· The Oppenheimer family is one of the biggest investors in JoJo Tanks, which dominates South Africa’s fast-growing water tank market.
· Two million JoJo tanks are currently storing water in SA.
· JoJo’s owners may consider selling the company to a larger group.
The squat JoJo tank is fast becoming the unofficial mascot of South Africa’s water crisis (because, let’s face it, the official mascot is way too scary), with some two million of these tanks currently in use around the country.
The company — named after Johannes Joubert, a Groblersdal farmer who founded it in the 1970s — is owned by the Oppenheimer family’s investment group Stockdale Street, as well as Rand Merchant Bank, Pan African Private Equity Fund Managers, and JoJo executives.
The Oppenheimers invested in JoJo with a sliver of the $5.1 billion (R40 billion) they earned from selling their 40% stake in De Beers to Anglo American in 2011. According to Forbes Africa’s Billionaires list, Nicky Oppenheimer continues to be the richest person in South Africa, with personal wealth of $7.7 billion (R89 billion). His family’s Stockdale Street outfit bought JoJo from the previous owners, an Investec consortium, in 2012.
Almost immediately afterwards, sales started surging as a widespread drought gripped South Africa. Households, businesses, and farmers scrambled to retain precious rainwater as the widespread drought culminated in SA’s driest year on record in 2015. Build It, a network of 300 hardware stores, reported that its sales of JoJo Tanks increased by 500% over the five years to end-2016.
Sales growth in the current financial year will probably match the surge seen in 2016, said Grant Neser, managing director of JoJo. This is due to the current drought in Cape Town, its worst in almost a century. Cape Town readers tell us the waiting time for JoJo tanks can be up to four months.
The current growth will solidify the grip JoJo has on SA’s growing market for water tanks. According to its own assessment, it controls more than half of the market. This has earned it opposition from the Competition Commission, which recently blocked JoJo’s planned merger with another water tank producer.
Currently, the company is focused on keeping up with demand. JoJo is expanding production capacity in response to a surge in demand in the Western Cape, says Neser. It also has plans to produce products in the rest of Africa, and already has a plant in Zimbabwe.
Its product range is also expanding to include fish breeding tanks “and a couple of other ideas that we will keep under wraps for now,” Neser says.
He added that the company may consider listing on the Johannesburg Stock Exchange, but that selling it to a larger listed entity (“no rush”) is more likely.
Potential buyers could include large plastics and packaging firms, said Cassie Treurnicht, research analyst and portfolio manager at Gryphon Asset Management.
“Nampak may be interested, although JoJo is perhaps a bit too small.”
Nampak is Africa’s largest packaging firm, and reported sales of almost R19 billion for the year to end-September 2017.
The plastics packaging specialist Bowler Metcalf may perhaps be the most likely candidate, but it is currently restructuring some of its assets and perhaps won’t have the appetite. Another plastic packaging manufacturer, Master Plastics (originated out of old Astrapak), may also be interested.
“But locally listed MPact (Mondi packaging MPT) have a very nice plastics operations that manufacture bins and crates which use similar inputs. This is probably the best fit for Jojo.”
Treurnicht says it is understandable that the JoJo owners would choose to sell their stake, instead of listing.
“If the drought starts to subside, we could be sitting at the top of the market for JoJo’s products. Water tanks are also not a recurring purchase. Once you have one, you won’t need another for a long time.”
Neser, however, expects increasing demand for water tanks due to climate change, growing population and aging water infrastructure. “But where the next hot spot [after Cape Town] will be is not easy to predict.”