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The Dangote truck assembly plant: significance, potential and challenges

Aliko Dangote

It was recently announced that the Dangote Group had established a Truck Assembly Plant in Lagos with an investment of over $100 million dollars. According to the company, the truck plant was being established to save foreign exchange; serve the company’s needs for such trucks, for the country’s needs and potentially for export. It would generate employment opportunities for 3000 workers as it matures. It would initially have a 10,000 number assembly capacity. It would be subsequently expanded as demand increases. It is a joint venture between Dangote Industries Limited (DIL) owning 60%; and 40% held by the China National Heavy Duty Truck Company, (SINOTRUK), a business partner which it had patronized, purchased and imported trucks from over the years.

This project is significant and potentially catalytic but needs to be critically appraised in terms of its development trajectory, and guided historically and technically so that it will realize its full potential and not become an example of the failed assembly plants syndrome that has historically bedeviled Nigeria’s efforts to enter automotive manufacturing (not assembly) and the engineering industries sector in general.

The Group’s establishment of the truck plant is also part of its own evolutionary history. Over the past few years, the Dangote Group has begun processes of diversification of its areas of business investments in order to emerge as a truly complex and evolved conglomerate. This is in the same way that such conglomerates as Mitsubishi, Sumitomo, Honda of Japan and Samsung and Hyundai of South Korea and other such companies evolved from commodity trading to basic manufacturing then to engineering, heavy industry, telecommunications, software, high technology and other advanced research and development fields. This is the perspective from which to view the evolution of the Dangote Group over the past few years. It has progressively expanded its range of business activities from consumer goods industry to heavy industry. The consumer goods it manufactures include basics like salt, sugar, flour, pasta; it then moved into agro industrial production of rice, sugar and tomato; then to construction materials primarily cement.

From 2013 the Dangote Group began to move into the heavy industry sector through its investments in petroleum refinery, fertilizer and petrochemicals and gas gathering, processing and transportation. These projects and their products constitute a major subsector of the intermediate goods industry of the heavy industry sector. In the capital goods sector, the Group has a somnolent Steel plant in Oshogbo but in the context of the development of its refining-petrochemical and fertilizer complexes, it entered the high end Engineering, Procurement and Construction (EPC) field through its joint venture with Saipem of Italy, Saipem-Dangote, (E&C), Engineering and Construction which is involved in the construction of the Dangote Fertilizer plant. In addition, it also acquired a gas processing equipment manufacturing company, Twister BV of Netherlands to develop and construct Gas processing plants and stations for the Group’s East West Off-Shore Gas Gathering Scheme (EWOGGS) which is part of the refinery-petrochemical- fertilizer complex. These strategic technical relationships with SAIPEM and Twister BV indicate that the Dangote Group is gingerly moving into the engineering industries or capital goods sector with focus on engineering and construction and application technologies. But their ultimate value to the company, Nigeria and Africa is if the emergent Dangote engineering industry is domesticated within Nigeria as the source of design and manufacture of the all machinery and equipment.

Thus the establishment of the Truck Assembly plant is consistent with Group’s diversification history, plans and strategy of self development. This investment in the automotive sector is coming on the heels of what seemed like speculative news in 2016 that the Dangote Group had acquired some stake in the Peugeot Company of Kaduna in alliance with other investors. The status of that project remains unclear. However the establishment of the Truck Assembly plant is in many ways consistent with Dangote’s historical pattern of investment whereby he starts with the importation of finished products then moves to partial domestication through manufacturing with imported inputs as it did with import of raw sugar for its sugar refinery and flour for its pasta and noodle plants. The next phase is the movement to backward integration by establishing self-owned facilities and capacities for local sourcing as it is currently doing with establishment of sugar and rice plantations and coal mines, so as to become independent of imported inputs and achieve domestic supply of necessary raw materials or intermediate goods. This is probably the pattern that would be applied to the development of the truck assembly plant.

This is where it is important to recapitulate historical experiences and advance development perspectives on the failures and obstacles to Nigeria’s achievement of national domestication of technological capacitation system. In Nigeria, in the automotive sector for over 50 years both private sector companies such as UAC, BEWAC and RT BRISCOE with their assembly plants; and the Federal government through the Leyland Assembly plant in Ibadan; the Peugeot Assembly plant in Kaduna, the National Truck Assembly plant in Kano and the Volkswagen Assembly plant in Lagos have attempted to create and domesticate an automotive manufacturing industry. All these efforts have failed.

On the other hand, countries like Brazil, India, Pakistan and even Malaysia which entered this industry about the same time or later than Nigeria, all now have functional automotive manufacturing industries Not Assembly Plants. This is because unlike Nigeria’s hapless, unpatriotic, ideologically backward leaderships; these countries leaderships and planners understood that successful entry into engineering industries and the manufacture of machinery, equipment, parts and components is never a matter of absolute reliance on so-called Market Forces and foreign Investors and investments. Practical experience demonstrates that such indispensable catalytic industries can only be established, nurtured, fostered and realized by the state’s deliberate design of an autonomous national technology development blueprint of policies, programmes and strategies. This is then followed with practical implementation through robust and sustained investments in creating the necessary complimentary intermediate goods industries and the ancillary industries that supply the thousands of parts and components that are required in the automotive manufacturing industry as opposed to assembly plants.

Nigerian governments’ failed to invest in or vigorously promote the emergence of endogenous engineering tools, general machine and special machine tools industries and intermediate goods like flat and various steels, other metal types and engineering plastics that are required in automobile manufacture. The governments’ and leaderships naively assumed that its so-called technical partners would who possessed the technology would willingly and happily develop the Nigerian automotive industry through so-called “technology transfer.” It did not happen and today more than 40 years after the assembly plants were established, they are pale and technologically obsolescent carcasses of the original plants; and exemplars of the Nigerian state’s failure to foster and nurture national technology development.

In fact the Nigerian government in its recent policies and actions for the development of the automotive sector demonstrates that it has not learned the basic lessons that foreign “technical partners” of assembly plants are inherently unreliable in the establishment of any engineering or indeed any autonomous national technology industries. This failure of Nigeria’s national leaderships’ to understand the inherently logical self-serving objectives and non-development nature of so-called technical partners was revealed in the new National Automotive Industry Development Plan (NAIDP) of 2014 unveiled by the Federal Ministry of Industry, Trade and Investment. A cursory perusal of the document shows that it is essentially a militantly pro-foreign investors and profoundly anti-national development plan that would actually prevent the emergence of a national automotive manufacturing industry. It was based on the strategy of providing profuse tax incentives and rebates to attract numerous foreign automobile companies to establish assembly plants that the Ministry HOPES would ultimately become automobile manufacturers. This led to the influx of many assembly plants that import and depend on Semi-Knocked Down (SKD) parts and Completely Knocked Down parts (CKDs) for their assembly activities.

The officials of the Federal Ministry of Industry, Trade and Investment with smug self-satisfaction often gleefully and loudly announced that they had attracted numerous “Original Equipment Manufacturers” to establish assembly plants. The joy of the officials was probably because they felt they had fulfilled the Nigerian government’s new policy obsession with the attraction of so-called foreign investors and foreign direct investments (FDI) as the engine force of national development.

However, this writer considers this obsessional pre-occupation, as obeisance to the Fetish Of Foreign Direct Investments (FFDI). It is in practice a disempowering dogma and strategy of the national surrender and abandonment of self-actuated national development to exocentric forces that apart from their logical and natural pursuit of profit cannot possibly have any motive or desire to develop another country. To ascribe this to them is to abandon national self-responsibility for development. Thus the Ministry officials’ self-congratulatory and happy posture was essentially naïve, wrongheaded, and anti-national. This policy shows that Nigerian bureaucrats have become programmed agents of foreign domination of Nigeria. It also suggests that the officials and experts understand very little about the development of automotive manufacturing as parts of national engineering industries.

The establishment of viable national automotive manufacturing industries in developing countries usually requires the choice of a limited number of manufacturers who produce specific models of vehicles: cars, buses or trucks. This is accompanied with the creation of a comprehensive range of ancillary industries that manufacture the parts and components for the operation of the domestic automobile manufacturing industry. Their existence makes it possible to manufacture all standard parts, spares and components that can be replicated and used across the spectrum among different manufacturers, thereby fostering standardization, ease of manufacturing and maintenance of vehicles. It is for this reason that in developing countries and even in highly developed countries that manufacture automobiles there may be multiple models of cars, trucks and buses but the actual manufacturing companies are few.

In short, the Ministry with its policy of attracting a multiplicity of automobile assemblers is effectively creating an anti-development situation in which the local components and parts industry cannot service the manufacturers with standardized parts. This policy would thereby sentence Nigeria into permanent captivity to foreign SKD and CKD suppliers for the assembly plants. It is quite clear that the crop of leaders, bureaucrats and technocrats that Nigeria has today have learned nothing and understood nothing from the failure of the earlier assembly plants and technology development efforts in general.

Ehiedu Iweriebor, Ph.d (Columbia) is a Professor and former Chair of the Department of Africana and Puerto Rican/Latino Studies, Hunter College, City University of New York, USA.

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