Newsmaker: Peter Mountford: CEO of Super Group

New boss claims the turnaround in the supply chain and logistics company was the application of common sense, writes Chris Barron

Eighteen months ago it seemed it was all over for transport and logistics company Super Group. Its share price had plunged along with its public image. At the end of the 2008-09 financial year it had lost R1.3-billion and there was talk of a takeover.

The shareholders, led by Old Mutual and Allan Gray, were not happy with the pricing of the proposed deal and dug in their heels. There was a rights issue and Peter Mountford was appointed to replace Larry Lip-schitz, the man who had started the business but who was now lurching from one disaster to the next.

Recently, results have shown a profit for the year ending June of R230-million. A miraculous turnaround?

No, just the application of logic and common sense, says Mountford modestly.

He got rid of noncore and loss-making businesses which cut the payroll by 2200, retrenched a further 400 employees and trimmed operating costs.

Having done all that, a turnaround was "likely".

Management blamed the group's woes on the recession, but Mountford believes the heart of the problem was bad business judgement.

"The failure of certain of those noncore businesses was beyond the economy. It was clearly impacted by the economy, but the decision to enter into some of those business areas proved to be less than fruitful."

In fact, Mountford was previously with Super Group but left in 2001 over a difference of strategy. He did not see the group's strategy "as having the potential for success".

Three years later the wheels started coming off.

"There was a movement into noncore business areas that perhaps were not a perfect fit in terms of the skills and experience of the then management team," he says.

The company's misfortunes seemed to support the view that entrepreneurs who start businesses are often not the best people to take them forward, because different talents are needed.

Mountford believes this is a pointless generalisation, disproved by the likes of Bidvest, which has been a runaway success under its founder, Brian Joffe.

But, having discounted the theory, Mountford's assessment of the problems Super Group got into supports it rather well. Namely, that the abundant energy, optimism and enthusiasm which drives entrepreneurs, also gets in the way of their making the kind of sober, informed and unspectacular judgements necessary to build a business over the long term.

"Perhaps there was an over-optimistic viewing of the economy going forward, an assumption that booming truck and car sales would continue," says Mountford.

"The group definitely overreached itself. It paid quite significant amounts for certain investments and certainly it got to a situation where the gearing, the borrowing, was very high."

Nothing illustrates the leadership malaise of the group better than its disastrous experience in Angola.

Super Group gave around R200-million worth of commercial vehicles and parts to a company there before any payment or payment guarantees were secured.

Needless to say, the money was never paid. Attempted legal action in Angola was "totally unsuccessful", which is probably not surprising given that one of the shareholders in the company is the son of the deputy president of that country.

Super Group has decided to approach the International Court of Justice at The Hague, but Mountford thinks that will be a dead end too.

The lessons from this seem obvious enough: "When you look at trading in Africa, you can't go in on a risk basis, on an open-account basis. Only trade in Africa where you have security of payment, and confirmed letters of credit from international banks in place, before you expose yourself in those regions."

This is the kind of mistake one expects from amateurs, not experienced professionals.

How on earth was it allowed to happen?

Board rulings were ignored and there was fraudulent documentation suggesting funds had been transmitted, which wasn't accurate, he says.

Of course, all this happened before Mountford took over. Indeed, it was at least in part because of the Angola debacle that he took over the helm. Harsh words were spoken, he says.

"Shareholders were very unhappy with the exposure that took place. Both shareholders and banks made that very clear to the management team at the time.

"Investors have every right to insist on strong corporate governance, strong financial controls and the sensible application of a policies and procedures framework," Mountford says.

The moral of the story? If you cock up in Angola, don't expect any protection from the law.

"From the publication of our experience we've been exposed to problems other people have had. You've got to be very, very careful in that environment.

"I've heard absolute horror stories from other South African companies."

He does agree, though, that one can't blame it all on Africa.

"The bigger lesson is not to find yourself in that kind of position in the first place. If you go in with the right checks and balances and don't expose yourself like we exposed ourselves, the rest becomes academic."

The experience has "not put us off doing business in Africa per se, but it's made the criteria for doing business in Africa very definitive", he says.

Super Group runs about 350 trucks hauling commodities such as copper southbound out of Zambia, Zimbabwe, Malawi and the Democratic Republic of Congo. Northbound they carry food, aid, building materials and mining equipment.

"The potential is huge, but it's been a very, very tough market."

Commodity prices were more than halved by the recession and transport rates were "slashed". Now commodity prices have recovered, but transport rates have not.

There have also been "dramatic" increases in toll fees, which now cost the company 22c a kilometre. Border delays are a constant problem and there has been a "massive decline" of up to 70% in northbound volumes because of the recession.

The roads are terrible and the company's repair bills "horrific" - 10 times higher than for trucks on South African roads, although the gap is narrowing.

"We are extremely worried about the deteriorating condition of local roads."

Mountford, 52, is a University of the Witwatersrand-trained chartered accountant. He also has an MBA from Warwick University in the UK.

He spent 14 years with SA Breweries in charge of ancillary beverages like Appletiser, Liquifruit and mineral water, and says the job was a breeze compared with running a supply chain and logistics operation.

"When you look back on a long and curved career, you wonder, did you choose one of the tougher segments?

"It is rewarding, but I'm not sure I wouldn't rather be selling powerful beer brands or fruit juice.

"It's a tough place to make a living. You're only as good as your last contract.

''There's no brand that you can largely predict into the future; it's a case of low margins in a highly competitive environment. You are working on tenders, so there is no easy margin in the game at all," Mountford says.