The Dangote-Afreximbank paradox

The Dangote-Afreximbank paradox

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Aliko Dangote

CREEPING protectionism has become a feature of global trade in recent years. The Global Trade Alert, a monitoring service operated by the London-based Centre for Economic Policy Research, defines protectionism to include any measure that discriminates against foreign commercial interests.

By this definition, protectionism includes government bailouts of domestic companies, wage subsidies, export and value-added tax rebates, localisation requirements, export taxes, export credits and financing from state-owned banks, investment measures, and public procurement measures. And Afreximbank has been swift in condemning such measures as being antithetical to Africa’s economic interest and, in particular, hindering greater intra-Africa trade.

Intra-Africa trade has been identified as a vital factor in spurring the continent’s industrialisation, and has been promoted at every turn by the African Export-Import Bank (Afreximbank). The African Union also recognises the huge benefits of boosting intra-African trade.

So it does seem puzzling that Afreximbank used its AGM in late June in Kigali, Rwanda to announce a $1bn credit facility for the Dangote Group. The agreement was signed by the Dangote Group’s founder, Aliko Dangote.

Aliko Dangote is generally referred to as Africa’s richest man and is a business hero to many. It was hardly a rags to riches story as his family were wealthy, but his business empire was self-made.

A substantial part of his fortune was made by his cement business, Dangote Cement.

But for all the admirers of Dangote’s business acumen, there are also a number of detractors that suggest that his success has been built on nothing illegal but a canny ability to build close relationships with powerful political figures.

It is said that he managed to persuade the former Nigerian President, Olusegun Obasanjo (who was also a VIP attendee at the Afreximbank AGM), to impose import constraints on foreign manufactured cement that led to him being able to corner nearly half of Nigeria’s cement market.

Obasanjo’s policies were also very useful in that cement import licences were only allocated to importers who, like Dangote, had also built factories for local cement manufacturing in Nigeria.

As further support for the local manufacturing of cement, the policy also waived VAT and customs duty for importation of cement production equipment. New investments in cement manufacturing also qualified for tax exemption for up to seven years under the Nigeria’s Pioneer Industry Scheme.

It might also be pointed out that that Dangote made generous contributions to Nigerian leaders. For instance, he was one of the major funders of Obasanjo’s 1999 presidential campaign and also contributed handsomely towards Obasanjo’s re-election in 2003 and towards the construction of Obasanjo’s Presidential Library.

So the paradox of the Afreximbank decision to back Dangote Group is clear. By any measure, Dangote Cement has been the beneficiary of many protectionist policies.

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