Residing in Lagos, Nigeria, Aliko Dangote’s net worth of $16.5 billion makes him the richest man in Africa. But to get a sense of just how staggering this figure is, consider that Dangote’s fortune is 2.8% of Nigeria’s GDP. For comparison, the richest man in American History, John D. Rockefeller, had a net worth of 1.5% of the U.S. GDP in 1937. Take it a step further, and if an American had a net worth of 2.8% of the U.S. GDP today, they would be worth $500 billion. Which begs the question how what such as massive net worth built, and what lessons can be learned from him? 

1. Invest in what you know
It is one of the oldest investing lessons in the book, but it has been important for Dangote. Born in 1957, Dangote was raised by his Grandfather in Kano State, Nigeria, and was exposed to the entrepreneurial spirit at a young age as his Grandfather became one of the wealthiest men in the area selling commodities. 

After graduating from Egypt’s Al-Azhar University, the 21-year old Dangote took a $3,000 loan from his uncle and set out on his own; but he didn’t stray far from the family business. The loan was used to import rice, sugar, and cement from overseas at wholesale prices, and then sell locally at significant markups. This was a business that Dangote understood, and he was able to make the venture was an immediate success. By 1990, the Dangote Group “had grown into one of the largest trading conglomerates operating in the country.” 

2. Find company that create value
Dangote’s business flourished for 20 years, but after visiting Brazil in 1997, he saw the opportunity to shift directions and fulfill a dire need. Nigeria was at the end of a 15-year stretch of military rule, and the new president, Olusegun Obasanjo, had promised to protect local industry, which set the stage for Dangote to make his move:  

“In a country where imports constitute the vast majority of consumed goods, a clear gap existed for a manufacturing operation that could meet the ‘basic needs’ of a vast and fast growing population.” 

Beginning as an importer and trader of commodities, Dangote already had a strong distribution network, and this created a distinct competitive advantage as his company transitioned into manufacturing flour, pasta, and sugar. 

3. The power of brands 
The distribution network was an important piece of the puzzle, but as Dangote has said, “[T]o succeed in business you need to build a brand and never destroy it.” Whether he has a Donald Trump-like flare, or he wanted to capitalize on his name recognition built from his years as a commodities trader, Dangote branded the products with his name. 

Source: The Dangote Group Website

The brand would be built on high-quality products at affordable prices – which is something that works in Africa as well as it works everywhere else in the world -- and is now one of the most recognizable brands in Africa. However, building and maintaining this brand requires substantial investment. 

4. Strong capital allocation
If there is one thing that stands out about Dangote it is his ability to successfully plow money back into his businesses, and this has created the economies of scale that allow his company to sell products at cheaper prices than competitors. It’s something many CEO’s attempt to do, but only a handful of the Warren Buffett’s or Jeff Bezo’s of the world do consistently well. 

In 2000, the Dangote Group acquired a cement company from the Nigeria government, and by 2003, Dangote was ready to expand the business by combining a $479 million loan with $319 million of his own money to commission the largest cement plant in sub-Sahara Africa. Today, Dangote Cement Plc. is valued at roughly $14 billion, which make it the largest company on the Nigerian Stock Exchange and accounts for 25% of the exchange by market cap. 

The successful reinvestment into Dangote companies is a consistent theme, and it is just as easily seen in the multiple expansions of Dangote Sugar, which has been built into the second largest sugar refinery in the world, and the growth of the companies distribution network, which has grown from 600 trucks to over 1,500 since the late 1990s. 

5. Optionality
However, along with reinvesting into current business, what make companies like the Dangote Group special is their ability to move in multiple directions. The Dangote Group has ventured beyond their initial focus of cement, sugar, and flour, and into real estate, telecom, steel, and oil and gas. 

There are likely sectors that Dangote won’t attempt, but it seems like nothing is off limits, and that is what has allowed his business (and his net worth) such incredible growth, which has turned the Dangote Group into a massive conglomerate generating $3 billion in revenue annually. 

Today, Dangote is viewed as part folk hero for reinvesting and creating jobs in Africa, and part villain as a man born into wealth and potentially leveraging government relationships to establish unfair advantages. Either way, Dangote remains a polarizing figure, and his story provides plenty of interesting business insights and investment advice, and at just 58 years old we can expect plenty more from Africa's richest man.