Updated: Mar 17
By now, almost anyone informed enough about business and markets know who Aliko Dangote is. Aliko Dangote is a Nigerian business tycoon who built his wealth in the manufacturing industry. He is the founder, chairman, and CEO of the Dangote Group, which is the largest private industrial conglomerate in West Africa and one of the largest conglomerates in Africa based on market capitalization. He owns 85% of Dangote Cement Plc, which is a publicly-traded multinational cement manufacturing company through his holding company, the Dangote Group. The Nigerian business magnate has consistently topped the Forbes list as the wealthiest Black person in the world since the early 2010s. Today, his net worth is valued at $14.2 billion. Many have drawn similarities between him and John D. Rockefeller, the American oil tycoon.
The similarities established between Aliko Dangote and John D. Rockefeller were not always perceived as a compliment, but rather as a satire with contempt. This contemptuous similarity is based on allegations that Dangote has monopolistic tendencies. He has been accused of monopolizing the entire African manufacturing market. Rockefeller was the main target of these accusations a century ago when his oil production company, Standard Oil Company, Inc., controlled 90% of the American oil market. The result of these accusations led Rockefeller to be vilified in the American press. In 1911, the U.S. Supreme Court ruled that Rockefeller engaged in an illegal monopoly. The Court found Standard Oil guilty of monopolizing the oil industry through a series of abusive and anticompetitive actions. Thus, Standard Oil was dismantled into 34 subsidiaries and the main corporation (Standard Oil) was effectively dissolved.
Aliko Dangote is also accused of managing a monopoly, which prevents small manufacturing companies from emerging in West Africa. Aliko Dangote, through his holding company, owns 18 subsidiaries, which operate in ten African countries. His subsidiaries are involved in all branches of the manufacturing sector, from food processing to construction to supplying oil and gas. Moreover, the Dangote Group is not only limited to the manufacturing sector. It also has subsidiaries in property development, logistics, and transportation. Indeed Aliko Dangote is involved in every sector of the economy. Moreover, Dangote Cement, one of the main subsidiaries of the Dangote Group, is listed on the Nigerian Stock Exchange, with a market capitalization of almost 20 percent of the capitalization of the Nigerian Stock Exchange. By 2020, three of Dangote’s subsidiaries were listed on the Nigerian Stock Exchange and employed nearly 20,000 workers. This is equal to 51% of all workers in listed manufacturing firms.
The fundamental point of Dangote’s success is based on vertical integration. A business technique that Rockefeller himself used to make his company prominent in the oil industry. Dangote founded his company in 1981 as a trading enterprise importing commodities such as sugar, cement, rice, fisheries, and other consumer goods for distribution in the Nigerian market. The company then move into manufacturing in the 1990s starting with textiles, moving onto flour milling, salt processing, and sugar refining. The company expanded itself through a high degree of vertical integration, which cut off the middleman. Dangote increased his production by making his processing proprietary rather than relying on a third-party. Doing so enables him to have control over different stages of the production process. Hence vertical integration has become the trademark of Dangote’s operating strategy.
Between 2010 and 2017, Dangote focused exclusively on capital formation. The rate of re-investment was on average 49% in Dangote Cement, 58% in Nascon (Dangote’s salt processing subsidiary), and 31% in DSR (Dangote’s sugar processing subsidiary). Dangote Cement’s revenues increased at a faster rate than its costs, while cost and revenue grew roughly in line with Lafarge, its main competitor. As a result of productive investments, Dangote extended its lead over competitors, resulting in monopolistic market structures.
Does that mean that Dangote is a monopolist? No. Because Dangote never wanted to absorb the competition. Dangote believed that competition is necessary to maintain markets and the economy healthy. He never truly engaged in horizontal integration. He was more concerned with vertical integration because he wanted to cut costs. He believed that producing in-house would increase efficiency and production rather than using a third-party for production. Dangote does have control over the manufacturing market in West Africa, but the control he gained over that market is the result of ruthless efficiency in increasing production rather than absorbing competitors.