DANGOTE IN ZAMBIA

Zambia 2017 | ECONOMY | FOCUS: NIGERIAN FIRM LOOKS SOUTH

As the old Swahili saying goes, “wisdom is wealth." Nobody doubts the wealth of Nigerian entrepreneur Aliko Dangote, but was last week's announcement of heavy investment in Zambia's agriculture and energy sectors wise?

Last weekend the Nigerian-born multi-billionaire paid a visit to Zambia's President, Edgar Lungu, to express his support for the government's investor-friendly stance.

Dangote called on the administration to work on expanding the domestic supply chain, both for local consumption and for export, and revealed his plans to invest in Zambian petroleum refineries.

With 2016 representing such a challenging year for Zambia, which suffered from the twin economic setbacks of low copper prices and a prolonged election, the industrial tycoon's confidence in the Zambian economy has elicited surprise in local and regional business circles.

The founder and CEO of Dangote group, the largest industrial conglomerate in Nigeria, first entered the Zambian market in 2015 with the opening of a cement factory in Ndola. Two years on he is now reassessing the potential of the landlocked southern African nation.

“Our strategy has been to enter new markets with a higher-quality product produced at lower-cost factories, and as a result we are rapidly gaining market shares in key African markets, in spite of well-established competition," he stated in a 2016 TBY interview.

This week, highlighting the country as a potential economic hub for the region, Dangote urged Lungu to continue spearheading a diversification strategy that will boost the agriculture sector, and which could transform Zambia into an important exporter of both raw and value-added agricultural products.

During the TBY interview he expressed the same outlook. “As a long-term investor, one would be remiss not to see the mid-to-long-term opportunities for investing in Africa to add value to raw materials for domestic processing and export." Herryman Moono, the National Secretary of the Economics Association of Zambia (EAZ), echoed this sentiment when he told TBY's Zambia editor earlier this year, “Value-adding agro-processing will definitely be one to watch. The president has placed an emphasis on developing the agricultural sector, and it is gaining momentum and priority."

Low rainfall in 2016 has also led to an energy deficit in Zambia, a country which is reliant on hydropower for over 95% of its electricity. This is not a new problem according to Ashwin Devineni, resident director of Maamba Collieries Ltd. “Over the last two years, poor rainfall cycles have caused daily load shedding. With uncertainty reigning supreme in levels of peak load power, it was even more evident that Zambia was lacking necessary base load power. Zambia began, and still is, importing power from expensive sources, in order to meet the growing demand. Establishing a constant supply of base load power, generated daily at the MCL's thermal plant, will therefore be a game-changer for the country."

Since September 2015, Zambia has been a net importer of energy, spending millions just to keep the lights on. But with firms like Dangote's now ready to ramp up investment, the country could soon overcome local supply shortages.