IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE FINANCIAL PERFORMANCE OF FIRMS: USING DANGOTE GROUP AS A CASE STUDY

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IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE FINANCIAL PERFORMANCE OF FIRMS: USING DANGOTE GROUP AS A CASE STUDY

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Corporate social responsibility is one vital aspect of any business. However, this is one area where grievous mistakes have been made. Companies need to understand the subject its concept, theories as well as the benefits there of.

Business firms not being socially responsible, infact lead youths of the communities to agitate for their right such is the case of the riverine areas. There is no doubt that there is an increasing amount of attention directed to social responsibilities in business firms.

Corporate social responsibility is the sense of obligation on the part of the organization to build certain social concern and criteria into their strategic decision making process. EVBOROKGHAI (2003).

Social responsibility by Andrews (1971) is the intelligent and objective concern for the welfare of the society that restrains individual and corporate behaviour from ultimately destructive activities, no matter how immediately profitable, and leads to the direction of positive contributions to human betterment, variously as the latter may be defined. The concept implies that when companies evaluate decisions from an ethical perspective there should be a presumption in favour of adopting courses of action that enhance the welfare of society at large. The point stressed in these definition is that when making decisions, business men or organizations should consider the social interest of people in society. These among other reasons probe the researcher to embark on this research work.

1.2 STATEMENT OF THE PROBLEM

DANGOTE GROUP, is a very reputable organization whose services is a visible friend in almost every home in the society, but do not have a defined policy on social responsibility.

Base on the above, many companies use the strategy of benchmarking to compete within their respective industries in corporate social responsibility policy, implementation and effectiveness.
Bench marking involves reviewing corporate social responsibility initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment and how costumers perceive corporate social responsibility strategy.
After a comprehensive study and an internal policy review performed, a comparison can be drawn.

1.3 OBJECTIVES OF THE STUDY

The objective of the study is to look into the impact of corporate social responsibilities on the performance of business organizations and they include:-

To examine social responsibility between/among business organizations, government and its agencies, stakeholders and the society at large.
To examine the impact of corporate social responsibility on the performance of business organization
To find out new areas in which business organizations can engage so as to strengthen its relationship among various stakeholders that make up the society.
To find out how business organization contribute to national development through charity donations in times of disasters, obedience and respect for governmental laws and policies, partnering with government financially in ensuring a healthy and vigorous economy.

1.4 SIGNIFICANCE OF THE STUDY

The study intends to present the under listed significance of the study as:

The research work seeks to create awareness on the need to engage in social responsibility in banking sector

Also, it seeks to bring into limelight how newly established organizations can use the concept of corporate social responsibility to capitalize on opportunities in their business environment.

The project would also be useful for scholars in the field of business administration and others to understand the basic concept on the area of social responsibility

1.5 RESEARCH QUESTIONS

What are the new areas in which business organizations can engage so as to strengthen its relationship among various stakeholders that make up the society?
What are the impact of corporate social responsibility on the performance of DANGOTE GROUP?
What extent have corporate social responsibility impacted positively among/between business organizations?
What are the contributions of social responsibility to the national development in ensuring healthy and vigorous economy?

1.6 SCOPE OF THE STUDY

The scope of the study will center on the impact of corporate social responsibility on the performance of DANGOTE GROUP, to examine the nature, size and breath of activity in business organizations. Social responsibility of business encompasses the economic, legal, ethical and discreational expectations that society has on organizations.

1.7 LIMITATION OF THE STUDY

Some of the available constraint faced by the researcher are presented below:

Time constraint: To do adequate justice, the duration allowed for the completion and submission of this research work is very limited, not to talk about other school activities such as coping with lectures, tests schedules and most of all researching for assignment and the project work at hand.
Financial constraints: The work is really tasking and in my financial capacity as a student it is not easy to meet up with.
Sourcing for adequate and relevant information cover the research is not encouraging as the respondent where not cooperating.

1.8 DEFINITION OF TERMS

Various literary terms that sharpen the write up will be examined and defined as follows:

Ethics = Ethics according to Grace and Cohen (2005) includes standards of moral behaviour that is, behaviours that are acceptable by the society.
Consumerism = organized effect by individuals or groups aimed to project the users of various products and service from harmful or deceptive business practices Grace and Cohen (2005).
Corporate social responsibility = according to Ronald and Ricky (1999) it is an attempt by business organizations to balance their commitment towards groups and individuals in it business environment.
Social responsibility = according to Welhrich and Koontz (1994), it is the ability of an organization to relates its operations and policies to the environment in such ways that are mutually beneficial to the company and the society.
Social audit = according to Ronald and Ricky (1999) it is commitment to systematic assessment of reporting on some meaningful and definable domain of the company’s activities that have social impact.
Corporate philanthropy = according to Michael E porter (1997), as a practical sympathy and benevolence shown by a business organization to various sectors of the society.
Shareholders = according to Kenning (1998), the include interest groups that are tangible, visible and approachable groups or institutions which can exercise direct influence in the functioning or affairs of an organization

1.9 HISTORICAL BACKGROUND OF THE CASE STUDY

The Dangote Group is a Nigerian multinational industrial conglomerate, founded by Aliko Dangote.[2] It is the largest conglomerate in West Africa and one of the largest on the African continent. The group employs more than 30,000 people, generating revenue in excess of US$4.1 billion in 2017.[2]

The company was founded in 1981 as a trading enterprise, importing sugar, cement, rice, fisheries, and other consumer goods for distribution in the Nigeria market.[citation needed] The group moved into manufacturing in the 1990s, starting with textiles, moving onto flour milling, salt processing and sugar refining by the end of the decade. The company next moved into cement production, growing rapidly and moving into other African countries. A high degree of vertical integration is a hallmark of Dangote Group’s operating strategy.[citation needed]

The group now owns and operates over 18 subsidiaries, operating in ten African countries. Dangote Cement, is one of these subsidiaries that is listed on the Nigerian Stock Exchange, with its market capitalization accounting for almost 20 percent of the total capitalization of the Nigerian Stock Exchange. Dangote Group is headquartered in Lagos.

In 2016, Dangote signed a contract with CNOOC group for the installation of a large underwater offshore pipeline. The pipeline, when completed will extend from Bonny (Rivers State) through Ogedegbe, Olokola to Lekki and the Escravos Lagos pipeline, finally terminating at the West Africa Gas Pipeline.

Overview

The origin of the group began in the late 1970s, when Aliko Dangote after receiving a $3,000 loan from an uncle,established a venture that traded consumer goods such as sugar between the years 1978 and 1980, before gradually expanding into trading other commodities such as rice.[5] In 1981, he established two business enterprises, Dangote Nigeria Limited, and Blue Star Services, this was a period when import licenses were required to import bulk commodities, the firm then sought to acquire import licenses for various commodities including steel, baby food, and aluminium products.He then added the shipping and the importing of cement to his group’s portfolio.Dangote competed (and competes) with Lafarge, a French company that imported and produced the bulk of African cement.

When the import license era was discontinued in 1986, the firm concentrated in bulk importing of salt, sugar, and rice and gradually reduced its cement business.

Manufacturing

The group’s first foray into manufacturing began in 1989 with textiles Mills Limited, operating two operations, a textile weaving mill in Kano and the Nigerian Textile Mills limited’s plant in Lagos.Beginning in 1997, following a decline of the textile sector, the company concentrated on manufacturing consumer goods it was importing into Nigeria such as sugar refining and flour milling, with the former it competed against imported products from Brazil and Europe. One of the biggest distributors of sugar in Nigeria, Dangote sugar refinery began local production in 1999.The strategy towards backward integration led to the establishment of a pasta plant and also flour milling to supply raw materials for making pasta. The company then invested in a cement manufacturing venture at Obajana, Kogi State, with an aggressive strategy, the Obajana plant began production with 5 million tonnes of cement,the group then invested funds in another cement operation at Ibeshe, Ogun State to shore up the local manufacturing sector from about 2.5 million tonnes to up to 8 million tonnes. To reduce economic and political risk within the country, the group began looking for opportunities to expand beyond Nigeria. The company’s strategy then focused on continental expansion with the building and acquisition of cement plants in African countries.

Today, Dangote Group is a diversified conglomerate, headquartered in Lagos, with interests across a range of sectors in Africa. Current interests include cement, sugar, flour, salt, seasoning, pasta, beverages and real estate, with new projects in development in oil and natural gas, telecommunications, fertilizer and steel.Competitors in both Nigeria and other portions of Africa include Stallion Group. Adenike Fajemirokun is the chief risk officer.

Subsidiary companies

Dangote Cement, the largest cement production company in Africa, with a market capitalization of almost US$14 billion on the Nigeria Stock Exchange, has subsidiaries in Benin, Cameroon, Ghana, Nigeria, South Africa and Zambia.[14] In December 2010, the group signed an agreement with the Government of Zambia to construct a US$400 million cement plant in Zambia. It was completed in 2015 and is located in Ndola, The plant produces 42.5-grade cement to compete against the lower-grade but dominant 32.5 products in the market, the new plant is expected to have an annual output of 1.5 million metric tonnes of cement.

Dangote Sugar is another major subsidiary of Dangote, competing with Bua Refinery Ltd. and Golden Sugar Co.[6] Dangote Sugar is the largest sugar refining company in sub-Saharan Africa.

Petrochemicals

The group has also diversified into oil and gas-related ventures, establishing a 3 million tonnes fertilizer plant, petroleum refinery capable of refining 650,000 barrels of oil and a petrochemical operation.[7] Dangote Refinery is expected to begin operations in the early 2020s, and will be the largest refinery in Africa at full capacity.

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