Debate over Dangote Lamu refinery exposes a society trapped in small things that personify mediocrity

It is ridiculous that in an economy that has suffered the exit of several high profile companies in the recent past people are arguing on whether or not a multi-billion company should set shop in the country. More troubling are some of the arguments that are been advanced to stop the entry of the Dangote East Africa Petroleum and Petrochemicals into the country.

Right from the outset, this column holds the view that this company should have been let in as early as yesterday for two main reasons. First, we have consistently advocated for the government to create an enabling environment for such quality investments to come in and to stop the bleeding of multinational corporations out of our domestic economy. Secondly, it is both a professional and moral duty to argue matters of public interest from an objective point of view as opposed to sectarian political interests. 

It is quite unfortunate that professional ‘goonism’ is been deployed to mislead the publics as opposed to evaluating the proposed investment on its own merit. If we argue for a case for public interest, it is fair to accept that public interest is not just when we oppose the excesses of government. A project proposition that promises to transform an entire county, community and the nation at large also presents us with a different type of public interest.

First, Dangote’s investment in the country is a private capital flow as opposed to other public finance models like user fee charges for Public Private Partnerships or securitizations programmes of public levies. This fact alone makes certain demands (especially by opposition political figures) for the government to make public the imagined contract with the investor look very foolish.

The role of government in private capital flows is purely of an enabler through guarantees to protect property rights of the investor(s), provide requisite permits or licenses, ensure environmental safeguards and if need be, provide incentives like tax holidays as sweeteners to accelerate such capital flows. In return, the government is eased of the pressure over unemployment from direct job injections and indirect jobs through the related value chains, and tax revenues in the long term.

Second, this project is located in an area already gazetted as a Special Economic Zone (SEZ). A simple google search would confirm that Lamu Special Economic Zone was officially gazetted on September 27, 2024 vid Kenya Gazette Vol. CXXVI No. 173, legal notice No. 149 of 2024. The gazetted land area is approximately 28,140 hectares (or 69,535 acres) in order to boost trade and support the LAPSSET corridor.

Benefits to investors on Kenyan SEZs include both fiscal and tax incentives. Corporation tax rates for the first ten years is at 10 per cent, 15 per cent in the next ten years, and 30 per cent thereafter. Investors are allowed 100 per cent capital expenditure claims on buildings and machinery, withholding tax on dividends to non-residents is exempt, with royalties, interest and fees also exempt for the first ten years. Indirect tax benefits include full exemption from Value Added Tax, import duties, excise duty and Import Declaration Fee on imported production goods.

Other benefits include one-stop-shop services on licensing, labour processing and utility connections under Special Economic Zones Authority (SEZA), liberalized foreign exchange regime with no exchange controls and free profit repatriation, and freedom from specific local government licensing fees and rent controls.

Currently, there are at least 33 SEZs comprising of 24 private zones and 9 public zones. Lamu therefore is just one of the many places where investors enjoy similar benefits. The strategic advantage for Lamu, Dongo Kundu in Mombasa and Vipingo in Kilifi is access to ports. This makes them very attractive to large high volume industries. Thus, questions about what agreements were signed or arguments for land compensation are foolish at best.

The fair question to ask here is: why do governments all over the world establish SEZs? Is it for ornamental purposes or are they not meant for this very purpose Dangote is doing in Lamu?

Market safeguards

Third, as a private and publicly listed company, the Dangote Group of Companies has outgrown even any private greed of the man as a proprietor and investor. Publicly listed companies have adequate market and regulatory safeguards to limit certain monkey businesses, even with presidents of the countries they invest in.

It is strikingly curious why critiques of this project conveniently ignore that not long ago, Dangote was in town for a separate high-profile cement production adventure. Asked why he abandoned the investment in a media interview, he unambiguously said that they do not pay kickbacks to invest in a country. He left no doubt that such a demand come from the highest office in the land then. The question again here is: why do we want to belief in our own version of truth and ignore words coming from the horse’s mouth?

The naysayers here fail to understand that at certain levels, companies outgrow even individual ambitions of their proprietors. Many of us seems to measure Dangote’s adventure into the country within the prism of Kenyan tender-prenuership culture, where entrepreneurship exists mainly to bleed public coffers.

This column has consistently argued that it is a big economic anomaly to have billionaires without any known industries associated with them, except their political or government connections.

Fourth is the scale of capital injection into the domestic economy and long term benefits. According to World Bank and other economic indicators, gross domestic savings in 2024/25 in the country were approximately US$16.19 billion (about sh.2.088 trillion at current exchange rates). This translated to about 12.5 to 13 per cent of the Gross Domestic Product.

Thus, the Dangote refinery is injecting more than our total annual domestic savings through a single project. Who, in their right mind, opposes such capital inflows no matter our political differences?

Fifth, the investor has made it exclusively clear how the project will be financed. According to publicly available information, the project is financed 30 per cent equity and 70 per cent debt backed by internal cash flows.

As at the time of writing this article, the company’s Initial Public Offering (IPO) is selling across different African capital markets to raise the equity to be invested into the country. These shares have been made available to Kenyans who want to own the company to invest.

Instead of imagining secrete deals with big people in government, why not just buy the shares and be part of the bonanza? Besides, the largest component of this project will be financed through debt sourced from international financial markets. If we have normalized our kangaroo type of behaviour in our financial dealings, why do we falsely imagine that international financial markets operate under such low standards?

For anyone who seeks money from global financial markets, they are bound by very high ethical standards, enforceable without fear or favour of even the most powerful amongst us. These markets are not loyal to any president or kings -the only standards that apply are those of the markets themselves.

Finally, I have heard certain professionals argue that an oil refinery is a strategic national asset. The government-owned refinery, Kipevu at Changamwe, collapsed on September 4, 2013. Reasons for collapse are listed as outdated technology of 1960s and economic inefficiencies.

What then, is this national interest that we are trying to protect that did not exist over the past 13 years that we have not had a government-owned refinery? Have we all of suddenly become too cleaver again?