Over 30% of Dangote’s business empire in bad shape- report | Bizness Watch



Over 30% of Dangote’s business empire in bad shape- report

Despite been ranked as one of the richest men in African by Forbes, most of Dangote’s investments scattered in several sectors of the Nigerian economy are struggling to survive, thereby jeopardising  over N20b worth of investments,  THE CITIZEN can report.

According to investigations, some multi-billion investments undertaken by the business mogul some years ago are in terrible shapes but the negative effects on the group’s bottom line are over shadowed by a few that are doing extremely well.

For instance, the celebrated Dangote Sugar Refinery located in Numan, Adamawa state has remained closed getting to two years now. THE CITIZEN was reliably informed that the refinery was embroiled in industrial crises with host communities.

“The company was shut down in July 2011 following alleged security threat by some angry casual workers and the host community. The workers had protested their working conditions. The host communities were demanding adequate compensation for its workers, an appeal which the refinery vehemently rebuffed them. Due to the unhealthy relationship and fear of attack, the factory has been shut down, which by implication, puts the multi billion naira  investments in limbo,” said a source.

According to our investigation, initial N12bn investment was made by Dangote Group as core running expenses into the Sugar factory after the takeover in the first five years. The areas that gulped the money include factory and estate rehabilitation; purchase of vehicles, trucks and heavy duty equipment; salaries and wages; farm inputs like fertilisers and chemicals, among others; spare parts for factory and heavy duty equipment and payments in the form of Sugar Development Levy. Other sundry expenses that formed the bulk of the company’s investment were power consumption; packaging materials; taxation; furniture and fittings; office equipment and heavy duty and light vehicle purchases.

In 2001, the Federal Government, which had the largest share holding volume, indicated its desire to divest a greater proportion of its share holding (up to 49 per cent of its shareholding structure) in Savannah Sugar Company Limited. Consequently, the company was privatised, with Dangote Industries Limited coming out as the preferred bidder. DIL subsequently emerged as the core investor. Since its takeover, over N13b has been invested in the factory, still no single product has left the company since two years now.
In the same vein, Dangote Integrated Rolling Mill in Oshogbo, Osun state is not closed down but it is not producing either. The Osogbo Steel Rolling Mills it could be recalled was established by the Federal Government in the 80s as one of the three inland rolling mills under the then integrated steel development scheme of the government.
It has an installed capacity of 210, 000 tonnes of steel a year and was privatised on August 27, 2002, with Integrated Steel, a division of the Dangote Group, emerging new owners, while the share purchase agreement was signed in December, 2005. The steel roll was taken over in 2005 by Kura Holdings, a subsidiary of Dangote Group
Since its takeover, over $62 million (N9.9 billion) has been spent by the company on renovation and upgrading of facilities. According to investigations, before it will come on stream, it is expected to gulp over $80 million (about N13 billion).  The mill, THE CITIZEN gathered is bogged down by non-availability of input materials, frequent and prolonged equipment failures and inadequate supply of spare parts. Other reasons why it is taking the company so long to roll out its first product includes  operational problems due to lack of technical know-how, managerial skills and responsibilities and proper work culture, were identified as part of the challenges being tackled by the company.
Similarly, the Dansa foods that produce different fruit juice flavours, Mowa water and Ziza Milk, located at Abule-Ado in Ojo area of Lagos has not been producing since November 2012. The factory is encumbered by a number of issues such as technical challenges, labour tussle, and issues with the suppliers. Therefore, all of the factory’s products in the market are the ones stocked earlier, which by our investigation might run out if nothing urgent is done to address the lingering issues bedevilling the factory.
According to sources, the group is not actually making desired profit from the factory as predicted, despite huge loans it acquired from banks to set it up some years ago. “The Abule-Ado factory is struggling to remain profitable since its inception. Despite hiring Indians to manage the factory, with the hope that they will use the tactical frugality in keeping overheads low will add value to the company’s books. Still, the same story and it is frustrating,” he said.
In addition, since the introduction of the fruit brand in the market, Dansa is trailing other dominant players in the sector. Companies like Chivita, 5Alive are strong in the market and have continued to wax strong in their respective positions.
According to a report tagged Juice market in Nigeria: A ValueFronteira market analysis, its findings revealed Chivita as the juice market leader and the brand with the least complaints from consumers, while Dansa recorded the lowest customer preference, as well as the highest level of complaints. “Our findings showed that 29% of the respondents sold 5alive, and this made it the most sold in the three markets. Interestingly, Chivita followed closely behind with 26%, Dansa made the third position with 20%, Fumman with 19% while other juice brands shared the remaining 6% market share,” the report said.
Also struggling is the Macaroni, Spaghetti and noodles. These products are facing tough challenges penetrating the market because of dominant players in the sector such as Indomie, Golden Penny noodles, Honeywell noodles, Chiki noodles, Sum Yun and Mimi Noodles.
It could be recalled that Dangote recently sold its 63.35% equity stake in Dangote Flour Mills to Tiger Brands Limited, a leading South African fast moving Consumer Goods Company.  The transaction saw the transfer of3.17 billion ordinary shares out of Dangote Group’s 3.67 billion ordinary shares of 50 kobo each in Dangote Flour Mills Plc to the Tigers Brand.
With all these developments, any discerning mind could decode why the group has continued to wage war with any company perceived to be a threat to its comfort zones like the cement manufacturing sector where it has a dominating market share. A case in mind was the war of altercation with Ibeto group recently over a purported glut in the cement market, which took consumers by surprise because there is no reduction in the price of cement in the market in any part of the country, assuming there is cement glut actually. Some experts say that the Dangote group was flawed in the court of public opinion and on economic doctrine that governs demand and supply principles. To be continued…


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