The day Africa’s richest man Aliko Dangote almost lost everything - CNBC Africa

The day Africa’s richest man Aliko Dangote almost lost everything

Western Africa

by Peace Hyde, FORBES AFRICA 0

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Aliko Dangote’s torrid time in starting his business taught Africa’s richest man not to be frightened of anything. He shares his story in the article below, which first appeared in Forbes Africa and is republished with its permission. Subscribe today by contacting Shanna Jacobsen [email protected]

Aliko Dangote is a man revered for his remarkable achievements in business and his passion for his country. As I wait patiently in his office at Union Marble House, in the plush Lagos suburb of Ikoyi, an inscribed plaque catches my eye. Before I can read it, I hear a man’s voice.

READ: Behind Africa's richest man's $15 billion empire

“Nothing is impossible. That is my mantra in life. No matter what you go through, just remember, nothing is impossible for you to achieve and you will overcome it.”

Dangote, Africa’s richest man and the founder of Dangote Group, is dressed in a blue suit and purple tie. His demeanor is warm and welcoming, his gaze attentive. It is hard to believe this soft-spoken man is worth an estimated $14.4 billion, according to FORBES. Despite this wealth, the plaque in his office serves as a reminder of a day he almost lost everything. It all began with a wrong soil test.

“We were importing cement and we had an import terminal in Lagos and Port Harcourt. The government gave incentives to people who would make Nigeria self-sufficient in cement and so we decided to take advantage of the opportunity and build a cement plant. At the time, the entire production of Nigeria was less than two million tons but we decided that we were going to go ahead and build a [plant with] five million tons capacity,” says Dangote.

“So we brought in a contractor and we asked them to do the soil test and also the foundation test. Then they gave us the wrong soil test. Normally the northern part of Nigeria has very hard ground. But they came back and said we just needed a shallow foundation with a maximum of two metres. So the drawing and everything was done based on a two-metre foundation. As soon as we were three months into the job we realised it was more than this.”

This marked the beginning of a long battle to salvage the multi-million-dollar project. The group had hedged everything on the cement factory. In order to stay ahead of the competition, Dangote decided not to do a proper feasibility study so as to avoid attention to the new project. That decision came at a high cost.

“So now we had to go and do piling. We had to stop and change all the drawings and all of a sudden we were faced with 1,000 piles to be built and there were not enough rigs in Nigeria. So we had to order new rigs and even buy rigs for some of the contractors,” says Dangote.

To make matters worse, Dangote needed to finance the project.

“We needed to raise $480 million but the problem was 90 per cent of the banks at the time had a market capital of only $20 million. In addition, there were no long-term loans, only short-term loans for about 90 days, so you could tell the challenge we faced. The project stopped, we had to change the drawings and we could not borrow too much money in the system. Borrowing short term and investing in a long-term business was so difficult.”

Another problem was infrastructure.

“We realised that we had to build a gas pipeline because the government who promised to build the pipeline in 1978 had actually not done anything, so we had to construct 92 kilometres of a gas pipeline. The water table was very bad in the area so we had to build a dam and over 100 houses because there was nothing there, so the challenges were coming one by one.”

For Dangote, failure was not an option.

“In my office, I had the project drawings on my wall but I knew that once this project fails the group is gone and that is what really kept me going. It was a major project for us because our size, compared to a project of half a billion then, was big money for us.”

Eventually, there was light at the end of the tunnel. The group received a much-needed lifeline in the form of a $479-million loan from a consortium of banks, led by the International Finance Corporation (IFC). But the storm hadn’t abated yet.

“The most challenging was when we had the cost overrun. Now we had finished the cement factory and the factory was not working and that was really when I went from black to red. I knew that we were really in trouble. But we were very adamant and we persevered. We had challenges for over a year or so and the factory was working on and off,” he says.

That was in 2003. Since then, the Dangote Group has expanded into 18 countries in sub-Saharan Africa as well as Nepal. This year, Dangote plans to take on a new challenge, the volatile oil market.

“We have been pushed into oil because we realised that we had too much cash for the type of business that we are running today, so we need to diversify. On the diversification strategy, we look at what the areas are that can actually take Nigerians to the next level and that is where we map out all the issues and the problems that we are facing as a country for lack of diversifying the economy.”

READ: Africa's richest man, Aliko Dangote shifts focus from cement to oil and gas

The group is building one of the largest oil refineries in the country with the potential to meet Nigeria’s requirement of 445,000 to 550,000 barrels of fuel, with spare capacity to export, according to Dangote. The project has an estimated completion date of 2018.

As we wrap up the interview, Dangote’s gaze goes back to the plaque on his table.

“It was a challenging experience and that is why I have the plaque on the table saying nothing is impossible. You need tenacity and focus in business. I have learned a lot and since that time I don’t really get scared of anything.”

WATCH: Forbes Africa TV Ep2: Aliko Dangote shares his secret of becoming Africa's richest man

 

 

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