Posted on November 13, 2018
Many will agree that Dangote’s success is a product of monopoly capitalism but there should be no denying his business acumen. Whether his business practices are good for the country is another discussion. However, over the past few decades, Dangote Group has been able to reduce costs and improve efficiencies by focusing on vertical integration. The company derives cost advantage by reducing costs associated with activities in its value chain. By controlling factors that can impact the cost of activities in the company’s value chain, Dangote has been able to improve efficiency as well as profitability. The Group generated revenue in excess of $4 billion in 2017.
Dangote Agro Sacks Limited was created to produce bags for packaging goods produced by companies within the Group. The company also as in its group Dancom Technologies which provides IT services to the Group. It’s haulage services is handled by another member of the Dangote Group Dantrans Limited.
In 2013, the Group signed a deal with Chinese heavy duty truck company, Sinotruck, for the supply of 1,700 heavy trucks and 1,700 semi-trailers to expand its distribution network. Fast-forward to 2017, the company partnered with the same Chinese truck maker to set up a $100 million plant to assemble trucks and cars in Nigeria for local use and export.
Now, the company formed through the partnership Dangote Sinotruk West Africa Limited said it would increase its local input into the assembling plant to up to 60 percent and plans to roll out commercial vehicles soon.
The expansion drive, which the company says is part of its backward integration plan, is meant to enhance value addition and local content.
“The company has the plan to have welding & painting shops to fabricate & paint truck cabin & Trailers of different type so as to enhance local content of Completely Knocked Down (CKD) operation of commercial vehicle Manufacturing,” Group General Manager of the Company, Hikmat Thapa said during a facility tour of the Ikeja plant in Lagos by the Lagos State Commissioner of Commerce, Industry and Cooperatives, Mrs. Olayinka Oladunjoye.
He said having done with the phase one of the project, the Company has embarked on the phase two which has to do with adding of the facility for Cab welding, Painting & Trimming. He added that the third phase of the project expansion would be to add the facility that would be used to fabricate, Paint & Assemble different types of Trailer bodies, load bodies with dual & triple axles, Tipper bodies & tankers and so on.
He explained that Dangote Sinotruk has installed capacity to assemble and produce 15 –16 trucks per shift or 10,000 trucks annually and will create over 3000 different jobs across Nigeria.
“In next one year, we have on our agenda to assemble and fabricate Truck Cabins, different type of trailers, Tipper bodies and Tankers etc. in our plant to increase value additions up 40 – 60 percent.”
The Automobile company said it hopes to expand sales to all the neighbouring West African States saying “we are targeting to sell our products to ECOWAS countries in addition to fulfilling local market requirement.”
Dangote Industries own 65 percent equity in Dangote Sinotruk, while the company’s Chinese partner Sinotruk owns 35 percent.
The company is established to assemble and produce full range of commercial vehicles covering heavy duty truck, medium truck, light truck and other semi-trailers etc.
Although Dangote Group says the objectives of establishing Dangote Sinotruk West Africa Limited is to provide employment opportunities to Nigerians, improve local automobile industry, add equipment base and achieve technological advancement in Nigeria, there is more. If the Group was ordering 1,700 units of heavy trucks from Sinotruk like it did in 2013, it would be paying $78.2 million, 78.2 percent of what it invested to own 65 percent of the new company which has the capacity to produce the trucks Dangote Group needs.