TotalEnergies-Dangote deal reminds us that start-ups can become giants of business

Nigerian multinational industrial conglomerate Dangote Group’s CEO Aliko Dangote. Photo: AFP

Nigerian multinational industrial conglomerate Dangote Group’s CEO Aliko Dangote. Photo: AFP

Published May 21, 2024


By Andile Masuku

Lately, I’ve been reflecting on the under-explored intersection of the venture capital (VC)-backed tech start-up economy and the traditional business world.

As if on cue, one of the highlights of the recent Africa CEO Forum annual summit in Kigali, Rwanda, was a panel featuring Aliko Dangote, the founder, chairperson and CEO of the Dangote Group, and Patrick Pouyanné, the chairperson and CEO of TotalEnergies, moderated by CNN International correspondent Larry Madowo.

During their conversation, Dangote and Pouyanné revealed that TotalEnergies, one of the world's seven major oil companies, has struck its first fuel supply deal with the Dangote Group’s Dangote Refinery. Founded by Dangote in 1978 with a $3 000 (R54 771) loan from a kind uncle, the Dangote Group is now West Africa’s largest multinational conglomerate.

The Dangote Refinery, reportedly the largest single-train refinery in the world, began producing diesel and aviation fuel in December 2023 shortly after receiving its initial crude deliveries. It boasts a Nelson complexity index of 10.5, making it more complex than most refineries in the US (average 9.5) or Europe (average 6.5).

The Nelson complexity index increases with the number and capacity of chemical procedures conducted after distillation. Fun fact – the largest refinery in the world, the Jamnagar Refinery in India, has a complexity of 21.1.

This panel conversation spotlighted the type of “boring”, big-ticket business often considered outside the flashy realm of “Startup Africa”: a hardcore capitalist enterprise that, for better or worse, plays a significant role in shaping Africa’s socio-economic futures.

Regardless of one’s enthusiasm for the potential of tech to accelerate socio-economic progress in Africa, or the urgent need for technological innovation to combat climate change, it’s essential to consider the relatively mundane economic concerns that absorb a significant share of the strategic bandwidth of captains of industry like Dangote and Pouyanné and other powerful stakeholders, including governments.

Context for last week’s TotalEnergies-Dangote deal includes Dangote’s initial announcement of plans for the refinery in September 2013, when $3.3 billion in financing had been secured for the project. Nearly a decade later, after multiple delays and setbacks, the refinery now seems properly on track to deliver as envisaged.

Intra-African trade challenges

In the realm of industrial development and self-sufficiency, Dangote’s ambitions for Africa’s economic future seem visionary. With plans to revolutionise key sectors like petroleum and petrochemicals, he envisions a continent on the brink of self-reliance. However, beneath this ambition lie the harsh realities of suboptimal intra-African trade, a challenge Dangote himself acknowledges.

Some of Madowo’s pointed questions highlighted the complexities of regional co-operation and trade in Africa. Despite being Africa’s wealthiest individual, Dangote faces the inconvenience of making dozens of visa applications every year just to travel within the continent, let alone abroad. Despite his considerable prestige, he noted that he had less freedom to move around Africa than his co-panellist and fuel supply deal partner, Pouyanné. Awkward.

These basic realities underscore the barriers to economic integration, emphasising the need for consistent policy and framework development to enhance intra-African trade under initiatives like the African Continental Free Trade Area (AfCFTA). Additionally, security concerns, (timely and relevant) talent acquisition, and regulatory stability pose significant challenges to investment prospects and economic growth.

Dangote’s candid remarks on the unpredictability of government policies resonate with many entrepreneurs and business leaders grappling with the ever-shifting regulatory landscape in Africa. While he sees hope in initiatives such as Nigeria's Petroleum Industry Act, the path to regulatory certainty remains challenging.

Both Dangote and Pouyanné stressed the need for better governance and clear frameworks for infrastructure and regional co-operation. They acknowledged criticisms of their fossil fuel-leaning strategies, but emphasised the need for pragmatic navigation towards a more sustainable future.

They hold that while Africa’s potential for renewable energy is undeniable, realising that potential requires more than wishful thinking. Initiatives like the AfCFTA hold promise, but their success depends on addressing existing trade barriers and improving infrastructure. *deep sigh* I know…

Nevertheless, it’s difficult to discount the positive impact of Dangote’s strategic investments in key sectors such as cement, sugar, and petroleum refining on economic growth and development across the continent. Balancing traditional industries with emerging technologies, while ensuring sustainability, is no easy task.

Thankfully, with Rwanda offering citizens of AU, Commonwealth, and La Francophonie member countries free visas upon arrival for a 30-day visit, both Dangote and Pouyanné could at least enjoy the peace of mind of attending this year’s Africa CEO Forum in Kigali without visa hassles.

Andile Masuku is the co-founder and executive producer at African Tech Roundup and head of community at Africa-focused early-stage tech investor Founders Factory Africa. Connect and engage with Andile on X (@MasukuAndile) and via LinkedIn.