OP-ED: Dangote's refinery fuels his vision for African self-reliance
At the Africa CEO Forum's flagship annual gathering, Aliko Dangote and Patrick Pouyanné unveiled a noteworthy fuel supply deal, underscoring Dangote's ambitious vision for Africa's self-reliance and the challenges of regional trade and cooperation.
Lately, I've been reflecting on the under-explored intersection of the VC-backed tech startup economy and the traditional business world.
Power panel
As if on cue, one of the highlights of the recent Africa CEO Forum annual summit in Kigali, Rwanda, was a panel featuring Aliko Dangote (Founder, Chairman, and CEO of the Dangote Group) and Patrick Pouyanné (Chairman and CEO of TotalEnergies), moderated by CNN International Correspondent Larry Madowo.
During their conversation, Dangote and Pouyanné revealed that TotalEnergies, one of the world's seven major oil companies, has struck its first fuel supply deal with the Dangote Group's Dangote Refinery. Founded by Dangote in 1978 with a $3,000 loan from a kind uncle, the Dangote Group is now West Africa’s largest multinational conglomerate.
Complex finery
The Dangote Refinery, reportedly the biggest single-train refinery in the world, began producing diesel and aviation fuel in December 2023 shortly after receiving its initial crude deliveries. It boasts a Nelson complexity index of 10.5, making it more complex than most refineries in the United States (average 9.5) or Europe (average 6.5).
Sidebar: The Nelson complexity index increases with the number and capacity of chemical procedures conducted after distillation. Fun fact—the largest refinery in the world, the Jamnagar Refinery in India, has a complexity of 21.1.
Boring is the new black
This panel conversation spotlighted the type of 'boring', big-ticket business often considered outside the flashy realm of 'Startup Africa'—hardcore capitalist enterprise that, for better or worse, plays a significant role in shaping Africa's socioeconomic futures.
Regardless of one's enthusiasm for the potential of tech to accelerate socioeconomic progress in Africa or the urgent need for technological innovation to combat climate change, it's essential to consider the relatively mundane economic concerns that absorb a significant share of the strategic bandwidth of captains of industry like Dangote and Pouyanné and other powerful stakeholders, including governments.
Slow boil
Additional context for last week's TotalEnergies-Dangote deal includes the fact that Dangote's initial announcement of plans for the refinery was made back in September 2013, when $3.3 billion in financing had been secured for the project. Now, nearly a decade later, after multiple delays and setbacks, the refinery seems properly on track to deliver as envisaged.
In the realm of industrial development and self-sufficiency, Dangote's ambitions for Africa's economic future seem visionary. With plans to revolutionise key sectors like petroleum and petrochemicals, he envisions a continent on the brink of self-reliance. However, beneath this ambition lie the harsh realities of suboptimal intra-African trade, a challenge Dangote himself acknowledges.
Needling questions
On the panel, some of Madowo’s pointed questions highlighted the complexities of regional cooperation and trade in Africa. Despite being Africa's wealthiest individual, Dangote - who carries a Nigerian passport - faces the inconvenience of making dozens of visa applications every year just to travel within the continent, let alone abroad. His considerable prestige notwithstanding, he ruefully noted that he has less freedom to move around Africa than his co-panelist and recent fuel supply deal partner, Pouyanné. Awkward.
These basic realities underscore the barriers to economic integration, emphasising the need for consistent policy and framework development to enhance intra-African trade under initiatives like the African Continental Free Trade Area (AfCFTA). Additionally, security concerns, (timely and relevant) talent acquisition, and regulatory stability pose significant challenges to investment prospects and economic growth.
Dangote's candid remarks on the unpredictability of government policies resonate with many entrepreneurs and business leaders grappling with the ever-shifting regulatory landscape across Africa. While he sees hope in initiatives like Nigeria's Petroleum Industry Act, the path to regulatory certainty remains challenging.
Pragmatic gains?
Both Dangote and Pouyanné stressed the need for better governance and clear frameworks for infrastructure and regional cooperation. They acknowledged criticisms of their fossil fuel-leaning strategies, but emphasised the need for pragmatic navigation towards a more sustainable future. They hold that while Africa's potential for renewable energy is undeniable, realising that potential requires more than wishful thinking. Initiatives like the AfCFTA hold promise, but their success depends on addressing existing trade barriers and improving infrastructure. *deep sigh* I know...
Nevertheless, it's difficult to discount the positive impact of Dangote’s strategic investments in key sectors like cement, sugar, and petroleum refining on economic growth and development across the continent. Balancing traditional industries with emerging technologies, while ensuring sustainability and doing no harm, is no easy task.
Thankfully, with Rwanda offering citizens of African Union, Commonwealth, and La Francophonie member countries free visas upon arrival for a 30-day visit, both Dangote and Pouyanné could at least enjoy the peace of mind of attending this year’s Africa CEO Forum in Kigali without visa hassles.
Editorial Note: This opinion editorial was first published by Business Report on 21 May 2024.