S&A: Dangote Is A Fraud & Habitual Debtor.
| May 14, 2010 | Posted by Question MarkMag under Gossip |
Aliko Dangote
S & A, an Australian based firm was contacted by Dangote Industries Limited CEO, Tony Hadley to provide project management and consultancy services for developing the cement division’s ICT infrastructure systems. S & A commenced work in April,2008 and till date Dangote Industries Limited is yet to pay for their service. They received a letter to their Australian office accusing the company of fraud and illegal activities and announcing that Dangote had reported S & A to the Nigerian Police and EFCC in a bid to avoid their responsibilities to pay S&A their duly earned fees.
In this interview, It was informed that it’s been a habit of Dangote to delaying payment to contractorsciting an Abuja lawyer who did “US$150,000 worth of billable work for the company and hasn’t seen a cent in over 8 months.” Dangote wrote to Mr. Schumacher requesting a 50% reduction of the company’s fees to which he agreed, but he [Mr. Schumacher] still has not seen one Naira forthcoming.
Q: Give us some background into Schumacher & Associates.
A: Schumacher & Associates was formed in 2004 in Australia to provide management consulting services to the cement, oil and gas, and mining industries, primarily in developing countries. Formed by former cement industry executives with Dennis Schumacher as lead consultant, we specialize in building capacity and infrastructure for companies doing business in remote locations as well as classical management consulting such as business process and performance improvement.
Q: How did S&A get involved with Dangote Industries Ltd?
A: In 2007 and 2008 we were carrying out a contract to design and build a modern ICT platform and communications system for Unicem in Calabar Nigeria, when in April of 2008, we were contacted by the newly appointed CEO of Dangote Cement, Mr Tony Hadley. He was looking for a comprehensive solution for the communications and ICT infrastructure for Dangote’s Cement installations worldwide. Mr Schumacher met with Mr Hadley (they had been former colleagues at Lafarge SA) and Mr Hadley presented the business requirements and outline for what Dangote required. Letters were exchanged which established the terms of business and a contract was prepared together with Dangote Cement’s lawyer, and signed by us and submitted to Dangote for signature. Based on this and the urgency of the task as defined by Dangote Cement executives including Mr Hadley and Executive Director, Mr Knut Ulvmoen, we commenced work in April of 2008. We assigned two permanent staff to the contract working at Dangote’s headquarters in Union Marble House, Ikoyi, Lagos.
Q: What was the nature of your contract with Dangote Industries?
A: Our contract was for the supply of project management and consultancy services to Dangote Industries Ltd for developing the cement division’s ICT infrastructure systems to a standard that would allow world class business systems to run real time across the enterprise including SAP, purchasing and other management systems and software. It was to include a modern telecommunications system. Practically our job was to survey the existing ICT infrastructure in the cement division, plan and design a comprehensive solution to build and/or upgrade the existing system based on management’s business requirements to a world class standard. The design was to incorporate a new Network Operating Centre based in Ikeja with complete IP links to other cement offices and installations in the UK and the UAE and other African countries.
After design and approval, we were to project manage the tendering process and implementation of the system from start to finish through the use of local contractors. We had successfully done this same type of project already at Unicem and Mr Schumacher had experience with the same type of projects in Lafarge in Nigeria previously.
Q: What actual work did you perform for them?
A: We carried out a comprehensive physical survey of every cement installation and plant in Nigeria and prepared a complete report on what was found and what required to be done (gap analysis). This was presented to the IT Steering Committee. This committee was formed with Mr Ulvmoen as the Chairman specifically for this purpose and was staffed by many high ranking Dangote employees including the Group CFO, Cement CFO, Head of Department for IT for Dangote Industries, and representatives from Obajana Cement plant and Benue Cement Plant as well as the cement terminals.
Based on the direction of the steering committee we then designed a complete ICT infrastructure system for Dangote Cement which required several months of work and incorporated the work of many outside contractors such as Gateway Communications, Resourcery Ltd, iTeco (Nigeria) Ltd, Cisco Systems-Nigeria, and Huawei Technologies Co., Ltd, etc., most of whom were invited to give presentations to the steering committee and did so during the design and tendering phase of the project.
The design was accepted with some modifications and we moved into the tendering phase of the project, which we successfully completed in late 2008 with iTeco being named the general contractor, and Resourcery as the contractor for the new Network Operating Centre to be built in Ikeja. Gateway was signed up as the main service provider for ongoing service and management of the IP network during and after the completion of the project.
During this time we were also asked to provide other services, such as interim ISP and internet services at Marble House, and a proprietary email system for the cement division, all of which we did, with Gateway acting as ISP (they continue to provide this service today). We also provided a communication link between the quarry and head office at Obajana which required design, specification, and quotations. This contract was given to Map Infotel of Abuja and is still in operation. Additionally we were requested to assist in identifying a reputable and competent service provider for a satellite vehicle tracking system for the company’s vast trucking fleet. We identified and introduced a viable service provider for them and sat in on their system development meetings.
Q: Where did the problem arise?
A: The first indication that there was a problem came with the delay in getting our contract signed. It repeatedly came back from the corporate legal department with requests for changes, some as small as the movement of a comma. There were many versions of the contract during the ongoing work we carried out, and each time we dutifully negotiated the requested changes, made the necessary new copies, signed them and sent them back for signature. At one point we were warned that this was a scheme, or ploy on Dangote’s part to enable Dangote get out of their contractual responsibilities at any time. Mr Schumacher conferred with Mr Hadley on this issue several times and was assured that the matter was under control and his direct words were “If you have done work, you will be paid for it.” Indeed, our invoices (which were submitted to Mr Ulvmoen together with signed and countersigned timesheets) were paid upon request. More than 20 invoices for fees and expenses were submitted and paid during this time, until mid August of 2008 when the payments suddenly stopped.
At this point a memo written by Mr DVG Edwin (Group Executive Director- Business Development) to the President, Mr Dangote, surfaced which in part took issue with our presence in the company. Mr Edwin’s remarks were in effect that Australians were not known to possess the skills necessary to perform IT consulting work with the inference that this contract should have been given to an Indian company for much less money. He ended the note stating that a lot of money was leaving the company for no reason due to this contract. Again Mr Schumacher took up the issue with Mr Hadley, the CEO of Dangote Cement who promised to rectify the situation. At the same time Mr Hadley and Mr Ulvmoen were urging us to complete the project in due haste.
Finally in January, 2009 after much time spent chasing unpaid invoices, Mr Schumacher took the decision to pull out all personnel citing the terms of our contract which spell out cessation of work for non payment of fees.
Q: What did you do to mitigate the problem?
A: We continued to negotiate with Mr Hadley and Dangote Industries for the payment of back fees and the completion of the project. Finally in July of 2009, Mr Hadley suddenly left Dangote citing breaches of contract and lack of good will on Dangote’s part. Mr Schumacher immediately requested an audience with Mr Dangote. After waiting in Dangote’s Marble House office for 3 days he was finally given a 3 minute audience. Mr Dangote instructed him to deal directly with Mr Edwin who had taken over from Mr Hadley with immediate effect. Mr Edwin authorised the payment of outstanding direct expenses to us which were paid, but not the unpaid fees.
Initially Mr Edwin promised a solution to the problem by attempting to arrange another meeting with Mr Dangote to negotiate the issue. This did not happen however, and from this point on Mr Edwin took an increasingly aggressive and threatening posture regarding the matter. It culminated with a libellous letter sent by FedEx to our office in Australia accusing us of fraud and illegal activities and announcing that Dangote had reported us to the Nigerian Police and EFCC. We can only surmise that they have done this for one reason only, and that is to avoid their responsibilities to pay us our duly earned fees.
Q: Where do we stand now?
A: Since late 2009 the email correspondence with Mr Edwin on this issue has become dominated by threats on the part of Dangote to take up a case against us with the Nigerian Police and the EFCC based on what they characterise as “illegal invoicing”, “fraud”, and most recently “blackmail”. We of course insist that we are owed payment for the work we performed and are accumulating interest on the outstanding amount at 6% pa of the unpaid balance with statements produced monthly. This is based on the original contract and our terms of business.
Q: What do you believe are the reasons behind Dangote’s refusal to pay your fees?
A: We can only surmise that it is tied up somehow with internal political conflict in the company from the time of Mr Hadley. This is speculation; however there is evidence to support this. Other contractors that have done work for Dangote have related similar stories to us including the specific tactic of delaying the signing of contractual agreements in order to allow them the flexibility to renege on commitments if so desired, while pushing contractors for all they can get out of them while the going is good. In our view, this is where Dangote is guilty of fraud.
Additionally we know that Dangote is in severe financial difficulty. We know of contractors who have waited for over 8 months to receive payment, and often it is only partial payment. One Abuja lawyer did US$150,000 worth of billable work for the company and hasn’t seen a cent in over 8 months. Recently Dangote wrote to him requesting a 50% reduction of his fees to which he agreed, but he still has not seen one Naira forthcoming.
We also are aware of the gross inefficiency and ineptitude within the company. Obajana Cement Plant was built at the cost of nearly 1.2 Billion US dollars for a rated output of 5 million tonnes of cement per year, yet they have never produced more than 65% rated capacity. This is due to faulty engineering work in the layout of one of the kilns which they have not been able to correct. At the same time their initial quarry surveys and equipment specifications were faulty leading to reduced raw material production.
Additionally a plant of this size should not employ more than 200 core workers with the upper limit in this context to be around 400 maximum, yet OCP employed over 1,000 employees (as of 2008 figures) of which over 15% were expatriates. Some of these expatriates, the vast majority who are from India, are employed in very low level jobs such as “Rigger”. This surely makes Obajana one of the most costly capital projects on the continent if not the world, and there is no solution in sight.
But this is not the only source of financial bleeding from the company. We are aware of “fraud, pilferage, theft, financial leakages and gross mismanagement” within the company including over billing and double billing, missing stock, and inappropriate purchasing for which suppliers were blamed, but which in fact require inside collusion. There is also the problem of stock and sales control which is a major issue within the company with little or no control over cement going out of the plants and terminals. It was estimated that at one of Dangote’s cement plants one third of the fuel supplied to the plant was being pilfered. It was just this sort of problem that our system was designed bring under control.
Q: Do you have any final comments on this subject?
A: Of course none of this unpleasant public airing of these events would have occurred if Dangote had negotiated in good faith from the beginning. At one point we offered a settlement, but they appear to have taken this as a sign of weakness. We are unaware of the reasons why they have chosen to label us as frauds and criminals; however it is specifically this action that has precipitated our “going public” in this regard. As a small foreign company, we do not have a permanent presence in Nigeria nor the staying power and financial strength to take our case through the Nigerian courts. Our reputation is more important to us than the money they owe us, and if we never see one cent of the outstanding fees, we will have at the very least laid our case before the public to judge our case and mitigate any negative aspects of this really very unfortunate turn of events. – Huhuonline
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