Update: I like this comment from a LinkedIn user on the piece feed. ” Dangote wants to invest 50b USD outside Africa. I believe Ndubuisi’s post is about how best he can invest outside Nigeria (to achieve geographical diversification) and at the same time derive additional value from synergies with his investment in agriculture in Nigeria.”
The Dangote Group plans to invest up to $50 billion in U.S. and Europe in coming years, according to Bloomberg.
Africa’s richest man, Aliko Dangote, plans to invest $20 billion to $50 billion in the U.S. and Europe by 2025, in industries including renewable energy and petrochemicals.
The 60-year-old Nigerian cement tycoon aims to move into these territories for the first time in 2020 after completing almost $5 billion of agricultural projects and an $11 billion oil refinery in his home country, he said in an interview with Bloomberg Markets Magazine this month.
“Beginning in 2020, 60 percent of our future investments will be outside Africa, so we can have a balance,” said Dangote, who’s worth $11.1 billion, according to Bloomberg’s Billionaires Index. Dangote Group will consider investments in Asia and Mexico, but will focus mainly on the U.S. and Europe, he said. “I think renewables is the way to go forward, and the future. We are looking at petrochemicals but can also invest in other companies.”
Dangote Group will invest nearly $5 billion in sugar, rice and dairy production across Africa. But he does not want to get close to the telecom sector. Also, he is not necessarily interested in the broad technology startup ecosystem, except to take equity, but not to run the business.
[Dangote] When I look at telecom, for instance, I think that would be very tough for us. We are a little late. Some players have been in this market for 17 years already. There’s no way you can go and jump over somebody after 17 years of their hard work. So I think we would pass when it comes to telecom today. There are other businesses that we understand better.
[Bloomberg] Why not back more tech startups?
]Dangote] We can really do almost anything, but I think technology is not really one of the areas we want to go into right now. If I am going to invest in a tech company, I can buy shares, but it’s not something I want to go in and run. I am very passionate about industrialization—more than going into a tech company. It doesn’t make any sense for us to go direct there.
So, Dangote is not going to own technology companies and a telco. There is no problem with that. But Dangote may not know that he can actually do well in technology. He understands consumers through his companies and he can sell mobile devices to some of those customers. My recommendation will be for him to use part of that $50 billion to buy HTC Corp, the struggling Taiwanese smartphone maker. The position of this firm is explained thus, via a Bloomberg Newsletter:
Beleaguered smartphone maker HTC Corp. is exploring options that could include a full sale. The company, whose market value has slumped about 75 percent in the last five years, to $1.8 billion, is working with an adviser as it considers bringing in a strategic investor or unloading its Vive VR headset business, according to people familiar with the matter.
Right now, it is rumored that Google wants to buy this company. But do not hold your breathe, Google will do the Motorola deal – take the patents and sell the company. HTC cannot compete in North America and Google knows that. The once innovative phone maker has lost grounds and may not have the resources to recover in the age of Apple, Huawei and Samsung. Google cannot save HTC, either.
The report said HTC and Google are expected to strike a deal by the end of this year as the Taiwanese firm cannot bear any additional losses from its smartphone operations. The report gave the market a different perspective about HTC’s future development since the market had widely speculated that the company will dispose of its virtual reality assets.
Rationale for HTC Acquisition
Dangote is investing heavily in agriculture and many sectors. Having HTC will help it modernize the agriculture sector and create new demand for mobile devices in the farmers networks. That will help it build a new business, adding more value in the agricultural value chain. The farmers that work with his company could be the first customers of a new device business if he uses his scale and HTC technology to deploy integrated solutions that will improve farming and agricultural services in Africa. This is a growth area and only Dangote has the ability to execute. HTC will have Dangote companies as its first customers, and when that happens in a Group, good things materialize.
Upon acquisition, he should close HTC sales operations in Europe and America and focus the firm in Asia, Latin America and Africa. In Africa, specifically, he will add more value to HTC products, at both the design and the applications inside them. This is one way Dangote Group can engineer huge growth and diversify its portfolios. Some of the areas below are opportunities which HTC acquisition can help Dangote unlock in the agriculture sector. It can build an integrated farming network that will be the foundation of agriculture 4.0 in Africa. And Dangote can use technology to create new businesses in these sub-sectors.
- Agriculture insurance technology: making insurance products geared for farming
- Agro lending technology: delivering capital to farmers at scale supported by technology
- Farming ecommerce: expanding farmers’ markets by providing digital platforms for trade
- Pricing aggregation: facilitating trading through provision of produce price data
- Storage: African farmers struggle with storage of produce. Building solutions in this area will be catalytic
- Logistics: there is a huge opportunity to facilitate the delivery of produce from rural areas to urban areas across Africa with our poor road networks
- Digitization of transactions: from payment to tracing origins of produce, we have a huge need to digitize farming systems in Africa
- Commodity trading: building exchanges for trading commodities
- Others: there are opportunities like making digital tools farmers can use. These could include farm diary, mapping solutions, etc
Dangote Group wants to invest up to $50 billion outside Africa to diversify its business geographically. It has already planned to invest or rather investing about $5 billion in agriculture in Africa. I recommend that it buys HTC Corp to help it unlock more value in the investments in agriculture. Agricultural commodity is projected to become a $1 trillion business by 2030 in Africa, according to the African Development Bank. The data/equipment/tools around agriculture could be at least $150 billion by then. HTC will help Dangote Group play a major role in this emerging agro sector as mobile computing will anchor that data future. Though the firm may not have the experience to run technology-enabled businesses, selling mobile devices, once they are made in Taiwan, will not necessarily be different for a man that understands consumers and their taste trajectories. Once he brings HTC inside, he needs to close sales operations of HTC in U.S. and Europe since the firm cannot compete in the age of Apple, Samsung and Huawei. This acquisition will create value for the company.