“If I knew, I wouldn’t have tried” – A billionaire’s tribulations
Mbongeni Mguni | Wednesday June 26, 2024 13:11
“I think the luck that we had in getting the refinery done was that people it would not happen.
“People who were sabotaging us were less concerned because they thought ‘these guys are going to fail and they have entered into something that they will never finish.’”
Dangote, Africa’s richest man with a net worth of about $14 billion and an outspoken champion of the continent’s industrialisation, was speaking recently at Afreximbank’s annual meeting held in The Bahamas.
Dangote took the spellbound room of about 500 delegates down his 10 year journey to establish a crude oil refinery in Nigeria, with the vision of establishing a level of self-sufficiency in fuel rare in Africa.
The continent may be generously blessed with some of Earth’s largest oil reserves, but only Libya and Algeria do not import refined petroleum products in Africa. The rest export crude and import refined products, in the process exporting jobs and value add opportunities.
Nigeria, in particular, has been highlighted as an example of Africa’s tendency to export raw materials for further processing outside the continent, only to re-import final products at high costs to its economy. Nigeria has the tenth largest oil reserves in the world, but exports the crude and re-imports refined petroleum products.
Dangote’s vision was mammoth, but the project, even in its more humble initial planning, was even more mammoth.
The initial price tag of $9 billion (P121.5bn) eventually ballooned to $20 billion (P270bn) or roughly the size of Botswana’s GDP, forcing the billionaire to dig deep into his own resources and tap various types of financing to keep the dream alive.
The refinery, a green-field project, was in fact an attempt to build a new ecosystem or industry where none existed, from the ground up. Everything had to be sourced from scratch and new industries established where they did not exist before, to supply parts or material for the refinery.
And everything was being done at supersize never-done-before scale.
“We learnt that all the equipment that we had bought of which some of which was 3,000 tonnes, we had to build a special port because all the ports in Nigeria where so small.
“We also learnt that we could not remove them from the port to the site and had to build a special road that could take the weight of 3,000 tonnes.
“We realised that in Nigeria we didn’t have the capacity for people to supply us with sand, gravel and others, while cement wasn’t a problem because we produce it.
“With that we had to go and build the capacity to crush stone of 800,000 tonnes per month and now we are actually is at 10 million tonnes and are actually the largest in the world in terms of quarrying,” Dangote said.
The industrialist found that he could not rely on the traditional Engineering, Procurement and Construction (EPC) model for the refinery, where work could be parcelled out and handed over to contractors to carry the burden of sourcing and construction.
The size of the refinery meant that Dangote Group would have to be its own ‘EPC’ contractor.
“Most of the EPC thought we were crazy guys in town thinking of putting up some refinery and looking at the amount of money required.
“We took up the challenge and set up a team of 340 engineers in India and actually became the EPC of the refinery.
“Every single bolt and nut we bought and did everything from A to Z and it has never happened before in the world.”
Not that he wasn’t warned about the scale of the project he was embarking on. Dangote recalls how the Saudi Arabia minister of energy cautioned him about the difficulties of establishing oil refineries. The minister mentioned that the Middle Eastern country, one of the world’s top oil producers, was experiencing its own challenges.
The minister advised Dangote not to go ahead with his project.
“I said but Your Excellency, unfortunately, we have already started so I’m not looking for advice,” the billionaire replied.
Besides the technical and logistical nightmare involved in building the refinery, as well as the funding headaches and personal risk Dangote piled on through the years, he recalls a peculiar difficulty he had initially under-estimated, one associated with the challenges of industrialising Africa.
This is namely, the pushback or resistance that comes in attempting to disrupt long held paradigms and well-established ecosystems, both formal and informal, as well as legal and illegal.
In Nigeria, informal and formal, legal and illegal oil traders of all sizes have been part of an ecosystem thriving from the anomaly of an oil rich country being an importer of petroleum products.
“In a system where for 35 years people are used to counting good money and then they see that the days of counting that money are coming to an end, you don’t expect them to pray for you. “You expect them to fight back and that’s the process we are going through.
“You expect them to fight through non-supply of crude, non-purchase of the product but I think it’s all temporary.
“But the country, the sub-region and Sub-Saharan Africa need this refinery,” Dangote said.
The billionaire also found organised “mafia” both locally and internationally who pushed back against the project.
“I knew that there would be a fight but I didn’t know the mafia in oil are stronger than the mafia in drugs,” Dangote said.
“That’s a fact.
“I knew they existed but not as strong as the way that I have faced them.
“There’s local mafia and there’s international mafia.
“I’m a person who has been fighting all my life and it’s part of my life to fight.
“We will end up winning because the population and the government are on our side but what we are doing is right.”
The billionaire’s fight against entrenched ecosystems and “mafias” echoes similar efforts across the continent when African industrialists have challenged sectors or activities held by established multinationals.
Efforts at import substitution have encountered resistance, sometimes from regulators used to the status quo or unwilling to take the risk to domesticate certain production or activity.
In Botswana, the $2.5 billion coal to liquids plant expected to churn out 12,000 barrels of oil a day for the country, has been on the cards since at least 2017, with several starts and stops. All along the way, technical experts have poured cold water on the project, with Chinese experts recently saying the coal identified for the project was not of the right quality.
To their credit, government, Botswana Oil and the regulator, the Botswana Energy Regulatory Authority, remain committed to investigating the business case for the plant and securing a private partner, in an effort to boost local fuel self-sufficiency.
The failure to industrialise is why Africa found itself in all forms of challenges during the COVID-19 crisis, with, initially, little access to masks and protective gear and later, limited access to lifesaving vaccines.
For Dangote, Nigeria’s oil paradox, where it is exporting crude and importing refined petroleum products, has other real world difficulties for citizens.
“Fuel coming into Africa is called Africa quality.
“One trader we sampled had 3,000 parts per million of sulphur in their imported fuel in Nigeria, while Belgium says their own fuel should not have more than 10 parts per millions.
“Many of the cancers we have in Nigeria are because of this and yet Nigeria exports some of the highest quality oil in the world.
“It exports the best and gets the worst refined.”
Dangote says the journey of the last ten years was “very, very scary”. It also proved the mountains African industrialists have to climb to develop their own continent.
“There’s quite a pushback against Africa industrialising.
“In fact, during the COVID period, some of the international banks were really looking forward to pushing us into default of our loans so that the project will just be dead but that didn’t happen with the help of banks like Afreximbank.
“I keep saying for us, we need to make sure we get together as Africans.
“We need to produce what we consume and I don’t believe there’s any help from the West.”