Despite controversy handing coalfield to Dangote Cement a stepforward

18Mar 2017
Ani Jozen
The Guardian
Despite controversy handing coalfield to Dangote Cement a stepforward

PRESIDENT John Magufuli has made true his vow to solve all problems relating to Nigerian cement mogul Aliko Dangote setting shop in the country and, in a big way, handing a portion of Ngaka coal mining area to Dangote Cement (T) Ltd, operating arm of the top investor based in Mtwara.

With that step, it is expected that all remaining worries as to obtaining cheap energy for the cement factory, and other initiatives most likely up his sleeve as he has done in other countries, will be resolved. It means Dangote becomes a vital input to the industrialization process.

As noticed in previous discussions on the issue that has occupied some noticeable headlines since the start of the year, there was a difference between sentiments expressed by the president, that the problems boil down ‘deal hunters’ out to trick the Nigerian investor by hiking prices of goods and services for their own cuts, and reality.

As a matter of fact the contentions were institutional in character, such that had it not been for his own interventionist and direct administration sort of style, had the matter been left as institutional dispute it would have proceeded to court. There is ample evidence it could easily lead to a minimum of instability, or havoc.

There is at least one stakeholder who is unconvinced of the good intentions of the president and would have preferred institutional prerogatives to be observed in the matter, a coal mining firm that has reportedly protected the ‘special treatment’ that the president has in a sense given the Nigerian investor.

The coalmining firm that is identified as Australian holds rights to most the remaining area in the Ngaka area where some nine square kilometers of ‘coal space’ has been allocated to Dangote Cement. The firm says arbitrary re-allocation of mining licences was ‘unnerving.’

Intra-Energy Corporation (IEC) owns 70 per cent of Tancoal shares, while the National Development Corporation (NDC) owns another 30 per cent shares of the firm.

Whether NDC puts up 30 per cent of the capital for it to own shares or it has been allocated those shares some sort of compulsory localization of shares in seeking a concession in the mining zone is one thing.

But if the latter is especially the case, to ease out Dangote Cement as potential client to an independent coal user and producer in precisely the area allocated to Tancoal would be galling, sort of.

This is what the company is pointing out, but aren’t those stylistics in the issue? In the final analysis the issue at hand isn’t Tancoal profits but Dangote stability.

As can be predicted, tussles will be conducted in various stakeholder meetings as well as in academia as to what the problem is, and as a preliminary observation it is this ‘elephant in a china shop’ image of Aliko Dangote, that when he steps into a country he deals with the president directly.

He knows most of these rulers directly as he is unavoidable in stakeholder meetings at upper levels, having been routinely identified as the richest man in Africa.

He has single handedly changed the cement industry map in Africa, and is now reversing ingrained habits like importing most of the rice used in populous Nigeria, and sparing a surplus for export all the same.

Let it be said that the right way of going about things isn’t less privilege for Dangote or any other important company that the government may seek to ensure they conduct business in an agreeable atmosphere but the fact that plenty of natural resources or land generally is in government hands.

In that case it gives a monopoly to an Australian firm to mine coal and sell to local users, and when a powerful company bent on cutting costs surfaces, the government has to backtrack and reallocate the resources.

It isn’t the latter step that is wrong as some pundits seek to assert but the status quo that is at fault. If the land was privately owned by a local person or bought by an investor, the cement producer could purchase a part of his shares and determine prices he obtains for coal.

Thus the more industrial raw materials are in state hands the more the ‘deal making’ impulse, and thus conflicts.

In the current set up for instance, the now aggrieved stakeholder would evidently have preferred that the cement firm purchases coal from its operations at prices determined by the producer, or at any rate there would be room for negotiations.

That isn’t what the Nigerian investor had in mind, as he needs no coal seller to give him coal whereas his workforce can fetch it by themselves, and thus he would be in a position to determine the costs of procuring coal as basis of energy supply for the cement factory.

Yet if Tancoal was wholly in private hands and its licence over the coal area secure on account say of a prior purchase of land from a resident firm, Dangote Cement could have purchased its shares, to determine its pricing policies.

The matter at hand is in a sense administrative, that constituting a series of state-operated companies that wish to feel privileged in relation to investors in this or that sector where they become dominant service providers clashes with the fifth phase efficiency drive.

Monopoly service providers can afford to sit on their goods or services for as long as it takes until someone sees the sense and accepts to deal with them on their terms.

Being in partnership with the state is also expected to provide privileged status in such negotiations, and now the president reverses the tables; in negotiating with the Nigerian firm, reducing the zone held by Tancoal.

In actual fact they lost little in potential production, but hugely in anticipated profits. That is precisely where the position or discomfort by the president in his earlier remarks on the problems Dangote Cement faced in Mtwara is clearly appreciated, that the firm was having to deal with a whole array of service providers mostly linked with the state.

Whether it is land procurement, energy, water, improving the road network, landline phone connections and a welter of other services are all under state monopolies. And each of them would seek to levy a special price for Dangote Cement in order to attain a windfall profit in dealing with the big client!