Dangote breaks cover

21 August 2014

Three of the five latest African cement news stories concern Nigerian cement giant Dangote Cement. This week it announced a new captive power plant in Nigeria and the fact that Sephaku Cement, which is 64% owned by Dangote, is now able to produce cement from its South African Aganang plant. These are fairly typical of the announcements that Dangote makes in the African market, and the high frequency with which it makes them. It is the third story, of course, which is unusual.

We have heard, for some years, that Dangote aims to become a pan-African cement giant. Certainly it is the pre-eminent producer in West Africa, with its influence rapidly spreading to the east, north-west and south of this vast continent. Few others, (perhaps South Africa’s PPC), can claim to have such influence and, unopposed, there seems no limit to Dangote’s bold ambitions.

For the first time Africa’s No. 1 cement producer has said that it wants to break out of Africa and enter new markets. A company release has identified the Middle East and Latin America as potential hunting grounds, either for new capacity or acquisitions. The proposed list of Lafarge/Holcim cast-offs, which includes few assets in either region (LINK), will also have received significant attention in the Dangote boardroom.

The selection of the Middle East and Latin America, however, is not accidental. The Middle East is a high-growth area and provides a platform for expansion into more impenetrable markets in central Africa like Chad and (South) Sudan. The Middle East also means proximity to India. Dangote may also want to dampen the influence that Indian, Pakistani and Iranian exports have in the region. Potential tie-ups with Dangote’s growing operations in east Africa are clear.

The selection of Latin America seems less obvious. There are numerous strong and growing local and regional producers. Not least is Colombia’s Cementos Argos, which has increased its influence in the USA through strategic acquisitions. There are also numerous domestic large Brazilian producers, but Dangote may feel there is room for more. Cade, the Brazilian competition authority, has agreed that competition could be improved in Brazil. Could Brazil be a prime target?

Wherever Dangote decides to play its first non-African card, it will be a major step for the company and African cement producers. How long until we see the first African-owned cement plant on another continent?

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