Yesterday, the Minister of Power, Works and Housing, Mr Babatunde Fashola, revealed that the Federal Executive Council has approved a proposal by a Dangote Group subsidiary to reconstruct a road between Obajana and Kabba using cement. After giving the usual PR line about how it is a demonstration of the government’s resolve to drive infrastructural development and reduce the amount spent on road maintenance by partnering with the private sector, he then disclosed that in return for this gesture, Dangote will retain 30 percent of his company’s income tax for some years.
For some years.
The implications of this pronouncement are almost too large to summarise but in essence, Dangote is being given tax reliefs to the sum of 30% of liable business income tax for an unspecified period of time. This huge tax rebate comes in return for constructing a road which is approximately 49km long.
Incidentally, this road happens to lead directly to the Dangote Cement Factory in Obajana. According to local residents and people familiar with the area, the road deteriorated in the first place because of the constant movement of heavily laden Dangote Cement trucks ever since the Obajana factory opened. Better still from Dangote’s point of view, the road will be constructed using Dangote Cement, which is essentially a huge advertising opportunity and a chance to showcase the superiority of cement-based roads over Nigeria’s laterite-based roads. If and when the gambit pays off, Nigerian governments will be sold on using cement to construct roads, and guess who Nigeria’s largest cement producer is…
Now Aliko Dangote is a very intelligent businessman with an exceptional knack for pulling off great deals and getting his way in an assuming, under-the-radar type of way. Over decades of existence, he has grown his trading business into a continental business empire spanning cement production, construction, agriculture and food processing amongst other things. This has not all been completely down to sheer business acumen though. A very important (and some even insist the most important) reason for his sustained and consistent success is his closeness to successive governments across both military and civilian administrations.
From the days of Shehu Shagari to the administration of Goodluck Jonathan, he has maintained a close and cordial relationship with the corridors of power, and this relationship has been crucial in his business expansion endeavours. It is well known that during the presidency of Goodluck Jonathan, the growth and success of the Dangote Group was enhanced exponentially, and in fact the growth of Dangote’s fortune was used as a campaign point by the ex President who stated on more than one occasion that Dangote’s inclusion on the Forbes 100 list was due to his favourable economic policies.
Dangote’s success in converting Nigeria from a net importer to a net exporter of cement has rightfully won him plaudits in both economic and political circles. His emphasis on production over importation and distribution is probably the most positively significant shift in the Nigerian economy over the last decade. He is also Nigeria’s largest private sector employer of labour and a symbol of what is possible for Nigerian entrepreneurs with vision and creativity.
In the midst of all this however, it would be foolish to lose sight of the basic fact that in business, the objective is to extract the maximum possible value for the minimum possible input. Given the opportunity, any business person will exploit loopholes and opportunities created by lack of capacity, insight or competence by a government. To those in power, concessions like those announced yesterday may seem like little more than a little favour for a friend or a gentle pat on the back. However they set a dangerous precedent and they also raise a lot of questions.
First of all, for how long exactly does this tax relief last for? “Some” years as announced yesterday comes across as deliberately vague and evasive. What is the definition of “some” years? Three years? Five years? Ten years? Thirty years? Under what part of the Tax Code was this arrangement sanctioned? Was it the Rural Infrastructure Levy? Or was it just an off-the-cuff decision reached behind closed doors away from scrutiny? Does the tax relief apply to a specific Dangote Group subsidiary or to Dangote Group as a whole? The people have a right to know.
Does the Federal Government have no expectations of business people regarding Corporate Social Responsibility? Why is Dangote Group essentially being paid to reconstruct a road that its business destroyed, while getting to advertise the effectiveness of its 42.5 grade cement in the process? Does Dangote exert that much power and influence over Federal decision-making? What is the government’s plan to leverage Dangote’s successful business empire for tax purposes, or are all Dangote investments to retain perpetual tax-exempt ‘pioneer’ status through the back door?
These questions are particularly important because they raise the issue of precedent. If it is established now that Nigeria’s national interest is secondary to Dangote’s business interest on this and similar issues, the time will come that Dangote will hold more power than the Nigerian government and will then be able to circumvent any regulation he wants. Any administration at that point will merely be the puppet face controlled by a multi billionaire private entity.
Dangote is a national asset and a credit to Africa. However, it is very important to maintain the separation of government and private enterprise. The two are supposed to be the proverbial parallel lines that never converge, complementing each other through enabling environments and tax revenue. So by all means encourage Dangote to purchase and manage privatised government assets to increase national productivity. By all means Dangote should be enabled to grow and add to the country’s tax revenue base.
Just don’t make the Federal Government subservient to a private business.
It will not end well.
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