From SME To A Conglomerate –The Dangote Story

With the current national unemployment rate of about 23.90% in Nigeria, and the economically active population constituting about 56.30%, coupled with the massive downsizing going around the world, there is a growing need to take your own destiny into your hands by starting a business. However, whatever your reason for starting a business, ensure that it is strong enough to propel you through the several business challenges that you will encounter in the business terrain.

The next step to starting a small business, after you have made up your mind to be an entrepreneur, is to develop your mindset and toughen your skin against competition and challenges of building the business. To succeed in business, you need to possess the mindset of entrepreneurs such as Bill Gates, Donald Trump, Richard Branson, the Late Steve Jobs, and our own Aliko Dangote. After getting in the right shape of mind, you need to sharpen your entrepreneurial skills. ‘Skill’ and ‘competence’ are what separate the successful entrepreneurs from the mediocre.

Leveraging On Strategies
Undertaking business in Nigeria can sometimes be exasperating. The situation is not helped by the pervasive decay of supporting infrastructure. This reality puts a lot of pressure on small businesses.  But regardless of how harsh an operating environment may be, an entrepreneur can scale the hurdle if he or she adheres to certain principles.  A business that starts small can become big if the owner has the right vision. For a business to grow, the owner must leverage on proven strategies; ranging from the use of Internet, embracing networking, developing a value chain, utilising franchises and promoting a global brand.

The use of Internet allows small businesses to establish effective inter-business collaboration and also achieve global competitiveness. Embracing networking allows small firms to establish formal and informal business relationships with bigger corporations. Networking with research centres, local institutions and others provides external support at different stages of a business. Developing a value chain through consumers and suppliers boosts business performance. This is done with the objective of maximising revenue and profitability by accessing higher value market and creating an environment that drives higher quality.

Scanning The Environment
Experts also assert that in order to grow a business, particularly in Nigeria, a business owner must take a comprehensive view of the industry he is operating in, and constantly scan the environment for opportunities. This, they opined will help entrepreneurs operate optimally.

Many people start a small-scale business having been blinded by the attractiveness of the product or by what seems to be an attractive market. That is why many of these micro-enterprises close down after a few months or years of operation, shattering the entrepreneur's dream of what appeared to be the perfect way of making a decent living. In order to avoid this, a pre-feasibility study should be conducted. Although this may be based on estimates, it helps to prepare for the future and, in some cases, shows alternative methods of doing the same business in a better way.

Small-scale enterprise development is not for everyone; it requires a lot of work, high level of discipline, dedication, persistence and creativity. The entrepreneur must be capable of decision-making and have the ability to manage accounts and employees (if any).  A well planned small-scale enterprise should be able to produce sufficient income to justify the time and energy invested in the venture. Keep in mind that if there is competition, it means there is a market.

...Doing It The Dangote Way
Do not neglect the days of little beginning! This is the inspirational story of Aliko Dangote, Africa’s richest man who rose from a small-time trader to a household name and a market leader in Nigeria and in Africa for consumer products; ranging from fruit juice, instant noodles, salt, sugar and flour.

It was in these commodities that the Dangote's brand, which is now a conglomerate, had its humble beginnings. Alhaji Aliko Dangote, the great-grandson of a wealthy kola nut trader, Alhassan Dantata, who hails from Kano in the northern part of Nigeria, read Business Studies at Al-Azhar University in Cairo, Egypt. In 1977, he used a small loan of ₦500, 000 from an uncle to start trade in rice, sugar and cement. He reinvested the profits from the business until he was able to venture into full-scale manufacturing.

Growing Into A Conglomerate
In 1981, the Dangote Group was born. The Group has now grown into a multi-trillion naira conglomerate with operations in Benin, Ghana, Nigeria, and Togo. The company has a special focus on cement but also has interests in sugar, flour milling, salt processing, textiles, real estate, oil and gas. By the early 1990s, the Group had grown into one of the largest trading conglomerates in the country. Currently it has the largest cement plant in Sub-Saharan Africa.

Today, Dangote Group dominates the sugar market in Nigeria, and Dangote Sugar Refinery is the main supplier of sugar (70% of the market) to the country's soft drinks companies, breweries and confectioners. It is the largest sugar refinery in Africa and the third largest in the world, producing 800,000 tonnes of sugar annually. Dangote Group also owns salt factories and flour mills, and it is a major importer of rice, fish, pasta, cement and fertilizer. The company also exports cotton, cashew nuts, cocoa, sesame seed and ginger to several countries.

The group has a polypropylene bagging factory which produces required bags for its products. Dangote has over 600 trailers for efficient distribution of goods around the country to his teeming distributors and consumers, and to the port for export. A vehicle leasing unit with over 100 fully air-conditioned commuter buses is also part of the Group’s line of businesses. Dangote is also into real estate with luxury flats and high-rise complexes in Ikoyi, Victoria Island, Abuja and Kano. He is branching into telecommunications and has started building 14,000 kilometres of fibre optic cables to supply the whole of Nigeria.

Africa's Cement King
Aliko Dangote is also Africa's cement king. In February 2012, Dangote announced the opening of a new $1 billion Nigerian cement plant, which is expected to increase his company's production volume by 40% in the country. The company’s cement production capacity is so great that the company has implored the Nigerian government to increase infrastructure investment to absorb what they have termed a "cement surplus."

In late 2010, Dangote listed his cement company on the Nigerian Stock Exchange (NSE), integrating the Group’s investments in cement across Africa. The cement company is currently the largest company on the NSE as it is potentially responsible for up to 40% of the total market capitalisation. He also invested $4 billion to build a new cement facility in the Ivory Coast and is building a $115 million cement plant in Cameroon. He owns plants in Zambia, Senegal, Tanzania and South Africa.

Dangote Foundation
Dangote Foundation is the philanthropic arm of the Group which spent over ₦15 billion in 2011 for worthy causes such as contributions to educational and healthcare institutions; sinking of boreholes and awarding of scholarships. The Dangote Group has nationwide staff strength of about 12,000.

It is the combination of his relentless financial growth and his company's pan-African and industrial vision –reminiscent of the aspirations of the pioneers of African independence –that has set Dangote apart. He is optimistic about providing local value-added products and services to fuel Africa's growth, a rare phenomenon on a continent bemoaning its dependence on imported products and putrefied infrastructure. As a self-employed person, with minimum basic education, Alhaji Dangote has proven that business success can be achieved through determination, dedication and perseverance.

His Wealth
According to Forbes, a leading news magazine, Dangote was the first verifiable Black African billionaire, with Patrice Motsepe of South Africa also on the list with $2.4 billion from his mining company. Worth $3.3 billion in 2008, Dangote was ranked 334th in the world and became the richest black person on the planet, taking the title from media mogul Oprah Winfrey ($2.5 billion). He remains the first African billionaire of fully Black African ancestry to be listed.

With an estimated net worth of about $2.5 billion in 2009, he was ranked 261st in the world and one of the richest black African citizens and the third richest person of African descent in the world; behind Mohammed Al Amoudi  ($9.0 billion) and Oprah Winfrey ($2.7 billion).
In 2011, Dangote was ranked as the richest person of African descent, with an estimated net worth of $13.8 billion, relegating Mohammed Al Amoudi ($12.3 billion) and Oprah Winfrey ($2.7 billion) to second and third places respectively. However, in the 2012 Forbes list, Dangote ranked 76th in the world but his net worth dropped to $11.2 billion.

Lessons From Successful Entrepreneurs
Brains: While appropriate educational credentials are important, entrepreneurial ‘brains’ means more than scholastic achievements. To become a successful entrepreneur, you should have a working knowledge about the business you plan to start before you start it. Common sense, combined with appropriate experience, is the necessary brainpower. Prudence, follow-through and attention to details are also very important.

Guts: Guts mean you must have an entrepreneurial instinct, which is an overwhelming desire to have your own business. You must have the guts and dedication to be completely devoted to your goal. Incidentally, devotion to your goal is much more likely if you have the love for your intended business. Life is too short to start a business that cannot give you satisfaction and joy. And, through good times and hard times, you will stick with something you love.

Capital: Every business, no matter how small, needs sufficient money to maintain a positive cash flow. Many businesses can be started on a very small scale with little investment. Then, as the business grows and you gain experience, cash flow from your business can be used for growth. In some cases, you do not need starting capital to hire other people because you might start by doing everything yourself. The "Do It Yourself" start is a good way to learn everything about your business and also makes you better qualified to delegate work to others later on. You can control your risk by placing a limit on how much you invest in your business.

Starting Small
It is usually better to start small and expand the business slowly once the market has been tested and income starts flowing in. Initially, self-sufficiency and the capability of handling the business by oneself is the best indicator of the right size of the enterprise. If your motivation is to start a business, doing something you are passionate about with the goal of turning it into a full-time career, you are likely to suffer from fewer emotional setbacks and entrepreneurial burnout when you find out that it takes time to build independent wealth. However, with dedication, you will be more patient with yourself and your business as it grows while you make better business decisions.

The key question is, what can small companies do to increase their chances of survival in a difficult terrain like Nigeria? The answer is, Strategic Planning.

Strategic Planning: The concept of Strategic Business Planning is not as fancy as it sounds. It is simply developing a business plan with a long term view. And it is something any small business can and should do. It is a critical success factor and its success does not only lie in developing the plan but also following through the plan.

Successful entrepreneurs build wealth because they believe in what they do and inject personal core values into how the businesses are operated. Consequently, wealth is always their reward. Having a true sense of pride and belief in your own company and products will be conveyed in everything you do. Your passion and confidence will get other people –customers and investors – excited about the business, and you will have a smooth run in establishing your business’ credibility.

myfinancialintelligence.com