Nigerian billionaire’s LSE-quote plan is watershed
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Nigerian billionaire Aliko Dangote is seeking a London listing for his $11 billion cement company. It is a watershed moment for Nigeria, and for Africa. There are significant governance hurdles, and Dangoteās plan to build a pan-African aggregates champion isnāt without risks. But the prospect of a FTSE 100-sized Nigerian company is worth celebrating.
Several years of strong economic growth, powered by the commodities super-cycle, have renewed investorsā interest in the worldās poorest continent. Africa has seen false starts before, but the rise of China, which has been investing heavily in the region, raises hope that Africaās economic development might be getting some heft.
For investors, it is not easy getting focused exposure to sub-Saharan Africa. The usual suspects, miners like Anglo American and Lonmin, the insurer Old Mutual and brewing giant SABMiller – either have footprints that extend well beyond their home turf or have share prices that depend more on Chinaās economic growth than Africaās. Zambeef, the AIM-listed Zambian beef producer, and Lonrho, the recently revived rump of Tiny Rowlandās century-old African conglomerate, offer direct plays on the continent. But they weigh in at less than 2 percent of Dangote Cementās expected market cap.
While Nigeria has a poor reputation, Dangote is a company which could find good investment demand. It would easily be big enough to qualify to membership of the FTSE 100, though it remains to be seen whether it will comply with all of Londonās index-inclusion criteria.
After recent debacles at the likes of ENRC and Bumi, corporate governance will be a red-hot topic. Aliko Dangote has said he would step down as chairman, however. The company is also likely to try to recruit experienced UK or European directors to supplement its largely home-grown board, which is well-regarded in Nigeria but less well known elsewhere.
There are ever-present political dangers and EBITDA margins, at 55 percent in fiscal 2011, are vulnerable. The scale of growth plan – Dangote wants to expand last yearās eight million tonnes of production capacity to 48 million tonnes by 2015 – is hardly without risk either. But if the price is right and the company meets Londonās corporate governance standards, Dangote could prove a breath of fresh air from a too-often troubled continent.