Can African businesses looking to expand in Africa compete with foreign companies and overcome trade and import restrictions that vary wildly from one African country to the next?
It’s a challenge even Africa’s richest businessmen are finding hard to overcome — businessmen like Nigerian cement industrialist Aliko Dangote, whose net worth was pegged by Forbes at $16 billion, according to an article in the Wall Street Journal.
Dangote’s cement business thrived with Nigeria’s firm restrictions on international trade, which discouraged foreign competition. As a result, Nigeria’s retail cement price is among the highest in the world at $200 a metric ton, according to the Wall Street Journal.
But when Dangote tried three years ago to build his first factory outside Nigeria, he ran up against land claims by a Senegalese family. The future of his partially built cement plant now rests in Senegalese courts, according to the Wall Street Journal.
Nigeria’s past three presidents restricted the flow of cement into the country, helping push up cement prices and Dangote Group’s earnings to 24 percent and $1.9 billion in 2012, according to the Wall Street Journal.
Dangote visited 20 African countries where he hopes to invest, trying to persuade them to follow Nigeria’s lead in keeping prices high at home by restricting imports, steering Africa’s growth away from consumption and toward industry and in the process, trying to pave the way to build “the most profitable cement company ever.”
It’s been a tough sell – despite his billions, Dangote hasn’t changed any minds yet, according to the Wall Street Journal. Many countries have French-owned cement factories, the legacy of colonization, and some of those have closed or cut back production in the face of cheap imports.
Companies in Africa that have expanded successfully on the continent include Massmart Holdings Ltd. of South Africa, which is owned by Walmart; Togo’s Ecobank Transnational, Inc. and South African telecommunications company MTN Group Ltd., according to the article.
But not all are success stories. Transcentury Ltd., a Kenyan power equipment company, opened a factory in neighboring Tanzania only to find it couldn’t compete with cheap power cables from China.
Bidco Oil Refineries, also of Kenya, built a cooking oil plant in Tanzania but was also undercut by Asian imports, according to the Wall Street Journal.
Many African governments relaxed import restrictions, delivering a flood of imports from around the world to “poor voters clamoring for inexpensive imports” and winning favor with foreign investors, according to the Wall Street Journal.
Dangote’s Senegalese cement factory, which he said would produce 4,000 jobs, is encroaching on sacred ground owned by the descendants of Cheikh Amadou Bamba. A Muslim Sufi and founder of the Mouride Brotherhood, he lived from 1853 to 1927 and is credited with leading a pacifist struggle against French colonialism.
Dangote said in the article that the highest-ranked French politicians have lobbied the Senegalese to protect a local French-owned cement plant. “The Senegalese, they dance to the tune of the French,” Dangote said.
A spokesman for Senegal President Macky Sall, Abdou Abdel Thiam said Senegal won’t block imports like Nigeria did. “Senegal is a free country,” Thiam said in the article.
