry. In an effort to put some of his cash reserves to work, Dangote purchased an oil refinery in Lagos in 2007. He hopes the refinery, which is scheduled to be at full capacity by 2020, will significantly reduce Nigeria’s reliance on international suppliers for oil and gas. The $10 billion refinery in Nigeria is expected to produce 650,000 barrels of oil per day.
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. 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.
Culled from Investopedia.
