South African tycoon Marcel Golding sees opportunity in the country's water crisis

Rex Trueform Group Ltd., the Cape Town-based investment company run by South African tycoon Marcel Golding, says the country's worsening water shortages create long-term opportunities for SA Water Works, a private water utility it has backed for years.

In its annual report for the year through June, Rex Trueform said private operators can help municipalities that face funding gaps, infrastructure backlogs and skills shortages. It pointed to public-private partnerships, performance-based contracts, cutting water lost through leaks and theft, water reuse and the repair of existing plants as areas of opportunity.

"What differentiates SAWW is its proven ability to operate commercially sustainable municipal water services," the company said in the report.

SA Water Works, a majority black-owned utility, runs two water and sanitation concessions. Silulumanzi has operated water services in Mbombela, the capital of Mpumalanga province, since 1999 under a 30-year contract, supplying about 120 million liters of drinking water a day to roughly 400,000 people. Siza Water runs a 30-year public-private partnership serving the coastal town of Ballito in KwaZulu-Natal province for the iLembe District Municipality.

Rex Trueform holds its interest through Ombrecorp Trading, which owned a 30% stake in SA Water Works' holding company, according to the group's 2022 annual report. On Sept. 1, Rex Trueform agreed to buy another 18 Ombrecorp shares for 4.04 million rand ($242,700), lifting its stake in Ombrecorp to 70% from 52%. The group is also owed about 208 million rand ($12.5 million) by SA Water Works through Ombrecorp, a loan its auditors flagged as a key audit matter this year.

The pitch comes as South African towns and cities struggle to keep taps running. The government estimates it will cost more than 400 billion rand ($24 billion) to repair failing municipal water and sanitation systems, at a time when the National Treasury is trying to cut spending. Johannesburg and other parts of Gauteng province have suffered repeated outages. AVI Ltd., the consumer goods group behind Five Roses tea, said in its own annual report that "'water shedding' has become a feature of some of the largest municipalities," borrowing the local term for planned power cuts.

From union leader to dealmaker

Golding, 66, came to business through the labor movement. He was assistant general secretary of the National Union of Mineworkers from 1985 to 1993 and helped organize the 1987 national mine strike. He served in South Africa's first democratic Parliament from 1994 to 1997, chairing its mining and energy committee, before leaving to run the union's investment arm.

With Johnny Copelyn, he built that arm into Hosken Consolidated Investments Ltd., a Johannesburg-listed investment group where he served as executive chairman. He was also chief executive of e.tv, South Africa's first privately owned free-to-air television channel, from 1999 to 2014. Golding left Hosken in October 2014 after he was suspended over share purchases he disputed.

In 2017, a consortium led by Golding and Hugh Roberts bought shares in African and Overseas Enterprises Ltd., the company that controls Rex Trueform, from the founding Shub family's trust for about 65 million rand. He became chief executive of African and Overseas Enterprises in September 2018 and also runs Rex Trueform.

What Rex Trueform does now

Rex Trueform was founded in Cape Town in 1937 as Judge Clothing Manufacturers and has been listed in Johannesburg since 1945. It was best known for its clothing factories in the city's Salt River district, which closed in 2005. The group turned the empty factory buildings into a property business and now also owns Queenspark, a chain of women's and men's clothing stores, broadcast services company Telemedia, AI Sport Africa, Emerge Media and software developer Byte Orbit.

Revenue rose 9% to 954.5 million rand ($57.3 million) in the year through June, with retail sales of 704.8 million rand ($42.3 million). Profit fell to 17.2 million rand ($1 million) from 31.1 million rand ($1.9 million), and the company paid no ordinary dividend.

African and Overseas Enterprises holds a 55.7% voting interest in Rex Trueform. Its ultimate holding company is Geomer Investments, through which Golding holds most of his stake. He has a direct and indirect interest in about 1.9 million ordinary shares and 10.1 million N ordinary shares of Rex Trueform.