What Dangote discussed with federal government on road construction – Group Executive Director
Mixed reactions have been trailing the statement by the Minister of Power, Works and Housing, Babatunde Fashola, at the Businessday Road Construction Summit, that the federal government was reviewing to a 10-year period a five-year limit on tax benefits he said the Dangote Group was enjoying, to offset the group’s investment in government road infrastructure. […]
Mixed reactions have been trailing the statement by the Minister of Power, Works and Housing, Babatunde Fashola, at the Businessday Road Construction Summit, that the federal government was reviewing to a 10-year period a five-year limit on tax benefits he said the Dangote Group was enjoying, to offset the group’s investment in government road infrastructure. The
Group’s Executive Director, Edwin Devakumar, in a chat with Daily Trust, puts the issues in proper perspective
What exactly is the situation on the talk about a tax review to 10 years for the Dangote Group?
To put the issue in a proper perspective, I will take a comprehensive look of what we are doing in this country towards business, what we have done in the past and what we are offering to do on the road issue.
The first concrete road we built was between Ilaro and Ibeshe in Ogun State. It is a 24km road and, at today’s cost, will cost around N8.7 billion, and we practically built it free of charge. We didn’t charge any government any money; we did it as a corporate social responsibility.
The second road which we have started doing is between Obajana and Kabba in Kogi State. This is a 44km road that will cost N16bn, and what we told the government was that we would take half its cost as our CSR and government can pay for the other half.
We gave government an alternative: offset it against our future tax and it could be recovered instalmentally over three years. So we have subsidised the cost by 50 per cent. But I am even losing interest on the three years offer because, today, if you go to the bank, lending rates for a strong company like ours will be between 21 and 24 per cent. You can imagine that in three years, I am losing another 50 per cent of the money on interest. At the end of the day, I may be getting next to nothing because the currency keeps depreciating. When the traffic gridlock worsened in Apapa, on the access roads to the port, it became frustrating to everybody. The Lagos government was so frustrated it contemplated banning all articulated vehicles coming in. But we decided to intervene by telling them to allow us do part of the work free of charge, to repair the road to ensure free flow of traffic.
The government agreed. We asked some fellow companies in the area whether they would be interested in contributing anything. Flour Mills Nigeria and some other players contributed some amounts of money. We are using our own construction company to do the road, which we are doing free.
How did all this lead to an agreement between you and the federal government to take the job beyond Apapa port access roads up to Oworonsoki?
The federal government came forward and said, ‘Since you are repairing that road, and this is the main motorway
of Lagos, and, of course, Nigeria, because Nigeria is an importing economy and Apapa and the Tin Can ports
are two key posts in Nigeria, and all the goods, containers, petroleum products and bulk cargoes go through those
critical roads, would you help us by doing a proper road up to Oworonshoki?’
We said, ‘Okay, we can do it but how are we going to work it out?’ We told the government to go for competitive bidding and we will take it up at a cost, 15 to 20 per cent lower than the lowest bid the government gets. But the government still
has cash flow and payment issues, so we said, ‘Fine, what we will do is to apply the same formula that we applied
on the Kabba road. We will recover our money over three years in installments against our future taxes.’ In
fact, the government won’t be paying us a dime; we are only offsetting cost over three years against our future tax payments. So, again, we are focused on it as more of a CSR project, offering to repair the road free of cost.
One needs to understand my president’s, Mr Dangote’s passion for working on the growth and development of Nigeria. He is so passionate about it. He will always say that if nobody comes forward to do certain things, it is his duty, his responsibility as a Nigerian citizen and that of the Dangote Group as a responsible corporate organisation to do them. And that was the philosophy that drove his offer to do the road.
What is the 10 years tax holiday controversy all about?
We were surprised when we read about the 10 years tax holiday. Tax holiday for what? Sometimes when my president gets frustrated, he says to me, ‘Your bible says Jesus was not recognized as a prophet in his own town. If prophets and Jesus would not be recognized in their own cities, I don’t blame people criticizing me and condemning me for doing things from which I am not benefiting.’
That’s how frustrating it is. You come forward to do something for the country and at the end of the day, you will be criticized. This is a company which has never gained tax credit, any concessions, any benefits in its entire business history. The philosophy that drives our business is that we should be able to sustain it without anything coming from the overnment.
How has the Dangote Group been able to survive government’s policy somersaults, especially in manufacturing?
We started manufacturing in 1992; we started with textile. Then we moved into packaging flour and sugar in 2000. Our first cement plant came up in 2005 to 2006 in Obajana; we did it with about $1.2bn. Before we started the factory, then President Olusegun Obasanjo called us, along with others, and said, ‘Why are you big
importers of cement when we have limestone and other raw materials?’ And the people in that meeting said, ‘We will put money into manufacturing, a long-term investment, and somebody will start bringing in cement and messes us up.’ But Obasanjo said, ‘Don’t worry, until the country becomes self-suffcient in
cement production, I will put a ban on importation of cement.’ By the time we were completing our factory, Yar’Adua got elected. In fact, before his inauguration, he came to Obajana as president- elect. After he took over, he said bagged cement should be allowed to come in and he opened it up totally. That year, if I remember, government gave out import licenses for more than 20 million tonnes of cement. The previous year, 7 million tonnes had been approved.
So if our business had depended upon government protection, we would have been ruined. Our business philosophy has always been not to depend upon government protection, government concessions, tax waivers and other benefits.
My president always puts out a challenge, ‘Anybody who is able to prove that I got any tax concession and waiver, apart from what my competitors are getting, I am willing not only to pay back, but to pay twice as much.’ He says it comfortably because we get what is available under the law. We have never gotten any special benefit just because we are coming to the market.
So we are not getting any special concession, let alone the 10 years holiday that the media reported. It is very painful to read that. We have grown this large because we have never looked up to the government for any support, otherwise, the next government would come up and totally mess you up.
They would say you were close to the previous government and these were the benefits you got.
His passion and love is growing his businesses with a view to empowering people one way or the order. He says to me, ‘At the end of the day, what am I going to do with my money? I just have to give more opportunities for people to work, to do business.’ We love criticism when it is genuine, because nobody is perfect. Unless your faults are pointed out, you can never improve in life. But when you are falsely accused, it is very painful.