Dangote’s $5 Billion IPO Sets a New Milestone for Africa’s Financial Markets

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JIMMY MOYAHA: A few weeks prior, we explored the potential for Dangote Petroleum to pursue a public listing.

Initially, the London Stock Exchange seemed to be their target; however, recent insights indicate that Nigeria’s stock exchange might be their main listing platform, with Kenya and South Africa possibly hosting secondary listings or reaping benefits from the primary one.

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We will discuss what this could mean for the African landscape, particularly in light of a potential IPO’s magnitude.

I’m joined by Craig Morkel, chair of the South African Oil and Gas Alliance’s Gas Economy Leadership Group, to delve into this further. Craig, it’s a pleasure to have you back on the show; thank you for being here.

This might represent the largest IPO Africa has ever seen, with preliminary valuations of Dangote Petroleum around $40 billion after a recent private stake deal.

It’s anticipated that approximately $5 billion could be raised through this IPO. Could you shed light on its significance?

CRAIG MORKEL: Thank you, Jimmy, and to your audience. This is far more than an IPO; it signifies investor confidence not just in Dangote Industries but in the broader African industrialization through energy infrastructure like this refinery.

A successful IPO has the potential to attract both foreign and local investments, including pension funds from South Africa. We hope Mr. Aliko Dangote, founder and CEO of the Dangote Group, considers listing on the Johannesburg Stock Exchange as well.

This investment scale holds substantial global importance, addressing supply chain disruptions stemming from global challenges like pandemics or geopolitical conflicts like the Strait of Hormuz closure.

Lowering the distance from supply to demand mitigates risk and reduces transportation costs.

This asset class is particularly noteworthy; it’s not just a refinery but a critical infrastructure that Africa desperately needs and deserves support for.

It would represent confidence in Africa’s industrial capabilities on an unprecedented scale.

Should they proceed with building a refinery in Kenya, it would enhance supply security across East Africa and bolster interconnected infrastructure, including roads and rail to regions such as South Africa.

JIMMY MOYAHA: Craig, you emphasized ‘investable infrastructure.’ South Africa has committed at least a trillion rand toward infrastructure development. Let’s explore this concept further. What does ‘investable infrastructure’ entail for Africa?

The continent is in dire need of infrastructure investment; although some areas are progressing, this type of IPO could illustrate the characteristics of viable infrastructure investments.

CRAIG MORKEL: Absolutely, Jimmy. We’re talking about a going concern here.

This isn’t a fledgling venture; it’s a verified revenue-generating entity. That makes it attractive, whether or not it goes public.

You pointed out the 6% stake acquisition indicating a valuation for this established asset. That’s encouraging.

However, I must voice a concern. We haven’t had access to their financials since it’s a private company.

Once it’s publicly traded, we’ll have the opportunity to examine the financials, and investors will conduct thorough due diligence. I encourage the Dangote Group to ensure all necessary documentation is prepared to foster investor trust. Mr. Dangote has considerable experience in attracting investments, so I believe he’s aware of this need.

This established entity has room for further growth. A greenfield project in Kenya wouldn’t be as daunting as it might seem due to the existing demand.

We can compare costs: can a Kenyan refinery produce products at a lower price than imports?

We’re not discussing textiles or plastics that can be sourced cheaply elsewhere. This involves resources that can serve as raw materials in Africa, undergoing various production phases.

We often overlook our daily dependence on the oil and gas value chain, especially regarding everyday items derived from these resources.

This shift will facilitate a move away from less sustainable options like coal and biomass, particularly for the 600 million Africans lacking access to clean energy.

This transition is crucial; it will allow individuals to access energy more reliably and sustainably.

Despite contributing a mere 1% to global greenhouse gas emissions, Africa must still pursue growth responsibly. Its emissions could rise to 3% without causing alarm.

Some institutional investors are hesitant to finance fossil fuel projects; I encourage them to reconsider this position during our transitional phase and recognize the potential for emission reductions compared to current scenarios.

As long as gradual emission reductions are in line with national commitments—like net zero targets set for 2050 or 2060—we can manage this transition effectively.

Abrupt changes without adequate preparation can result in problems witnessed globally, such as blackouts and market fluctuations due to reliance on unstable energy sources.

JIMMY MOYAHA: This dialogue regarding energy security and the necessity of investable infrastructure in Africa underscores the significant potential of the Dangote Petroleum Refinery and Petrochemicals operations as they aim to list on the Nigerian Stock Exchange and possibly others.

This IPO could signify a transformative moment for Africa’s development and capital markets, paving the way toward making the continent more attractive to investors.

We’ll wrap up our discussion here. Craig Morkel from the South African Oil and Gas Alliance’s Gas Economy Leadership Group has joined us to share insights on the anticipated IPO of Dangote Petroleum.