Sbusiso Mlangeni from Germiston wrote to It's My Business to ask how to get into the lucrative industry. Hendri Pelser investigated

Selina Maphanga defines the term entrepreneur. This school principal runs several successful businesses after her school work is done. They include Bakgokathabafi Projects, a company that transports ore for Anglo Platinum's Twickenham mine near Burgersfort in Limpopo.

"I saw the opportunity in trucking. In the area where we live, there are few people who can transport stone or sand. You can make money easily," she says.

She bought an old truck for R150000 in 2004. She says the machine was a good investment and she knew that her business could grow. She approached the mine, as well as local municipalit ies for contracts.

The mine gave her a once-off two-month contract to move ore.

ON THE ROAD

Selina realised that while the contract was small, it was an opportunity.

The workload also meant having to hire two more trucks, which created problems.

"The owner of the trucks would just remove them from site if he won another tender ... and he did not want to give us a formal contract because of this."

Nevertheless, Selina and her team proved their worth and secured another, long-term contract.

"We felt that it was important to find our own vehicles," she says, adding that funding for two new trucks came through a loan from Anglo Zimele - the mining group's supplier empowerment fund.

CHANGING FLAT TYRES

Selina knew that costings and budgeting had to be done carefully to ensure a return on investment. She approached a friend to guide her.

This allowed her to create a business plan where she could be competitive but still make money. And it is this planning that won Bakgokathabafi Projects a contract.

She knew that as much money as possible had to be reinvested into the business to pay off her loan and for the business to become profitable.

But because of her lack of experience in truck business, Selina bought the wrong type of trucks.

She bought two 20-tonne commercial trucks because she "liked them".

Unfortunately, these trucks are not meant to take the punishment the mines throw at them. They break down constantly.

This means they sit idle for days while she waits for a mechanic.

"If the truck stands, you lose a lot of money. Look for advice before you enter the industry. Find out what you need and do not buy simply what you want," she says.

Selina has hired a full-time mechanic to deal with the situation.

MORE TO COME

Selina has also learnt that she needs to keep her finger on the business's pulse at all times, and this includes managing one of her biggest expenses - diesel.

"Besides the fact that it is expensive, our drivers will try to steal the diesel to sell. You cannot watch them all the time. We try many things to combat this such as locking the diesel (inlet) cap. But they then climb underneath the truck and undo the draining bolt."

Nevertheless, she is learning to deal with the challenges of a new business and she is adamant that it will continue to grow.

"I definitely believe in expansion ... and I am constantly looking for new contracts.

''The opportunities are there to secure the work.

''But opportunities don't just come to you. We market and sell ourselves aggressively."

How to enter the sector

The Road Freight Association's chief executive, Sharmini Naidoo, shares some valuable tips with SMEs wanting to enter the road freight and trucking sector.

• Road transport has been increasing each year as more goods are being transported by road. The current road vs rail split is 87:13 in favour of road.
• The transport business is highly capital intensive, often highly geared and very risky. It requires a hands-on approach to running the business. It is a 24/7 operation and requires commitment and knowledge about the legislation, technical and operational requirements of trucking.
• There are also many barriers to entry to newcomers. It is a highly competitive sector where cost structures are high, margins are low and it is difficult to obtain funding if you do not have a strong balance sheet.
• Newcomers often underestimate the knowledge and experience required to run a successful business It is often seen as a good BBBEE opportunity but financiers and cargo owners (those that need the product to be moved) are not prepared to take a risk on a new company that does not have a good track record in terms of service delivery and reliability.
• Understand the inherent risks and uncertainty in this industry. Loads may not always be guaranteed and you still need to make payments on your vehicles.
• Reinvest in the business.
• Do not fall into the trap of buying contracts and paying deposits for non existent contracts.
• Undercutting rates to secure work is not sustainable in the long term.
• A truck that stands does not make money - if you do not move the necessary loads, you won't be able to pay your bills.
• Cutting costs by not insuring a vehicle is not an option.

Most popular vehicles

According to May sales statistics from the National Association of Automobile Manufacturers of South Africa, the following vehicles makes were the most popular on the local market:

Light commercial:

• Toyota
• Ford
• Nissan
• Medium commercial:
• Mercedes
• Isuzu
• Hino
• Heavy commercial:
• Isuzu
• Nissan
• Mitsubishi Fuso