Interview: Aliko Dangote
What impact do you expect power privatisation to have on the broader gas-to-power value chain?
ALIKO DANGOTE: The power sector is by far the largest consumer of natural gas in Nigeria and is expected to account for the bulk of domestic gas use in the future. Currently, gas use by power plants accounts for 70% of marketed gas production. Total gas production for use by power plants is just sufficient to fuel the available gas-fired generating capacity of 3382 MW. On the assumption that the country should aim to have at least 30,000 MW of gas-fired generating capacity by 2020, the total gas production for use by power plants will have to rise eight- to ten-fold. The investments required to finance an increase in total power station capacity from 12,000 MW to 40,000 MW are vast.
On a conservative estimate, this growth in capacity would require around $36bn. This will have considerable knock-on effects across the entire gas-to-power value chain. Everything from the regulatory framework and operating environment for both sectors to pricing and supporting infrastructure will have to be overhauled. Issues such as reducing flaring, increasing gas production for the domestic market, strengthening and expanding gas infrastructure, and reviewing the domestic gas pricing regime will have to be addressed comprehensively and in coordination with power sector development plans. Conversely, once these issues are addressed, we can expect to witness a considerable increase in investments throughout the value chain in the coming years as domestic and international capital, talent and technologies continue to seek out and exploit emerging market opportunities in an increasingly competitive and constrained global market space.
How can governments and private firms in Africa effectively reduce dependence on commodities?
DANGOTE: A large number of economies do certainly rely on commodities, which leaves them vulnerable to fluctuations in prices. However, research on structural transformation in select countries conducted by Harvard University shows that labour in a number of African countries is actually transitioning from primary and commodity industries to manufacturing and services. Even among those still in primary industries, productivity within these sectors seems to be increasing.
This transformation comes on the back of previous reforms made by governments in the 1990s to improve governance, education and economic stability. In Nigeria, the recent rebasing showed us that the national economy is more diversified than originally assumed.
The advantage of this transition is that activities such as manufacturing mostly involve larger companies that can more easily afford to invest in training and apprenticeship programmes. At Dangote Cement, for instance, we recently launched a training academy to develop job-ready technicians for our production facilities and we are seeing great results.
Secondly, even in the absence of formalised training, you find that learning occurs organically due to knowledge-sharing among employees in a firm or across similar industries. So while investment in training is always encouraged, you will find that there will be some organic learning and auxiliary industries that emerge as people discover the opportunity.
Are there any reforms that you believe might serve as a model for adoption in other African economies?
DANGOTE: It would be impossible to talk about public sector reforms and not mention Rwanda. Precisely what makes Rwanda stand out is that they have moved away from the idea that there is that one perfect policy that can act as a model. Rather, they have built an environment in the public sector where constant improvement is encouraged and any policy can be reevaluated if it is not delivering the intended results. There is no policy out there that is perfect and no specific reforms that can be transplanted from one location to another; however, building in mechanisms that you can continuously learn from and tweak is what makes the difference in Rwanda and other progressive countries.
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