Engen’s enterprise development partnership with the National Empowerment Fund (NEF) continues to yield great results as the company’s growing numbers of black-owned service stations thrive due to hard work, clever planning and unwavering support from the company. Two dealers stand out: David Makwakwa and Thamsanqa Malatsi have grown their service station investments from average, high-potential sites into roaring success stories that will inspire other emerging businessmen and women.
“The Engen-NEF deal was signed in 2009 to provide affordable loans to black entrepreneurs, providing the necessary capital to purchase service stations,” says Tasneem Sulaiman-Bray, GM of Engen Corporate Affairs. In an environment where access to participation in the retail fuels industry could require significant capital investment, the NEF deal seeks to provide support to these HDSA entrepreneurs who may be experiencing financial barriers to entry into this market.
“The aim is to grow Engen’s ratio of black-owned service stations, in support of the country’s Broad-Based Black Economic Empowerment [BBBEE] Codes. Since then, we have attained 50% BBBEE ownership across our network of over 1,000 sites.”
Engen believes business and financial support to deserving black entrepreneurs is the best way to increase equal participation in the mainstream economy. “It is our responsibility as a good corporate citizen to play a part in helping the country towards achieving a more integrated economy,” said Dumisani Bengu, Retail Business Manager.
Malatsi and her late husband bought the All Africa Convenience Centre in Alexandra in May 2013. Shortly thereafter, the site was closed for ‘reinvigoration’ (renewal and additional construction to bring it up to modern standards) and reopened in December. Soon after that, her husband passed away, having grown the volumes by just under 5%, and Thami continued his good work to grow volumes by a further 67%. Thami says a site that pumps 200 kilolitres (kl,) but has potential for more, is a great proposition.
“I’d say it’s the minimum starting throughput, and it brings down the price, but look carefully for high potential, which is a slightly trickier proposition. Think location, location, location.”
Located on one of two Sandton thoroughfares to the N3, leading to OR Tambo International Airport, All Africa Convenience Centre has the potential to do 500kl, she says. Even so, this wasn’t a foregone conclusion from the outset.
“The business was in trouble when we bought it, and we had to do a lot to get people’s confidence back.”
How did she do it?
“It comes down to advertising and motivating staff to deliver a dynamic service,” she says. “An on-going problem is affordability. Every second house in Alexandra is a spaza shop, and our prices are not for every second person. But the superior experience you get from coming here is important to some people, and we give them that. And of course nobody can refuse convenience when the family is hungry late in the evening.”
Besides financial help, Engen provides much-needed staff and management training, she says. “I went for three weeks’ training at the start, to learn how to run this business. Engen sends very knowledgeable people over to come and see how we do things and advise you on ways to grow the business.” She’s never looked back. “I’d say you’re in great hands buying a dealership from Engen. It’s a very good business, and I just wonder why we hadn’t bought one sooner! In fact, I’m looking around for another one,” she says.
All Africa is currently being used as a test site for solar power installation. The implementation of a solar photovoltaic (PV) energy production system on the site is among the first renewable energy initiatives in the retail fuel sector. The initiative is in line with the company’s drive to reduce its environmental impact and the national climate change response strategy.
David and Engen go back four years. In 2011 he took a seven-year loan with the NEF to buy Mohlakeng Convenience Centre in Randfontein – under caretakership at the time.
During the subsequent years he grew the site’s volume throughput by 60%, and sensibly ploughed every bit of profit back into servicing the loan. As a result, he expects to pay it off in 2016 – a year ahead of term. David agrees with Thami on starting volumes, saying potential of at least 300 kl per month is necessary to do viable business. “If I can grow it to 400,000 litres it’ll be a very good business,” he says.
To do that, he has partnered with other businesses in the township to attract and retain customers, for example catering to funeral processions and rewarding the traffic department for its loyal business. As the only service station in the township, David has been fortunate in not having to share volumes with other businesses. With a background in retail (he has worked as a store manager at Woolworths and a regional manager at Shell,) he understands the delicate balance between low margins and high volumes. “If the business in the area is not above 400,000 litres, you cannot share it,” he cautions.
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