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Biggest Mistakes a Businessman Can Make - Aliko Dangote

Saturday, August 8, 2015

Media men had a piece of Aliko Dangote last weekend. And when they were done many appreciated why he is one of the richest in the world. In an interactive session with senior editors Dangote discussed state of the nation while explaining some details in his businesses that are geared towards a better life for Nigerians.
His tremendous knowledge in many areas awed the audience. But what moved them most was his patriotism. He called on Nigerians to invest at home and create jobs. "Five to 10 people can make Nigeria a great economy," he said. And what with the power situation in Nigeria? "We'll not have meaningful development until we sort out power problems in the country," he tells government.
Dangote spoke from his heart. Here's Africa's richest man who doesn't own a house abroad. His is about how to make Nigeria a better place. And, again, his humility thawed many especially those meeting him for the first time.
Below are just a few of the things he said on the night, his own words as captured by ONOCHIE ANIBEZE
On oil subsidy
The issue with subsidy is that government needs to block all loopholes. If there's no subsidy, it will affect our foreign exchange, we'll end up buying a dollar at N500, because there's no VAT on petroleum products. That's why the import of petroleum products is taking about 30% of our foreign reserve. We just need to make sure that there's no siphoning of money. The refining business requires volume. If you don't have a massive volume, there's no way you'll make money. Most of the refineries in Africa are running at a big loss. It's not possible for government officials to successfully manage oil businesses. It's good enough if they remove the subsidy, but you can check with neighbouring countries like Senegal. If a poor person in Senegal can afford to pay subsidy, why can't a poor person in Nigeria afford to pay. I think there must be something for the masses, which should be in terms of power, social insurance, good education system, good roads etc.
Factory in Ethiopia
Dangote commissions cement industry in Ethiopian
Dangote commissions cement industry in Ethiopian
By the end of 2017, we would have invested in about 16 countries and these are very heavy investments. I'm going to announce the expansion of the plant we just commissioned in Ethiopia. This is just to expand our operations. It is taking 40 Megawatts of power which is more than what Kano is getting today which is 38 Megawatts. We don't have generators on standby. There is nothing like generator there which we normally have everywhere in Nigeria. It's one of the few countries that is growing at double digits because they have power and because they are a bit more serious than we are in Nigeria. You hardly find potholes on their roads. A factory like that in Nigeria would need about 60 Megawatts of power and 30 Megawatts on standby which is a total of 90 Megawatts and it would have cost us about 130 million dollars. The cost of doing business there is less. In the last twelve years, they've had an average of 10.8% GDP growth. This year, they are running at 10.6% GDPA.
Investing in Nigeria
This requires determination and seriousness. These things are humanly possible and we should be able to do them. It's not really the work of the government to make a country prosperous, it's the work of individuals because the duty of the government is to facilitate, but government will not have the money to invest.
That's why it's shameful that some Nigerians go and keep their money abroad. It is very difficult when we have a huge chunk of our money abroad and we want foreigners to come and invest. They won't believe that the environment is good. It won't work that way.
The only way is for us to lead, even though we can't do all, but that leadership will pave the way for others to invest their money in our economy. In fairness, it's difficult for people to find a place where they can make good money like Nigeria but it is also very tough. Once you are in business in Nigeria, you won't be able to find enough sleep. Doctors always advice that we sleep for six to seven hours. I don't think people who sleep for that long can operate businesses in Nigeria(laughter).
On payment of taxes
People don't pay taxes because they don't see what they are being used for. Initially, Lagosians were upset about tax payment, but they realised that it's important to pay taxes because they started seeing that the money is being used judiciously. The issue of not paying taxes is really reckless. The first thing I always think about is paying my workers' salary. We are all on the brink of danger if so many states are not paying taxes and are heavily indebted. If you do a financial analysis, you'll discover that some of the states are technically bankrupt.
I tell people that when you own a company, the government is automatically a shareholder.
They are even guaranteed shareholders because whether you make money or not, they'll make money. If I open up a factory today, first of all, I'm risking my money. I have to pay interest on money borrowed from banks. From my profit the government will take 30% as corporate tax and 2% education.
The only way for me to make money from that business is to declare dividends and when I declare dividend, they'll also take 10% holding tax. You realise at the end of the day that in your own business, government is taking 42%. You begin to wonder if it makes sense. Of course it does. There's no way the government can function without taxation.
If the partnership is only for us to enjoy and not pay taxes, it's not sustainable. So definitely, someone has to pay the taxes, I'm not supporting an increase in taxation, I'm calling for an increase in VAT because when I did the numbers, I realised that 5% additional VAT will amount to about 900 million. The most difficult thing to do in any organisation is to reduce salaries. It's much easier to reduce the number of workers. No country operates on 5% VAT, the minimum is 15%. What we don't want is social acrimony. The last strike cost us over N15 billion and we've not gone back to the normal situation, it takes time.
On power
The most dangerous thing that could happen to an entrepreneur is for him to go into a business he doesn't understand. You need to know the A to Z of the business you are doing.
That's the only way you can succeed. That's the biggest mistake most people are making. I don't think that most of the people that have invested in power really understand what it is. It involves three things; generation, transmission and distribution and all the three require heavy investment. There are a lot of issues that we have to resolve and I think with seriousness, we'll be able to do them.
We have gas, but we shouldn't use gas alone. We took the decision that by the end of the year, all our cement plants will be using coal. The coal is there and Nigeria will not be competitive in exporting it because we don't have the infrastructure to take these coal for export. We've started using coal and there's no emission, not a single dust anywhere.
Aliko Dangote
Aliko Dangote
Technology has changed, 38% of power being generated in America is by coal. In our own operations, we've discovered that running on coal is cheaper than gas. We need to see how we can build a lot of infrastructure because that would help to open up the economy and make us independent. The government has to sit down and find a solution to power.
We will not have any meaningful development till we are able to sort out the power issue. We won't have an inclusive GDPA unless we tackle power. The power issue is a great one and it's preventing everyone from progressing. In Uganda, they increased the power to 230 Megawatts and the next year, their GDP grew by additional 4%.
Time management
The biggest problem we have in Nigeria is that we don't quantify time. That's why people will sit in traffic from here to Ikeja for two to three hours. If you invite me to a place and if I'm totally free and available, I'll look at how many hours it will cost me. If it will take five hours of my day, I won't go except I'm going for business purposes. That's my policy. I put a lot into consideration and do some calculations, if I'll need to send someone to represent me, I do that.
On refinery
We are building a refinery and our refinery will make more money if there is subsidy. We have changed the size of the refinery three times because we are looking at the maximum we can do that has ever been done. We started with about 400,000, then we shifted to 500,000. Now, we took it to 650,000 barrels per day. That's the biggest ever single line thresh of refinery. It's a huge plant and it comes with a lot of challenges, but at the end of the day, it will save us a substantial amount of money. Presently, about 38% of our foreign exchange goes to petroleum products, so I think that will totally eliminate it and eliminate all the imports. We will also be able to export and we won't do it all by ourselves. Other refineries will produce. Even if other refineries are not working, we'll be able to satisfy 100% local demand and we'll be able to export massively. Five to ten people can make Nigeria a great economy. We have to encourage Nigerians to invest at home.
On Agriculture
I think there will not be an improvement in job creation unless people go into Agriculture. I know even in Agriculture, there's money. We are also doing four sugarcane factories. We want to export sugar. We are doing a lot of sugar and rice and I think that in the next four to five years, we'll be able to create about 180,000 jobs.
There are only two countries in the whole of West Africa that eat parboiled rice – Nigeria and Sierra-Leone. Other neighbouring countries eat white rice. So, what's the business of Republic of Benin collecting ships of parboiled rice to Niger.
How can Niger eat two billion tons of rice? We have no business importing sugar, there's so much land and water here. God has given us these things and we have to use them. Today, Ethiopia is growing rapidly, but the mainstay of their economy is agriculture.
It's only a Nigerian that calls an airline and even when he's told that they have 20 people on standby, he still carries his bag to the airport. We are the only people God has created that way. He will say 'Don't worry when I get there first'. When he gets there, he starts shouting and complaining, whereas he had already been told.
On Gas Generation
We've been wondering what the issue is, why we've been unable to get gas. The total amount of gas that is being supplied out of the entire trillions of fields of gas that we have is only about 6.7billion of which 3.5 billion is for export energy, 1.25 billion flares, while about 1.3 is for their own operational use. A little over one billion is what we get for domestic use. We pass part of it to the West African gas pipeline in Togo and Ghana. There is a lot of gas in the east but there's no usage. Majority of them are in the shallow waters. Nobody will spend their money to generate the gas unless the infrastructure are on ground.
Buying Arsenal FC
The issue is that if I buy all the Nigerian clubs, the Nigerian flags will continue to remain here. But buying Arsenal will take the Nigerian flag worldwide. Just like whenever Abrahamovich is mentioned, the name of his country, Russia comes up, everyone knows he's Russian.
On railway construction
Railway is so expensive that it's only the government that can run it. The cheapest railway line is about 3.7 to 4 million dollars per kilometre.
If you want to construct a railway from Lagos to Kano, you need about four and half billion dollars and that's private sector cost, not government cost. We wanted to do from Lagos to Calabar and it was about 12 billion dollars. I also think that the government should start building concrete roads, because we've realised that concrete roads are far cheaper and they last for more than 40 years.
We are doing one in Ogun State. But in any country where there's corruption, they wouldn't want to do concrete roads, because it lasts a lifetime.
We've not maximized the use of money in this country. As a country, it's shameful that we are still struggling to pay salaries. We shouldn't allow people to hear that. Ghana just had a week of power outage and everybody took to the streets with placards. They should come to Nigeria and see what we are experiencing.
Houses outside Nigeria?
Aliko Dangote
Aliko Dangote
Someone once asked me how many houses I have abroad. The truth is, I don't have a nine- inch block outside this country, I don't have any house anywhere in the world outside Nigeria.
Cautious about media business
I once went to see Abiola and I said to him, you look a bit worried. And he told me he could not sleep because of a publication. He said, "How many times will I be chasing reporters and running my business. Let me advise you, don't go and do this newspaper business." When people realise that the paper is not balanced – you are always pro-government, it is a challenge. The worst tag a paper can have is to be marked a government paper.
The general feeling is that they are eating from the government. So that is why I run away from the media business. That's not to say I won't do it.
Via: Vanguard

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