Undoubtedly Africa’s richest man Aliko Dangote is an astute businessman who invests in areas of the economy that enjoys tremendous tax holidays.
Most Nigerians are oblivious of the fact that tax avoidance is undertaken to take advantage of the loopholes in the tax system without contravening the laws.
Dangote Cement Plc, Africa’s largest producer of the building material recorded a 15 percent increase in full year profit to N181.32 billion from N159.01 billion as at December 2014.
The increase in profitability was driven mainly by a significant reduction in income tax expense by 261.26 percent to N6.97 billion in 2015 compared with N25.18 billion in the 2014 period. Isn’t that a tremendous boost to the bottom lines?
The most capitalized company in Africa’s largest economy has been enjoying tax holiday on some of its newly acquired plants in Nigeria and other sub Sahara countries in form of capital allowance.
Capital allowances (CA) are incentives granted to a tax payer who incurs qualifying capital expenditure in a basis period.
They are given in lieu of depreciation on certain types of assets, especially plants.
The company has added new factories in Cameroon, Ethiopia, Senegal, South Africa, Tanzania and Zambia in the past two years and will open a plant in the Republic of Congo later this year.
New factories signify a reduction in tax burden as capital allowance will be charged those assets.
Dangote Cement’s aggressive expansion across Africa and its acquisition of new plants paid off as sales volume increased by 35 percent while total revenue jumped by 25.50 percent to N491.72 billion in the period under review.
The price cut last year by the company also helped bolster top lines.
According to the company’s audited financial statement, cement production capacity increased by 86.93 percent to 42.55 million metric tonnes in 2015 from 13.97 million metric tonnes as at December 2014.
The Nigerian cement maker has spent N157.09 billion on the acquisition of property plants and equipments (PPE), according to its consolidated cash flow statement.
Asset turnover increased to 0.44 times in 2015 from 0.39 times in 2014.This means the company is using PPE to generate higher sales, profit and dividends.
Cement sales volume was up by 34.93 percent to 18.85 million metric tonnes as against 13.97 million metric tonnes as at December 2014. It is projecting an increase in annual capacity to about 77.3 million tons of cement by the end of 2019.
Little wonder the largest cement maker’s net margin of 36.86 percent and return on assets (ROA) of 16.32 percent and return on equity (ROE) of 28.12 percent, is the highest in the industry.
While the billionaire owner of the cement company was investing copiously in sectors that enjoy pioneer status, his contemporaries were swooping on areas of the economy that do not enjoy so much tax benefits.
