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Nick’s Motors, a cross-border road transportation company, carries hazardous bulk liquids such as diesel, petrol, paraffin, mining solvent and JetA1 fuel for top clients in mining and other industries throughout Southern Africa. The company has weathered many storms in its time, but the worst was when owner Nicholas (Nick) Pilakoutas died of lymphoma six years ago without a succession plan.
It was up to his two young sons, Andreas and Alexander (aged 26 and 21 respectively back then) to take the reins from their father.
They inherited an inefficient company with outdated systems and a management structure in desperate need of reform. Add to their woes an unstable market, high leasing liability, cash-flow constraints and having to conduct business via their headquarters in Harare, Zimbabwe, in the eye of a liquidity crisis.
But that wasn’t all. “We clearly don’t fit the assumed profile of transporters: older, rugged men who use old-school business methods. As a result the staff showed no faith in our abilities,” says Alex, now 27, who had to give up his studies in BCom Economics to help rescue the family business.
In addition, suppliers, service providers (banks specifically) and clients were all sceptical of Andreas and Alex’s ability to rebuild a sustainable business structure and provide the strategic direction needed to revamp Nick’s Motors and provide a reliable transportation service. The sobering truth was that they really had very limited experience shadowing their father in the business prior to his passing. This was not enough if they were to bring the business back from the brink of death.
“A succession plan is often so easily overlooked,” says Andreas, who holds a Bachelor of Business degree, majoring in Logistics and Supply Chain Management. “So often you hear, ‘Oh, my sons will take over and run it when I’m gone.’ But it’s not that easy!
A business should be able to continue to exist without the founder, but it takes years of planning, communicating and mentoring.
“We were left with the enormous task of trying to oversee a family business in a country that we no longer lived in, trying to unravel a complicated structure whilst at the same time dealing with the reality of having to give up our own potential life plans,” Andreas continues. He studied in Australia, and was about to start a promising career there when his father asked him to return to Africa to assist him. He returned, but his father died before there was time for him to get to know the business properly.
When they took over the business the brothers decided to focus on its core competency, which is tanker work. This move was met with a lot of resistance from employees and management at the time, who were also reeling from the death of the man who had been at the helm of the company for a quarter of a century.
“People are always the hardest part to manage, no one likes change and we had a lot of changes. We did our best to encourage the workforce to embrace the change and keep moving forward,” says Alex.
The brothers adopted a strategy that focused more on organic growth in markets and routes where they can really make a difference. This meant loading from South Africa and Mozambique into Zimbabwe, Zambia, Botswana and the Democratic Republic of Congo.
They continued to build on the company’s reputation of delivering fuel swiftly, reliably and at a fair price. The changes they implemented proved successful. They became the first transporter in Southern Africa to be awarded the highest possible score by Puma Energy South Africa at the completion of their accreditation assessment.
“Over time we have put in place better systems, established a stronger presence on the route, employed improved technology and launched better processes,” Alex says as he explains how they’ve gone about turning the family business around.
“We’ve implemented intensive driver training and strict adherence to Safety, Health, Environment and Quality (SHEQ) guidelines. Performance excellence is integrated across our entire organisation and this commitment underpins everything that we do,” Andreas adds.
Doing business in Africa
“Being in business in Africa is challenging because things change constantly. The instability in all SADC countries, especially in the supply of energy, plays a big role. However, it is something we have become accustomed to and have learnt to deal with accordingly,” says Alex.
According to Andreas he and Alex have become familiar with a number of airports and border posts in Africa. While they travel a great deal in Southern Africa, technology has made it easy for them to stay in touch with the team on the ground.
The brothers say they’ve strengthened their position in Zimbabwe in particular because they’ve established incredible relationships with other Zimbabwean businesses and loyal service providers with whom they often band together to solve common problems.
The Transport Operators Association of Zimbabwe (TOAZ) has for example helped to set up cashless toll gates in Zimbabwe to work around the cash liquidity crisis that the country is facing. “Without the help of the TOAZ, we would have struggled to get the cash to pay for the road tolls and our vehicles would be parked,” Andreas explains.
He says business in Zimbabwe is highly competitive and rates are always being cut as the desperation increases. The current banking crisis adds fuel to the fire; they fortunately have a fantastic relationship with their bank after having proved themselves over the past six years. This ensures they are able to draw cash weekly.
“The cash we get is never enough so our cash flow management is rather intensive,” Andreas says. “We run weekly budgets to make sure we can pay suppliers as and when funds become available. It’s a delicate balancing act because we don’t wait for the end of the month.”
The Zimbabwean economy is not structured for “cashless” transactions, but innovating companies are establishing the structures for this to work. Mobile company Econet Wireless for example launched EcoCash, a mobile payment solution, which has become a big part of Nick’s Motors´ day-to-day transactions. Bank-to-bank transfers take days to reflect and this has a negative impact on the procurement of parts and other supplies. Intentional payments for imported products like diesel can take up to six weeks, which places a huge burden on cash flow.
“Mutually beneficial relationships with other suppliers built on trust and understanding are the only reason we still get food for the canteen and stationary for the offices,” says Andreas. “It all comes down to having a good reputation and sticking to your word.”
This article originally appeared in the 16 March edition of finweek. Buy and download the magazine here.
