AFRIPOL.ORG IDEAS HAVE CONSEQUENCES
Africa’s chance to shine amid global turmoil
Africa’s chance to shine amid global turmoil
By Alhaji Aliko Dangote
The world economy has dominated media headlines for more than six months now, with continuing uncertainty as to the true size and scale of the crisis that has engulfed almost every corner of the globe.
Much has been said about how the African continent will be impacted by the ongoing crisis, some negative and some positive. I believe that while we are certainly not experiencing ‘business as usual’, the crisis presents opportunities for African businesses that may not have been available 12 months ago.
First of all, let’s look at the impact the credit crisis is having on Africa. We are already seeing the inevitable capital flight from our stock exchanges as investors liquidate their assets and hoard cash. It has been estimated that more than $5bn of international investment was removed from the Nigerian stock market last year and the Nigerian Stock Exchange has had a difficult start to 2009. The low price of oil and other commodities is affecting the budget stability of a number of African markets, including Nigeria, and the exposure of African banks, particularly in Nigeria, to margin lending has caused the first crisis in the banking sector since the consolidation process took place. Hence, we are experiencing some of the same issues as the rest of the world. Access to credit is more difficult and existing credit lines from banks are being withdrawn.
Despite this, the International Monetary Fund and other global institutions believe that while growth will slow down, African economies will continue to achieve circa 3.5 percent growth on an annual basis, despite the scale of the recession internationally. In fact, Africa is likely to be the highest growth region in the world over the next 12 months. We have become considerably closer to the international economy over the past 10 years, but remain isolated enough to ride out the crisis more easily than many others. Many improvements have been noticed in the way Africa is seen in the world. The real improvements – mobile telecommunications, banking, mining, capital markets, mortgages, inward investment and democracy – have led to the creation of a large, demanding and growing middle class.
Personally, I do not believe that African companies need be as pessimistic about the future as many others are. I see opportunities for African companies to take advantage of the current situation. Many of the most successful African companies outside of the commodities sector deal with consumer markets within African countries. Supply, and in particular, penetration, has not yet met demand and has a long way to go. The consumer market for my company’s products, which include sugar, cement, flour and salt, will continue to exist and the recent devaluation of African currencies against the US dollar makes it considerably more expensive to import, demonstrating the importance of increasing local production capacity. This is a chance for African companies to take ownership of a real manufacturing sector and to develop a production base that will supply the products that we need from local sources.
African companies with strong cash flows are in the enviable position of being able to analyse the opportunities that the crash in global asset prices represents. For example, the cement division of my own group of companies recently reviewed its strategic approach to expansion in Africa and across the world. The relationship between the cost of greenfield projects compared with the cost of acquiring existing assets has changed dramatically. Global cement manufacturers are heavily leveraged and will have to divest from non-essential assets. This offers us the chance to become a truly global multinational far quicker than previously would have been possible. We are also in a position to ensure that we pay the lowest price for new greenfield assets when we build them.
We have been working towards this aim for a number of years. Africa needs strong and credible businesses that can offer world-class services to local and international clients and customers. Africa can be projected on the world stage through its businesses and through successful business leaders. Africa needs the equivalent of a Tata of India or Rusal and Gazprom of Russia.
There is an obvious prerequisite for this to happen. African companies have to operate to international standards, supply products that meet international requirements and sell services at a level equivalent to those available elsewhere. The stage is set for this to happen and Africa has to take advantage of the opportunity that has arisen.
Alhaji Aliko Dangote is the chairman and founder of the Dangote Group of companies.
Dangote was nominated for AFRIPOL PERSON OF THE YEAR 2005