Dangote Cement listing on London Stock Market is not necessary

Aliko Dangote, the richest African capitalist is on a move and it is no surprise to global market observers and analysts that he is strategizing to list his $11 billion Dangote cement on London stock Market. With its vast expansion and investments beyond its primary base in Nigeria into the rest of Africa’s emerging markets, Dangote Cement without doubt needs more resources and funds to keep up with the pace of development.

Aliko Dangote plans to bring his profitable cement industry into listing on London Stock Market Exchange and Dangote Cement will be free-floating 20 percent stake in the company. The twenty percent is quite big compares to the five percent stake in Dangote Cement listed in Nigeria.

On a surface the participating and floating of the company’s stake is quite compelling because it will enable the company to do more with its expansion and also bolster the image of the company as an transnational corporation with a net benefit of a positive branding. But before the next year implementation of the plan, it is imperative that a profound feasibility studies must be undertaken and the right decision be made. A strategic outlook is necessary to avoid mishaps and pitfalls that may be encountered.

The exposure to London Stock Exchange will attract investors who can be brand critical and may not have patience when the stocks underperform in the cyclical downturn that defines market trends. With the company roots in Nigeria and Africa, a more adverse criticism and depressing analysis can follow put when inevitable mistakes are made which are inherent in management of any big corporation. Whenever political turbulence and disturbances occur in Africa, the prospective investors and stockholders may quickly sell and that will affect the bottom-line of the company.

Moreover the market for Dangote Cement is in Nigeria and Africa. Most of the demand for the Dangote Cement is in Nigeria and with the increasing expansion in Africa the demand for cement will continue to increase inorder to the feed Africa’s emerging markets.

Comparatively, the argument can be made that the market demand with the resources for the expansion can be found in Africa. The suggestive argument that resources for further expansion should be sought outside the shores of Africa has no legs. The money and capital for expansion of the growing Dangote Cement can be found in Nigeria and Africa. That does not translate that the scope and vision of the company should be limited to Africa but potential human and physical capital are not wanting in that part of the world.

The five percent stake in Dangote Cement in Nigerian Stock Market can be increase to up to 10-15 percent. Nigeria’s stock market has been bullish for Dangote Cement. Financial Times reported: “Dangote Cement’s net profit in 2011 is expected to be $790m on revenues of $1.5bn, according to guidance filed at the Nigerian Stock Exchange.”

The president of Dangote Group, Mr. Aliko Dangote was reported to have said that he desired to magnify his profit to enable him to upgrade the business into a huge multinational company and world’s largest cement industry with impressive profit. Yes, it is doable in Africa with sound management and strategic planning.

Emeka Chiakwelu, Principal Policy Strategist at Afripol, outlined the operational standing that, “African market can give the company the fund, resources, capital and the market to realize its ambitious project. But the company must be ready to work with both small and medium capital markets in the continent without looking outside the shores of the continent.”

A while ago, Dangote Cement opened a billion dollar cement industry at Ibese, Ogun state in Nigeria. With this investment resource, enormous profit can be made as the demand for building materials are edging up in the region. As result of demand of cement in Nigeria and Africa as economic growth in non-oil sector of the economy bulges, the accumulating profit will increase and market will be highly appreciated. The profit can be diverted for further expansion especially in research and development.

“With the economic growth of Africa hovering above five percent and Nigeria’s GDP edging up to seven percent for 2012, Dangote Cement can grow without seeking resources from London Stock Exchange,” as Chiakwelu pointed out.

“And the company’s expansion and building of cement industries in the eight African countries should not necessarily be simultaneous but can be realized with one construction after another,” Chiakwelu concluded.

Written by
Emeka Chiakwelu
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