First and foremost, it is essential to note that a different set of rules and mindset govern businesses and entrepreneurs that drive them. Some of the elements of those rules include profitability, efficiency, and sustained growth over long periods. The government and the drivers of the statecraft, in turn, pursue the actualisation of nationalistic economic advantages. The level of performance that they record on these will depend very much on their skills in discovering those hidden advantages as well as in the negotiations that are ordinarily deployable in unlocking them. Private entrepreneurs, therefore guided by these sets of rules and mindsets may act in ways that may appear illusorily inconsistent with the pursuit of nationalistic economic advantages.
There are three main areas where those critics consider that the Dangote Group erred in that decision. The first is that the Group’s proposed procurements of the 10,000 trucks deprive Nigeria of the opportunity to strengthen its automobile manufacturing or assembling capabilities. Meaning that the proposed 10,000 trucks if locally procured should give a significant boost to the local vehicle production or assemblage. The second is connected to the first and holds that the opportunity should go to the domestic industry either as revenue or fresh investments, to prevent the export of revenue or investment opportunities and other ancillary benefits such as employment and consumer income to another country. Thirdly, Nigeria is the source of the foreign exchange for these planned purchases. And given that Nigeria has been giving concessionary rates of foreign exchange to the group to enable their expansion of cement production operations in countries such as Tanzania and Zambia, their purchase decisions should consider the interest of the country. This third point is more like a moral persuasion for the group to remember and payback the good deeds that the government has done for it.
We can, therefore, summarise the three possible pillars of this condemnation. The first is the pillar of nationalistic interest which expects the Dangote group to fully consider that Nigeria needs to derive economic benefits from this purchase decision. The second is a compensatory action for a series of government-approved economic rent that the group enjoys. By implication, since the group has benefited a lot from government-sponsored economic rents it, therefore, has a moral obligation to consider the interests of the government in its commercial decisions as a way of paying back for those above-normal profits. Perhaps a third pillar is that the Nigerian automobile industry will likely supply the same quality of trucks at the price that the Indonesian supplier proposes to sell to the group.
The ability to pull off any economic rent from the government is an excellent demonstration of astute entrepreneurship. Therefore, while it might be true that the group has benefited much from the waivers of government, it is crucial to establish that those concessions were put in place to encourage investment in the country. Ordinarily, many countries would be willing to extend such waivers to tap into the scale of investment driven by the group. Like good entrepreneurs, the group knew the importance of the exemptions and the rent derivable from it and went for it. They probably drew the attention of the government to it as well as lobbied and negotiated the concessions. The government likewise needs to evaluate and appreciate the scale of the economic importance of the group procuring the trucks locally. Such an understanding should naturally lead to government negotiating with the group to pull the deal off. It is sheer blackmail if the government fails to consciously negotiate with the group to locally source these trucks and nurse the feeling that the group should know or recall the benefits from the government’s previous goodwill. Entrepreneurs think differently. You get what you negotiate. And if our government does not consciously identify the opportunity in this and settle for it, they should stop crying like an overfed baby.
Perhaps these critics also believe that those who run the Dangote Group are oblivious of the innate capacity of our automobile assembly industry. One unspoken assumption is that the Nigerian automobile industry will produce the same quality of trucks that will be procured and perhaps at the same price or cheaper. Even if both countries – Nigeria and Indonesia – can manufacture or assemble trucks if, given the opportunities, there is always a comparative advantage concern which influences the quality and price of the final output. The question therefore is, will Nigeria be able to manufacture the trucks at the quality specifications of the group and a competitive price? The answer cannot be in the affirmative given the disparities in the relative costs of doing business in both countries. No entrepreneur is prepared to incur preventable losses to make a group of industry operators happy. It is equally inconceivable that the Dangote group will prefer to procure the trucks from Indonesia at a higher rate when it is possible to get the same vehicles at a lower price locally. In addition to these arguments, one would expect the Manufacturers Association of Nigeria (MAN) as well as trade body of automobile manufacturers/assemblers to commence discussions and negotiations with the Dangote Group on the possibility of securing the contract rather than resorting to social media intimidation.
Again, it amounts to sheer blackmail to claim that because the group locally sourced the foreign exchange deployed in setting up its cement plants outside of Nigeria, then it is morally bound to conserve foreign exchange for the country. There are two strands in this argument. One strand stands on the morality of the Dangote Group compensating for rents derivable on the back of government waivers and other financial support that enabled it to expand its operations in Nigeria. However, that argument cannot stand because of the fact that a reasonable proportion of the profits from those plants outside of Nigeria are repatriable to Nigeria as foreign exchange earnings. Therefore, those economic gestures are long-term investments that will equally earn foreign exchange in return. The other strand of the argument seems to view economic activities involving the spending of foreign exchange as inherently undesirable. Something like this is the thinking that trade deficits are not right. Fortunately, apart from outright consumer goods or public sector imports, the average private-sector imports are usually on either machines or raw materials that are typically for production enhancement. Such imports, therefore, help in the creation of economic value as well as improvements in science and innovation capabilities. The intended procurement by the Dangote group falls within this category and should be commended rather than unnecessarily condemned.
To the extent that both the country and vehicle manufacturers see substantial opportunities in the prospective acquisition of 10,000 trucks from Indonesia by the Dangote Group, the onus is on both stakeholder groups to approach Dangote Group for negotiations. Ideally, it should not be the other way around. It is such negotiation that will throw up adequate compensations for the forfeiture of the opportunities that the Dangote Group might have identified in the procurement from Indonesia. It will also afford the local industry the opportunity to comprehensively appreciate the consumer preferences of the group in respect of the truck as well as determine whether indeed they can produce the specifications at competitive prices. And there is nothing that says that both parties must agree to assemble the trucks locally. There is also nothing inherently wrong if the Dangote group insists on the procurement of those trucks from Indonesia regardless of the persuasions. He who wears the shoe knows where it hurts. The group understands the challenges it faces and how the importation of the trucks from that country might be the best solution to dealing with that. The beauty of capitalism is the attendant distinctive freedom of choice in decision-making as long as it does not infringe on the law.
Frontpage February 19, 2018