Dangote-BUA Rivalry: Beyond Sugar Business
Competition is not strange in business. The spirit of competition has that unique capacity to engender more efficient production processes or create a pathway for the invention of new or better products. It provides an avenue to help businesses identify consumers’ needs—and then develop new products or services to meet them.
In the Nigerian business space, there appears to be a growing business rivalry between Africa’s richest man, Aliko Dangote, and the chairman of BUA Group, Abdulsamad Rabiu. The silent row has gradually spilled over to the Sugar Industry recently where Dangote and Flour Mills dragged BUA to the Ministry of Trade and Investment over allegations of sabotaging the Nigerian Sugar Master Plan.
Beyond the Sugar Industry, the feud between the business rivals goes as far back as the late eighties when BUA Group chairman became very keen on redefining and stamping his place as a worthy competitor.
The two competing Billionaires are from Kano State. Dangote comes from a background of wealthy merchants in the commercial city of Kano State. His maternal forebears made a living from the import and export of consumable goods.
Dangote followed in their steps in the trading of commodities in 1977, as he began to garner great wealth of experience and business network.
Abdulsamad Rabiu also, has a legacy in the trading of commodities, given that his father, Isyaku Rabiu, was a prominent merchant in Kano State in the 1970s and 80s.
In 1983 however, the military regime of Major-General Muhammadu Buhari overturned the fortunes of Isyaku Rabiu over issues of import license and duties. He was accused of tax evasion. Eleven years after Dangote had already become a high-flyer in business, young Abdulsamad made up his mind to pick up his family’s scattered fortunes when he established BUA International in 1988.
Meanwhile, Dangote Group stands out today as a leading pan-African brand, representing nearly a quarter of Nigerian Stock Exchange’s N28 trillion ($75bn) value. The TIME had reported in 2018 that the group was responsible for 10% of Nigeria’s Gross Domestic Product. Dangote Cement on its own boasts of a market cap of $14bn and controls 60% of the market.
Abdulsamad Rahman’s largest operation and only publicly listed company, BUA Cement, is also in the cement business where Dangote is a market leader. The BUA subsidiary has a $3bn market capitalisation and 17.6% market share of the sector.
BUA subsidiaries have often trailed those of Dangote, and they were always compelled to fight heavily to break through tough market entry barriers to assume competitive positions.
For instance, when BUA Cement started production and reduced prices by about $20/tonne to attract customers, Dangote deployed some killer strategies by temporarily beating down their prices even below that of BUA Group. On seeing this, the BUA Chairman shifted his focus to meeting the demands of just the North. This has made BUA Cement a major market leader in the North.
The battle for cement supremacy between the two groups did not end there and has always been very intense. Another instance was when BUA Cement, got a restraining order against Dangote Cement, after the police invaded BUA’s three minning sites in Obu Okpella, Edo State.
Both companies in June 2020 were locked in a bitter dispute over limestone mining rights in Obu-Okpella, Edo State. Albdulsamad’s BUA-led group has its highest-producing cement plant in the area and had accused Dangote of blocking the group’s access to the mines – which are a rich source of essential raw material in the manufacture of cement. Dangote, however, said he owns all the mines. This has led to a complicated legal case that is still before the courts.
More so, Dangote is currently building a refinery and petro-chemical plant in Lagos. What is seen by many as the turning point in this rivalry was when BUA also entered a pact with France’s hydrocarbons group, Axens, in September 2020 for the development of a 200,000 barrels per day refinery and petrochemical plant in Akwa Ibom State.
Axens is to supply process technologies for BUA’s upcoming integrated refinery and petrochemical facility in Akwa Ibom, expected to be operational by 2024.
On completion, the facility will refine 200,000 barrels per day (bpd) of hydrocarbons – a ninth of Nigeria’s 1.8m bpd oil production– and help reduce the country’s dependence on imported fuels. It will also export high-quality gasoline, diesel, kerosene, jet fuel and propylene to neighbouring markets.
BUA secured a large and strategic port on the Atlantic Ocean coast from the Akwa Ibom government, thereby easing its logistics. The epoch-making project will swallow billions of dollars and a number of development and commercial banks have stood in line offering to finance the operation via debt and equity.
It is noteworthy that this is not different from what Dangote intends to do with Lekki refinery. The fact that it is coming a little more than a year to the start of Dangote’s own 650,000 bpd refinery in Lagos, which is expected to kick start in 2021, underlines the long decades of competition for market dominance between BUA’s conglomerate and the Dangote Group.
It didn’t just stop there. Recall that BUA Group, a member of the steering committee of the Coalition against COVID 19, (CACOVID) responded to a statement issued by the private sector-led group on 8 February 2021. The press release issued by BUA stated that the company, on its own, purchased one million doses of COVID-19 vaccine for Nigeria. Abdulsamad claimed that his group, BUA, solely made the purchase of the COVID-19 vaccines for Nigeria after other members (including Dangote as a top member) were offered the opportunity and they declined.
According to the statement issued by BUA, “This payment was made immediately after the meeting, and BUA transferred the money to the CBN in order to meet the deadline. However, with this development by the CACOVID operations committee, we now have just cause to believe that some members of CACOVID are not happy that BUA took this initiative in the interest of Nigeria and to ensure that the deadline was met to receive the one million doses of the vaccine next week.”
Keen observers speculate that the BUA Group’s chairman statement, that some members were not happy that his company took the initiative, were direct shots at Dangote who is one of the top three heads of the steering committee for CACOVID.
The BUA chief has also constantly decried Dangote’s monopolistic inclination and had allegedly written petitions to the current President Muhammadu Buhari, detailing how policies of successive governments over the last two decades have inordinately favoured his archrival.
Outside the business world, both Dangote and Abdulsamad appear to be in good terms, even if it is for the cameras. Abdulsamad was invited to the wedding of Dangote’s daughter in 2018.
In March last year also, Dangote in what was tagged a “billionaire meet”, visited Abdulsamad at his BUA headquarters, on Victoria Island, Lagos.
After the meeting, Abdulsamad took to his social media handle to stream about his new found friendship. His words: “It was an honour for me to receive my friend and brother, Alhaji, in my office today. I share his vision and aspirations in transforming and industrialisng our beloved country, Nigeria”.
Read Also: The Nigerian Sugar Master Plan: How the Leading Players Have Fared
Needless to say, competition as earlier mentioned is good for any market. Competition from different companies and individuals through free enterprise and open markets is the basis of any capitalist economy. When firms compete with each other, consumers get the best possible prices, quantity, and quality of goods and services. Companies are encouraged to compete so that both consumers and businesses can benefit. It removes monopolies and gives room for innovative ideas within the market.
Dangote and Rabiu’s combined 850,000 bpd oil refinery would serve Nigeria’s economy in many beneficial ways. With the combined refinery, the country is expected to become a net exporter of fuel and other petroleum products within the next two years. This would impact on the naira as it will increase foreign reserves.
If the business rivalry between Dangote and BUA would offer Nigeria and Nigerians so much benefits, then nobody should mind such “rofo-rofo” experiences once in a while, provided things never get out of hand, and will not impede growth or drag the nation to the bottom of the ocean at any given time.