Aliko Dangote Explains the No. 1 Reason Businesses Fail in Africa

With a net worth of $18.7 billion, Aliko Dangote remains the wealthiest black person. Despite his wealth, he is a prudent and strategic businessman who only takes calculated risks.

Since he believes in understanding the business first, he said, “I only enter a business that I can fully understand. I never enter a business that is not clear to me. The second principle is that I have to be able to become number one or, at worst, number two in that business.”

With this mindset, he has dominated every sector where he owns a company. Some of the sectors are manufacturing, where he produces the Dangote Cement, Dangote Fertiliser and commodities such as Spaghetti, salt and sugar.

This understanding and prospect in the oil and gas sector have seen him also invest in the industry. Currently, he is constructing an oil refinery plant that will be the largest in Africa and the world’s largest single-train facility.

With his vast experience in different fields that transcend the thinking of budding entrepreneurs, he told Mo Ibrahim during an interview why some are yet to attain such milestones. He attributed it to their money culture. Here is what he said.

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The cash flow conundrum

One typical quality of successful entrepreneurs is their spending habits. They have good spending culture that has become a tenet for them. So instead of spending, they think of how to multiply what they have earned.

This, in turn, has seen them have different mediums generating money for them. Though these seasoned entrepreneurs have come to this realisation, the budding ones are yet to understand it. This has led to the demise of many businesses.

For instance, Bkam, an Egyptian startup founded in 2012, initially grew and expanded into Saudi Arabia and the United Arab Emirates. During this period, the company recorded good finances with funding from investors like Ahmed Osman.

Despite the finances from different investors, the company ran out of funds in 2016 and shut down. Mahmoud Abdel-Fattah, the chief executive officer and founder, said that he shut down the business as the funds that were easy to get at the beginning were hard to get now.

He said, “An investor promised $500,000 and kept asking for documents for almost four months while we stopped fundraising from other investors. During those four months, I spent all the company’s money and my money. Then he disappeared. The e-commerce in Egypt was collapsing, so it was hard to recover quickly”.

Another startup is the Nigerian Mobile recharge and payment solutions platform, Zoto. Though the reason for shutting down was not made clear, one of the logical causes is the misappropriation of funds through freebies.

For instance, “When you download the app and recharge N100, you’ll get free N1000 airtime. But using a referral code will give you N1000, and the person also receives N1000. If you are the referral, and someone uses your code to recharge N100, you will also receive N1000, likewise the buyer.”

Aliko Dangote’s reason for business failure in Africa

Since the place of capital in a business cannot be overemphasised, it is good to checkmate how it is spent. Aliko Dangote, during his session with Mo Ibrahim, further buttressed this and said, “ Everyone, including the younger ones, needs to be very careful because one of the common issues with us Africans is that we spend our projected incomes.

Once you start doing business and business starts doing well, rather than for you to keep reinvesting the money in the business, you will start spending money and thinking that the profit will continue to come. Business has ups and downs, so you need to be very focused to decide on what to do with the profits, what not to do and how to do it.

Meaning you are not supposed to use your money to buy posh cars. This is because the luxury things take up your time which will not make you focus on your business. I do not have a holiday home anywhere, but I know people working for me. They have in London, but I don’t.” 

This strategic thinking has seen Aliko Dangote grow his wealth exponentially. So, allow your business to develop deep roots before considering expensive things.

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