Dangote's Strategic Investment

Africa's newest member of the Billionaire club, and the richest black person alive just did it again...hate him or love him, he is good.


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Dangote acquires 45 per cent stake in South Africa's cement firm
DANGOTE Group has acquired 45 per cent stake in a South African firm, Sephaku Cement, a subsidiary of Sephaku Holdings Limited.
Sephaku is a Black Economic Empowerment (BEE) controlled minerals exploration, development and investment company, with a diverse range of mining and exploration projects including, platinum group metals, chrome, limestone, gold, nickel and fluorspar.
According to a statement issued by Sephaku, a strategic partnership agreement with Dangote Cement, which forms part of the Dangote Group of Nigeria, makes it a substantial minority stakeholder of 45 per cent in Sephaku Cement. Sephaku Cement Chairman, Dr Lelau Mohuba, said the partnership would provide the company with the necessary funding and technical expertise to expedite the construction of their new cement plant without affecting their status as a black-owned and controlled cement company. Also reacting, Pieter Fourie, Chief Executive Officer of Sephaku Cement, revealed that its plans are on track to be in production by mid 2010. The plant represents an investment of R3bn and will have a production capacity of 2.2 million tons per year. The plant is expected to be the most modern cement plant in South Africa and will set the benchmark for emissions as well as power and energy efficiencies. A number of existing South African cement plants have inefficient and uneconomical capacity- some of which are in excess of 40 year old. The Dangote Group is Nigeria's leading industrial conglomerate and leads the country's cement market. It recently commissioned two cement plants with a combined capacity of eight million tons per year. Dangote Cement also has two import terminals located in Lagos and Port Harcourt, which have production lines to supply cement in 50kg and 1500kg bags as well as bulk tankers carrying 35 MT loads. Other Dangote industrial products include salt, sugar, flour, and pasta. The Dangote Group's transformation from being an importer of cement to a manufacturer has largely been strengthened by substantial investments in manufacturing plants around the country. Recentlt, Dangote Cement placed an order for three new plants totaling 16 million tonne capacity for Nigeria and 2.6 million tonnes of capacity for Senegal for EPC projects with the Sinoma Group of China. Alhaji Aliko Dangote, President of Dangote Industries lauded the partnership with Sephaku, stating that "it provides an early entry for his group into the exciting South African cement market and with a group of likeminded entrepreneurs working together, will provide a win-win solution to delivering cost effective product at world class levels of energy efficiency and emissions".
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My Analysis: For those accusing Dangote of patronage as his sole source of wealth, well this doesn't look like patronage to me. It looks exactly like the kind of shrewd business decisions and the vision we have come to expect from Aliko. If properly analyzed this is a great deal of immense proportions, likely to double Aliko's networth in the next couple of years. Here he is sitting on a pile of cash from his Nigerian IPO, and seeking where best to put it- he is directing it at a diamond in the rough: the SA cement market. For those who do not know, as soon as the China Olympics is over, South Africa will be the next place to be. With the number of construction works expected to go into building new stadiums, infrastructure and support facilities for the World Cup 2010, one can expect Sephaku's cement to be in high demand. But why will Sephaku want Dangote? For one, he has a proven business track record, plus the fact that he is in position to absorb excess inventory if need be to the fast expanding Nigerian market. Add this to the fact that the current global credit crunch makes easy money like the type Dangote is providing hard to come by, especially for a cyclical business like Cement and an unknown commodity like a black businessman in South Africa and you see a deal made in heaven. Let those who have ears let them hear.

The best way to play South Africa and other African economies waiting to explode (investing with the mentality driving this mogul?) if you live in the US? Either you invest directly back home or you buy GAF- an ETF with exposure to SA, Nigeria, and the Middle East trading on AMEX especially when it is 14 points below its 52 week high. ___________________________________