IN an interview with McKinsey in 2015, Aliko Dangote said, “the big growth opportunities for Dangote Group are mainly on the south side of Africa”.
At the time, it seemed he had his eye on a few countries, with South Africa, Zimbabwe and Zambia on the watch list.
However, while progress was made in Zambia and South Africa, nothing materialised in Zimbabwe, despite his following up on the initial 2015 interest in 2018 as well. Dangote is now reportedly planning to visit Zimbabwe, ten years after the initial discussions, to try again to enter with a “US$1 billion investment”.
Will this investment happen? It is hard to say, as so many deals have fallen through in the past. But this time, there could be a little more incentive for Dangote to take on the risk.
Is Dangote more interested in cement or fuel?
Historically, when you think of the Dangote Group, you would think of cement, and the deals it has closed so far in Southern Africa have been cement-related. However, with the launch of its refinery in 2023, could the interest now be more to do with fuel?
For context, the Dangote refinery, located in Lagos, is the largest single-train oil refinery in the world, built to process 650 000 barrels of crude per day. It is hoped it will make Nigeria self-sufficient in refined fuel.
This is also what has driven up Dangote’s personal wealth in the last couple of years. The chart below from Forbes shows that Aliko Dangote’s net worth went up by over US$10 billion the year the refinery started operations. The significance of the refinery to Southern Africa is that Dangote has planned a 1,6-million-barrel storage facility in Walvis Bay, Namibia, that could reshape energy access across the region. The facility will target five primary markets: Botswana, Namibia, Zambia, the DRC, and Zimbabwe, which together consume more than 120 000 barrels of fuel each day.
- DPA, Varun in power deal
- Ease of doing business is everyone’s business
- ED commits to create investor-friendly climate
- Varun Beverages spreads wings
Keep Reading
Many countries in the region import fuel from the Middle East and Europe, facing lengthy shipping times and price volatility. This facility could supply 15% to 20% of Southern Africa’s current demand, potentially reducing the region’s US$10 billion annual fuel import bill. With Zimbabwe being one of the largest importers, and one which also doesn’t have many options, could this be the opportunity that has sparked Dangote’s interest again? Who knows, but it is worth watching either way. It may also give some hints as to how the government plans to ease investors’ concerns around de-dollarisation.
Delta’s dominance faces a new test
Everyone wants to crash Delta’s party. Last week, Varun Beverages, the PepsiCo bottler, announced its first push into alcoholic beverages, starting with distributing Carlsberg beer in Zimbabwe.
For context, Delta is the largest beverage manufacturer in Zimbabwe. The company holds the Coca-Cola licence in the country and also manufactures beer, a segment in which it has been particularly dominant.
Delta holds 96% of the market share in the beer segment that Varun is now targeting. Varun Beverages Limited is an Indian-listed bottler for PepsiCo, operating in 10 countries. Its markets include India, Nepal, Sri Lanka, and several African nations such as Mozambique, Zambia, South Africa, and Zimbabwe, which it entered in 2015. It is notable that the initial market where Varun is testing beer distribution is Zimbabwe. This indicates several key dynamics.
First, the risk-to-return trade-off in Zimbabwe is much more attractive than global markets might suggest. While RMB ranked Zimbabwe the Worst Investment Destination in Africa, for Varun, it appears to be one of the first markets worth exploring for this new product category. Second, Delta’s business must be inherently healthy. When you have both Innscor and Varun Beverages trying to enter a market aggressively (Innscor with its Nyathi beer brand and now Varun with Carlsberg), the unit economics of the business must be good. How will Varun’s move impact Delta? This may need to be unpacked in more detail, but let me leave you with a question that offers a hint.
Mukogo is a finance and strategy professional with over 18 years of experience and the publisher of Money & Moves, where this article was taken.
Varun entered Zimbabwe in 2015 to challenge Delta in the soft-drink market. Did Delta’s beverage sales volumes increase or decline from that point?
The answer: Delta’s soft-drink volumes between 2016 and 2024 increased at a growth rate of 7,5% per year, even outpacing other parts of the business.
Here is a fascinating paradox: dominant companies often grow when serious competitors emerge, rather than shrink as you might expect. Take Econet’s data business after Starlink arrived—the pattern holds.
Tinashe Mukogo is a finance and strategy professional with over 18 years of experience and the publisher of Money & Moves, where this article was taken.
