Firms post astounding growth figures from African operations
By Ada Anioji
Despite widespread fears that Nigerian businesses expanding operations intent on spreading their pan-African wings face almost insurmountable challenges, the facts on the ground are clearly disproving this, a The Difference survey has revealed.
Indeed, so phenomenal has the recent outcome been that analysts are beginning to suggest that the future of pan-African business enterprise is decidedly Nigerian.
First it was ‘Africa’s global bank,’ the United Bank for Africa, UBA. At the close of its 2015 trading year, the bank revealed that its African operations had contributed some 28 per cent of its group profits. Encouraged, the bank which presently operates in a third of the 54 nations of Africa is already eyeing setting up shop in at least six more in the next few months. It is a core mandate that the new UBA Group Managing Director, Kennedy Uzoka is being expected to meet and surpass.
And UBA is not the only Nigeria-originating bank that is pushing the frontiers of business in the continent. Zenith Bank, Access Bank, First Bank and several others are equally playing in the market and gleaning their own share of the Afro-profits too.
In a recent interview, First Bank MD, Adesola Adeduntan confirmed the bank’s strong interest in boosting its operations in the pan-African circuit saying that having already set up shop in a number of African nations, the next issue under consideration would of course be reaping the dividends of the investments.
And players in other sectors are following suit, including quite notably, telecommunications and manufacturing.
Otunba Mike Adenuga’s Globacom for example has been functioning in several West African markets for a while now. Ditto, Africa’s richest man, Aliko Dangote, through, notably, his Dangote Cement imprint.
Given the overall downturn in its Nigerian home base, indeed, for Dangote Cement and the Dangote Group, things may have been really rough at the moment if it had not made the decision some time earlier to push its pan-African possibilities.
According to Onne Van der Weijde, the chief executive officer, Dangote Cement Plc, the diversification of the company into other parts of Africa has indeed started yielding very positive results. Weijde, who disclosed this at the company’s fact behind the figures presentation ceremony in Lagos, noted that Dangote Cement increased its top line by 20.6 percent to N292.2 billion in six months to June 30, from N242.2 billion in the corresponding period of 2015.
Giving a breaksown of how the firm performed in the different regions of the continent, he disclosed that while Nigeria barely scraped through with a 4.2 percent growth to N216.6 billion, West and Central Africa grew its revenue astoundingly by 192 percent from N17.1 billion to N49.9 billion for the first half of 2016. Not left behind in this pan-African growth surge are South and East Africa, who he revealed, grew its top line by 50.9 percent to N26.1 billion from N17.3 billion recorded for the corresponding period of 2015. The company ended the H1 with a profit after tax of N103.4 billion compared to N121.8 billion declared in H1 2015.
Weijde said the company will begin 100 per cent coal production in the fourth quarter of 2016. This, he said, will help to solve the problem of gas shortage and foreign exchange volatility and increase profitability. According to him, some of the company’s plants in Obajana in Kogi State and Ibese in Ogun State have already started using locally purchased coal for operation, blending with imported coal to assure optimal quality.
“Our investment in coal is enabling us to reduce our dependence on both oil and gas as fuel sources, thus protecting our production from disruption and improving margins. The devaluation of the naira will obviously have an impact on costs and our priority will be to protect margins,” he said.
Weijde said: “We have achieved strong sales growth in Nigeria and are readying more coal-burning facilities that will improve our fuel security, reduce our dependence on LPFO and even gas and help to restore our margins. As we have previously made clear, our focus will be to protect margins through cost controls and adjustment of prices,” he said.
Conversely however, South African firms in the continent that used to be the champions of the pan-African business arena in the Nelson Mandela era are presently having a rough time.
Its poster boy and Africa’s biggest mobile phone operator, MTN Group Ltd for example, has reported a $357 million half-year loss and cut dividend payouts, after a hefty regulatory fine in Nigeria and underperformance in its South African home market.
Founded with the South African government’s help after the end of apartheid in 1994, MTN agreed in June to pay a 330 billion naira ($1.05 billion) fine in a settlement with Nigerian authorities for missing a deadline to cut off unregistered SIM cards from its network.
MTN said the fine, a third of the initial penalty, wiped off 10.5 billion rand, 474 cents per share, from headline earnings, South Africa’s main measure of profit that strips out certain one-off items.
MTN’s headline loss came in at 4.9 billion rand ($357 million), or 271 cents per share, in the six months to end-June. This compared with headline earnings of almost 12 billion rand, or 654 cents per share, a year earlier.
The company, which has more than 230 million subscribers, cut its dividend by almost 50 percent to 250 cents per share for the half year.
MTN has said its Nigerian business would pay the fine in local currency. The penalty was worth $1.7 billion when it was announced, but the naira has fallen sharply since then, cutting the equivalent dollar value by about $500 million.
The company also said the results were affected by unfavourable currency swings, underperformance in its home market and in Nigeria, where it had to cut off another 4.5 million SIM cards to comply with the local regulator’s user registration requirement.
Already, commentators are beginning to explain the new surge in Nigerian business expansion. While some trace it to the fact that the country has the single largest home market in the continent, others say it is connected to the cosmopolitan tendency of its citizens to feel at home in any part of the continent and world that they find themself.
Remarked a Ghanaian taxi driver: ‘There is something about Nigerians. They are so free and so brave. When they come into a place, you know they are there: they just take over.’
While this noted ‘streak’ now and again provokes the paradoxically admiration and ire of other Africans, observers say it is the very first thing that is needed for business expansion and consolidation. And with the home economy now witnessing very unprecedented nrgative headwinds, it is most likely that many Nigerian business players will continue to look lustingly at the mouth-watering figures that the Dangotes and Elumelus are posting from their African operations and begin to take steps to launch out in the same direction. And thid, many say, will be good for business growth and the development of the continent, overall.