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Billionaire Aliko Dangote resigns from Dangote Flour Mills Board as Parent Company Cuts Funding

BellaNaija.com

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Aliko Dangote - Bloomberg Billionaires  Index - January 2014 - BellaNaijaAfrica’s richest man, Aliko Dangote, has resigned from former ‘Dangote Flour Mills’, now known as Tiger Branded Consumer Goods PLC.

South African fast consumer goods company, South African Tiger Brands committed 200 million dollars to owning a 65% equity of the company in 2013.

However, the company “had written down the value of the Nigerian flour mill twice in 2014 for 66.3 million dollars amid stiff completion and sliding Naira value.”, according to Premium Times.

Dangote himself holds 10 percent of the company’s equity through Dangote Industries.

The company released this statement, “Tiger Brands has decided not to provide further financial support with respect to its investment in Tiger Branded Consumer Goods Plc of Nigeria,” and said they will review their investment in the Nigerian flour mill.

On Monday evening, Dangote reported his resignation alongside three other directors of the board – Olakunle Alake, Asue Ighodalo and Arnold Ekpe, a former group Managing Director of Ecobank Transnational Incorporated.

Source: Premium Times

6 Comments

  1. The girl who flies planes

    November 17, 2015 at 1:05 pm

    bdlive.co.za/business/retail/2014/05/22/tiger-brands-wary-of-african-assets-after-nigerian-misadventure

  2. OddB

    November 17, 2015 at 2:31 pm

    This is probably a good time to talk of the Dangote business model.

    While I have never worked for/with him so may not authoritatively have hard facts or figures, from information readily available online and other unconfirmed reports, its best we ask ourselves some good questions;

    1. What is the benefit of size afterall?
    When does an obsession with market share domination no longer become a good desirable trait in business. Case in point would be sugar and cement; while a lot is not known about how much sugar is actually produced or locally sourced in Nigeria by Dangote, he clearly controls anywhere between 90-95% of commercial quantity sugar distribution. Is that totally necessary?

    With the cement its even more disturbing. His total production capacity from the cement plants are more than the consumption capacity of the entire nation. Now with the opening of other factories in other Neighbouring countries, you get that he is not looking to be an exporter. so what is the need? He has driven the price down severally thereby killing competition and there are even still rumours that the majority of his cement are actually imported ~(cue: visit tincan 2- josep dam terminal to confirm).

    2. Acquiring of middlemen/supply chain to avoid paying them?
    There is a coating/paint business that runs out of snake island Apapa, that used to be a major vendor to Dangote. Their prices were too high so he bought into them, He’ s a director there now and at least earns from their earnings. He’s partenered with SAIPEM to form a new co that would handle engineering and construction services in West Africa just in time as he decides to build refineries, plants and mills in the region. We can go on but the list of such companies he’s acquired are a few more.

    Generally, while this is not new in business (acquiring vendors) especially in Nigeria (cue: Sahara who have their own vendors are subcompanies up to even brokers, insurance and even janitorial I hear), when exactly does this now appear to bad practices or even brinksmanship.

    Lets not forget how heavily leveraged he is with the banks or his special import waivers and concessions he’s able to get from any government he chooses.

    Smart guy, I’d like to interview him someday. But can we ask ourselves a few questions.

  3. The real D

    November 17, 2015 at 5:12 pm

    @oddB, if this is indeed his business model than he is only very smart doing what major companies outside Nigeria have done which is probably why he is the richest in Africa, driving cost low is what has made Wal-Mart the household name it is today. some people may have problems with this business model but I don’t, I tell people you are upset that Wal-Mart is kicking you out of business, then why don’t you be competitive like Wal-Mart, if you were there before Wal-Mart or in this case Dangote and they were still able to run you out then you were doing something wrong and if you were came after the competition and did not do your research on how to beat them then again that’s on you.

    As for buying into vendors it is a worldwide phenomenon NOT especially Nigeria, how do you think the Great Value brand came about? I worked for a big oil and gas service company and buying into vendors waS the order of the day because to stay competitive, you need to constantly look for ways to lower cost of production, supplying e.t.c if not the next person who jumps on the scene will drive you out of business before you can say Jack. Let us use being a makeup artist as an example, I started out as a makeup artist, charging 20k for bridal makeup, my next door neighbor sees my business is running successfully and decides she wants in but charges 15k, if I don’t look for ways to keep lowering my cost of service there will come a point when I will no longer be able to lower my cost and still remain profitable hence get chased out of business due to competition because people in most cases will go for the cheaper option. Buying into vendors not only translates to cheaper cost of production but it means that although money is changing hands it is ultimately all coming to 1 pocket.
    Enough business lesson for today.

  4. X-Factor

    November 17, 2015 at 7:02 pm

    @ The real D……Whatever you do sha, as much as possible, Try and avoid a Price War, trust me it is the fastest race to the bottom, You may explore other options such as floating a more commercial brand to cater for lower end market segment….

  5. OddB

    November 17, 2015 at 7:33 pm

    Hi @The real D, thanks for your contribution.

    Firstly, I only just said we should talk about the model. I did not out rightly say it was a wrong model.

    Now using the Wal-Mart’s analogy doesn’t really apply with the Dangote model. What exactly is the ROACE (Return On Average Capital Employed) for Dangote Cement for example? Driving low cost short term with a look on long term earnings, increased market share and profitability has always been the other of the day for businesses world over.

    SAB MILLER for example have used these methods to drive up their market share against the big boys like Coca Cola Hellinic, PEPSI and InBev and its tested.We can say the same for UBER, AIRBnB and the likes of them.

    But real income and profit have to be the end goal of whatever market share domination exercise any company goes into.

    And yeah about the competition not doing their research enough to phase him out, my friend that’s a bit naive in this environment. You can not compete with government policies.

  6. OddB

    November 17, 2015 at 7:34 pm

    As regards him buying up smaller companies/vendors?
    Well this is just funny to me. I get M&A and the reason to want to be bigger.

    InBev-SAB MILLER, Marriot=Starwood, Shell-BG have all been interesting M&A’s this year. You see in business school, they always say that the first gain of M&A is cost efficiency (vis-a-vis increased revenue, cost of capital, tax gains and value generation). But there’s M&A and then there’s just flat track “bully buying” for the sake of driving prices lower.

    Look I work in the oil and gas servicing realm as well, and read daily of acquisitions by the big guys on the smaller heavily leveraged companies, while that is good, the government has to watch and guard against anti-trust issues.

    Anyway, long live the capitalists.

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