Dangote's oil corridor test sparks energy strategy shift

Dangote's approach in southern Africa comes as no surprise. He has recently finished the US$20 billion Dangote Petroleum Refinery in La...

Dangote's approach in southern Africa comes as no surprise. He has recently finished the US$20 billion Dangote Petroleum Refinery in Lagos — a 2,685-hectare site located in the Lekki Free Trade Zone, capable of processing 650,000 barrels of crude oil daily.

The wealthiest individual in Africa, Aliko Dangote, recently returned to Zimbabwe with a $1 billion investment plan, signaling he has the financial power to help President Emmerson Mnangagwa realize his goal of establishing a regional energy center.

Dangote, whose wealth is valued at $29.8 billion by the Bloomberg Billionaires Index, entered State House on Wednesday, almost a decade after a comparable initiative failed under the previous president, Robert Mugabe, who passed away, during allegations of corruption.

   

Last week, he presented a well-known package for Zimbabwe – involving cement and energy projects. However, this time, the businessman included a fuel pipeline connecting Walvis Bay in Namibia to Zimbabwe, an action that seems aimed at supporting Harare's regional oil distribution goals.

Dangote's approach in southern Africa comes as no surprise. He has recently finished the US$20 billion Dangote Petroleum Refinery in Lagos — a 2,685-hectare site located in the Lekki Free Trade Zone, capable of processing 650,000 barrels of crude oil daily. The company secured funding through loans amounting to approximately US$5.5 billion, with about US$2.4 billion already repaid by mid-2024.

"We have recently entered into a pact between Zimbabwe and the Dangote Group for multiple investments across areas like cement production, electricity generation, and a pipeline to transport fuel products," Dangote said to journalists.

   

There have been numerous changes since we arrived compared to the present. The government is stable; there is significant openness.

Dangote's renewed effort follows a decade since his initial attempt, which failed due to bureaucratic hurdles and tariff conflicts. This time, the billionaire is focusing the pipeline as a key element of a larger regional logistics strategy.

In Nigeria, The Business Post supported Dangote's initiative, while The Punch noted that the investment "includes Zimbabwe in Dangote's range of locations from Ethiopia to Zambia."

Reuters mentioned that the pipeline would "support the Dangote Group's efforts to build the largest oil refinery globally."

   

From Nigeria to Namibia, Dangote is establishing an oil distribution network to supply products from his refinery throughout Africa. In Namibia, his company is installing 1.6 million-barrel storage facilities for markets in southern Africa.

Zimbabwe's position between Mozambique's Beira port and the rapidly expanding markets in Zambia and the Democratic Republic of Congo positions it as a key connection within this trade route. In the previous year, the Zimbabwe Independent stated that Zimbabwe and Mozambique were in the process of finalizing a US$15 million agreement to increase the capacity of the Beira–Feruka pipeline from 2.19 billion to three billion liters per year.

Gloria Magombo, the permanent secretary of the energy ministry, stated that the expansion, led by the National Oil Infrastructure Company (NOIC), is part of a long-term strategy to achieve five billion liters annually and establish Zimbabwe as a regional center for fuel distribution.

The motive behind expanding our capacity is due to increased internal demand fueled by economic activity, and we are also aiming to establish the regional market as our primary supply area.

The Mozambican portion of the work had already started, as Harare completed its stage of the project. The NOIC upgrade comes after the development of new energy infrastructure, such as an ethanol storage plant in Msasa, Harare, and an LPG storage facility in Ruwa. Both NOIC and Fossil Contracting, which built the LPG plant, are part of the Mutapa Investment Fund, which oversees more than 30 state-owned companies.

Dangote's closeness offers Zimbabwe fresh possibilities. Harare is looking for private investment to finish its pipeline extension and link new storage facilities to regional markets. His involvement could bring in that funding while integrating Zimbabwe into a continent-wide oil distribution network.

Dangote's 2015 offer involved a proposed

2 800MW coal power station in Sengwa via Black Rhino Group, an infrastructure company supported by the US private equity firm Blackstone. At that time, Dangote's associates criticized "bureaucratic delays and demands for facilitation payments."

In 2018, Josey Mahachi, who represented him in Zimbabwe, stated to The Financial Gazette: "To invest in Zimbabwe, you needed to bribe certain individuals, a practice that Dangote refuses to engage in."

The incoming administration claims the situation has evolved — and Dangote himself has confirmed this. However, experts caution that issues related to governance, ownership, and tariff transparency could still pose challenges. Despite this, they generally view it as a significant shift for Zimbabwe. This reflects the confidence analysts have in the billionaire's statements.

Stevenson Dhlamini, an economics professor at the National University of Science and Technology, described the oil pipeline initiative as a "masterstroke of economic geography."

For a country without coastal access like Zimbabwe, expanding its pathways to international markets is a crucial strategic goal. Traditionally depending on routes through Mozambique and South Africa, this new pipeline to Namibia's Walvis Bay introduces a completely new trade route facing the Atlantic. This is not merely a pipeline; it serves as the foundation of a new economic corridor. It strengthens regional integration along an east-west axis, promoting trade and mutual dependence between Zimbabwe and Namibia," he stated.

Dhlamini mentioned that the pipeline could generate "positive network externalities, encouraging the development of logistics, services, and emerging sectors along its route."

"By offering a different pathway for essential energy imports, it minimizes logistical risks and strengthens Zimbabwe's economic independence. Dangote's courageous step has genuinely created an opportunity. He has started a fresh story for Zimbabwe. If his initiatives are carried out successfully, it will set a successful example, showing that substantial, long-term investment can succeed in the country. This would have a greater impact on rebuilding widespread investor trust than any policy announcement alone. The process has started, and the effective execution of these projects will be the real indicator of a new economic era in Zimbabwe led by the Second Republic," he added.

Tapiwa Sibanda, the Strategy Director at Trade Winds, stated that Dangote's pipeline plans align well with Zimbabwe's goal of establishing itself as a fuel distribution center. However, he emphasized that success would rely on clear guidelines regarding pipeline ownership and cost recovery.

Rudo Moyo, an energy economist with Economic ViewPoint, stated that the agreement could reshape Zimbabwe's role in regional energy distribution, "but officials need to steer clear of policy changes that previously discouraged private sector involvement."

Chenayimoyo Mutambasere, an economist with the Africa Centre for Economic Justice, stated that a new fuel pipeline into Zimbabwe could bring significant economic benefits by lowering transportation expenses, enhancing supply stability, and alleviating strain on foreign currency expenditures.

"Pipelines continue to be the most effective and economical way to transport oil products across great distances, and in the long run, they can greatly stabilise the local fuel market," Mutambasere stated.

Nevertheless, any discussion regarding Dangote's planned investment needs to be tempered by the ongoing absence of transparency and legislative scrutiny that typically accompanies major infrastructure projects in Zimbabwe. Until there is complete openness about the funding setup, ownership framework, repayment terms, and the details of the contractors engaged, it will be difficult for the public, let alone experts, to develop a thorough and well-informed understanding of the proposal.

This issue is not hypothetical. Zimbabwe has faced this situation before. In 2012, a comparable pipeline plan was introduced by the then Minister of Energy. The initiative failed when Emmerson Mnangagwa opposed it, particularly pointing out the lack of parliamentary review and the unclear contracting procedures.

Mutambasere stated that the 2012 precedent highlighted the importance of having well-defined governance structures, competitive bidding processes, and complete legislative supervision prior to entering into any binding agreements.

It is also crucial to set realistic expectations. Investments in pipelines do not generate immediate profits. These are large-scale projects that require significant capital and have extended payback periods, typically ranging from 15 to 25 years. Their financial success relies on consistent flow, regional collaboration, and a stable regulatory environment.

If the project supported by Dangote is organized in a clear, fair manner and under robust parliamentary supervision, an extra pipeline might offer real economic benefits. It could:

l Lower fuel transport expenses in comparison to road transportation;

l Enhance the dependability of supply;

l Reduce the likelihood of international supply chain interruptions;

l Enhance regional trade integration; and

l Enhance manufacturing efficiency through ensuring consistent fuel supply.

In brief, the possible advantages are genuine, but Zimbabwe must avoid repeating the errors of previous unclear agreements. A project of this magnitude needs to undergo complete public, parliamentary, and regulatory review to ensure it benefits the nation rather than private interests.

Aliko Dangote US$1 Billion Investment Proposal Emmerson Mnangagwa Robert Mugabe

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