Ethiopia’s Sugar Revolution Has Attracted A New Investor: Aliko Dangote

By Dana Sanchez Published: January 31, 2017, 1:11 pm
Ethiopia's sugar revolutionDangote Sugar Refinery general meeting, May 23, 2014. Photo: CKNNigeria.com

Aliko Dangote, CEO of Nigeria’s massive Dangote Group, said he wants to diversify his investments in Ethiopia, and he’s looking at sugar production.

Ethiopia produces enough of its own sugar to stop importing it this year and start exporting it — a turnaround that the government describes as revolutionary.

Newly constructed sugar refineries Omo Kuraz I and II and Beles I are scheduled to begin production this month. Construction is also planned for 10 new sugar factories, according to Girma Amente, Minister for Public Enterprise, Fana Broadcasting Corp reported.

The country is expected to have 13 large sugar factories by 2020, according to Ethiopian Sugar Corporation.

Ethiopian sugar production is meeting local demand with some surplus production expected this year, Ethiopian Herald reported.

Until recently, the country imported some 200,000 metric tonnes of sugar a year for local consumption.

“Our production capacity had not been over 400,000 metric tonnes before. But now due to expansion … and the new factories that will get fully operational this year, the nation will have a capacity to produce 700,000 metric tonnes of sugar this year,” said Gashaw Aychlum, spokesman for the Ethiopian Sugar Corp.

With this capacity the country no longer needs to import sugar, Aychlum said. “We could say the nation is in a state of ‘sugar development revolution.'”

Sugar is where Africa’s richest man cut his teeth. As a merchant in Nigeria, Dangote spent years importing Brazilian sugar. After a trip to Brazil in the mid-1990s, he shifted his focus down the value chain into agro-processing and manufacturing, Global Risk Insights reported.

It was only natural that (Dangote’s) first commissioned facility would be a sugar refinery. Coming online in 2001 and supported by his own 200,000-hectare sugar plantation, the refinery has expanded to become one of the largest refineries in the world.

Active in Ethiopia since 2015, Dangote Cement has been importing bags into Ethiopia to package its products. The business tycoon said that he plans to establish an Ethiopian packaging facility in few months as part of his efforts to diversify, Ethiopian News Agency reported in 2Merkato.

“We are also looking at the possibility of looking at other areas, sugar and others, mainly agriculture, which we now discussed with government to move forward,” Dangote said.

How big is Dangote group?

Four of Dangote’s companies listed on the Nigerian Stock Exchange have a market cap equal to 43 percent of the total of equities listed as of Dec. 23, 2016, LeadershipNG reported. The remaining 57 percent of market cap is controlled by 180 companies.

The four listed Dangote companies include Dangote Cement Plc, Dangote Sugar Refinery Plc, NASCON Allied Industries Plc and Tiger Branded Consumers Goods Plc.

“Aliko Dangote, Africa’s most successful businessman built his fortune in sugar, textiles, and cement,” Bloomberg reported.

In Nigeria, Dangote Sugar Refinery produces 800,000 tonnes of sugar a year, and is the major supplier of sugar to Nigeria’s soft drink companies and breweries. Expanding into other African countries, the salt, sugar and flour manufacturing companies under Dangote Group are active in 15 other African countries.

As of today, Dangote has a net worth of $12.4 billion, according to Forbes. He’s Africa’s richest billionaire, and ranked No. 51 among all billionaires in 2016. He’s been Africa’s richest person six years in a row, despite a drop in net worth during 2016 as Nigeria’s currency weakened and its economy struggled, according to Forbes.

Sugar key to reducing Ethiopian unemployment

Sugar development is seen as key to reducing unemployment in Ethiopia. So far, the sugar industry has provided jobs for more than 350,000 Ethiopians, according to Ethiopian Herald. It’s expected to create 600,000 more jobs by the end of 2020.

The sugar industry until now has been concentrated in a few areas, but it’s being decentralized with new factories in states including Tigray, Amhara, Afar and Oromia, Aychlum said.

The government said it has been building dams and other irrigation infrastructure for new sugar development projects in remote areas devoid of infrastructure and social service institutions.

“Building a single sugar factory is like building a town,” Aychlum told the Ethiopian Herald.

Dangote is entering the Ethiopian sugar industry at a time when the government is just starting to reach out to foreign partners.

Dangote’s model from the start has been “to dominate sectors protected from new entrants, and to use scale and his trucking and distribution system to drive prices down to levels that let him crush domestic rivals. He has pursued success with single-minded focus, and has many critics,” CNBC reported.

 

 

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