Oando CEO Wale Tinubu sits in the trendy Johannesburg suburb of Parkhurst finishing a late lunch. In his shirtsleeves, Tinubu is in relaxed mode between interviews with South African media.
It has been a big day. Oando listed last Friday morning on the continent’s top stock exchange, the JSE. One official noted that Oando, with a market capitalisation of just more than R3-billion, was the biggest single listing since telecoms giant Telkom came to the market a few years ago.
But Oando listing its shares on the JSE is much more important than its size and the fact that listings have been relatively infrequent in recent years.
South Africans in the post-apartheid era have become used to their top companies applying for secondary — and even primary — listings offshore.
But applications from foreign companies to list in Johannesburg are rare. Only two non-South African companies have secondary listings in the South African market.
Oando’s arrival has greater importance, though, as it is the first African company to list on the Johannesburg bourse. It is, it should also immediately be added, the first Nigerian company to set up a secondary listing elsewhere.
So there was reason to celebrate as the company’s key employees, advisers, JSE officials and media filled the JSE foyer for a breakfast to coincide with the market opening and Oando’s first trade outside of Nigeria.
Oando is listed in the resources, oil and gas sector of the JSE, doubling the representation of companies in this sector from one to two.
The other is the omnipresent Sasol, which, with a market capitalisation of R156-billion, is 50 times bigger than Oando. But, no matter, Oando has big amibitions.
So has its founder, Tinubu (37), who started in the energy business with just $500 and plenty of drive. Tinubu bought a boat and started delivering fuel to customers.
Now, just 12 years later, Oando has 500 fuel stations, mostly in Nigeria, where it has 15% market share — the largest — but also in neighbouring Ghana and Togo.
It also has a 100km gas pipeline that distributes gas to industrial customers in the Lagos area and is active in a range of energy activities besides, from trading to supplying equipment to the energy industry.
Oando has big plans. Its R3-billion market value belies the fact it it could well be raising $1-billion in the next three years as it takes up opportunities that political and economic reform in Nigeria have brought. These are principally privatisation and deregulation opportunities.
Oando is bidding with Shell to own one of four state-owned refineries that are being privatised. Nigeria has the unhappy distinction of being awash with oil, yet government inefficiency has made it a net importer of refined fuel. It exports crude, mainly to the United States and Europe and then imports the refined stuff back from Europe.
“If the government owns it, nobody owns it,” says Tinubu, who has law degrees from the University of Liverpool and the London School of Economics. “If you own a car, you keep it fixed. If the government owns it, and a screw has to be tightened, it remains loose.”
Oando is one of six companies short-listed to acquire a majority stake and management control in the Port Harcourt Refining Company, a 210 000-barrels-a-day refinery that at present runs at 60% capacity.
“If we win the bid it will add $3-billion a year to Oando’s revenue. If we take capacity to 100% it will add $5-billion.”
Tinubu says Oando’s strategy is to develop a greenfields refinery at Lekki, just east of Lagos, over a six-year period. The privatisation opportunity represents the potential to enter the refining business quicker and at a lower price, but if the bid fails Oando will nonetheless become a player in this sector.
Nearly 50% of all Nigeria’s gas is flared, meaning that it is simply burned off. The government is keen to see the practice discontinued.
“Only 3% of available gas is harnessed and 50% is flared,” says Tinubu. Oando’s plans to develop gas-fired stations to help meet the country’s 6 000MW power shortfall.
“The multinationals want to ship this gas abroad. We want to invest in infrastructure to use the gas to grow the market.”
Oando’s third major opportunity is to participate in exploration and production. The government is granting oil concessions to industry participants and Oanda has won the right to develop a marginal onshore field in the Niger delta with up to 4,7-million barrels in recoverable reserves.
Tinubu sees the potential for the company to quadruple its value over the next three years. This may be a tall ask, but Oando’s annual report says that the company achieved a 482% return to shareholders during the past four years.
Tinubu’s aim is for finance to come in equal proportions from South Africa and Nigeria. He opted to list in Johannesburg rather than London because he believes the company is too small to be noticed in major markets and because South Africans are more likely to understand the risk profile.
Oando is an opportunity for South Africans to invest in energy. “South Africa has the finance but has largely missed out on the energy boom. West Africa has the energy resources.”
Tinubu is not fazed by larger competitors. “The multinationals have a wait-and-see attitude. Oando has first-mover advantage,” he explains. “There are very few entities in Nigeria structured and capitalised to take advantage of the new opportunities.”
Tinubu says South African investors are “showing a lot of curiosity. There has been interest in investing in the African energy sector but there have never been the right vehicles.”
This chief executive has a quietly confident, even reassuring, manner about him. There is not even the slightest hint he is in sales mode.
There will be sceptics, not least those South Africans who see Nigeria as a risky market. The share opened on the JSE at R4,85 and closed the day at R5,10. But the share has been illiquid, with few sellers and wide spreads between bids.
On Tuesday Oando was trading 37% up at midday at R7,10, but it remained illiquid with only one seller pitching shares at R9. It closed 66% up at R8,50, meaning that Tinubu’s company, worth R3-billion last Friday, was now worth R5-billion.
Tinubu has a three-letter answer for the sceptics: MTN. The cellphone company, which makes 50% of its profits in Nigeria, has seen its market capitalisation rocket to R93,6-billion since it began operations there in 2001.
Nigeria offers the same spectacular growth in the energy sector that MTN has shown in telecommunications, Tinubu says.