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Following The Yellow Brick Road

Published 10 years ago
By Forbes Africa

Sighting a Moseme Road Construction yellow truck on the Johannesburg freeways during the 2010 FIFA World Cup preparations was a given. Travelling along the N1, the N3 or near O.R. Tambo International Airport, you were bound to bump into one—or a big board bearing the company’s grey triangular logo. The company is only one of a handful still standing after the near collapse of South Africa’s construction industry after the 2010 World Cup infrastructure boom.

“We were one of the few wholly black-owned civil engineering companies at the time that got the biggest contracts,” marvels Ernest Moloi, who is the sole owner of the company.

His business is now picking up after having to retrench staff and close down other business units. “I had to reduce the business and refinance it with R48 million ($5.8 million) of my personal funds,” says the maverick who explored at least 10 business ideas before settling on civil engineering.

Moseme currently employs 250 staff, with business units that include asset holding, property development and Roadfix, which develops asphalt that can remain in potholes for up to 20 years. The company is based in Brakpan on the East Rand of Johannesburg.

Enerst Moloi

Since the economic meltdown and drastic slowing down of infrastructure development after the 2010 World Cup, Moloi has been travelling throughout Africa in search of business opportunities. He has managed to convince the Ugandan government to build a toll road from Kampala to the corridor of Kenya, and preparations are underway.

“First the government had to come up with legislation for that and then a feasibility study,” he says about an original idea that he pitched to the government. In property development, Moseme is planning to build shopping malls outside South Africa. They are holding discussions in Botswana and Uganda about the ventures.

Moloi founded his business from humble beginnings, through bold moves and determination.

“I asked a neighbor if I could build her two back rooms to use for generating extra income and she agreed,” he says.

He then gathered a few guys from the neighborhood who were  unemployed, bought building material and had them do the work while he managed the project.

“They did such a great job that the client was very pleased, and that was the beginning of my entry into the world of construction.”

This was in 1994, at the advent of Black Economic Empowerment (BEE) when the South African government was making efforts to empower historically disadvantaged individuals. Moloi took advantage of the socio-economic climate and used his

limited experience to seek government tenders.

“My first tender was for R25,000 ($3,000) to build a clinic in the informal settlement of Orange Farm, in the Vaal vicinity. I did not even own a car and therefore travelled by taxi every day from Soweto to the site,”

he says.

For someone who had been unemployed, this was big money. “Instead of paying myself a salary, I opted to pay only the workers as I had already figured, because I was the big boss, at the end of the job the balance of the money would all be mine.”

As it turned out, he had miscalculated the budget and ended up not getting a cent. That was his first and biggest mistake which he will not forget for the rest of his life.

“Since then I always engage an accountant in all my business dealings prior to signing any contract,” he declares.

The one lesson learnt from the experience was to treat himself as an employee and pay himself a regular fee. He said that this is a common error by most emerging entrepreneurs. They see the price value of a contract and then think that it will make them rich overnight.

Moloi’s next contract was valued at R45,000 ($5,400). It paid him enough to buy an old Honda Ballade. Life was better as he could get to work quicker.

Several contracts down the line, Moloi made his first million. Instead of getting excited by rewarding himself with a flashy car and a home, he resisted the temptation to show off with expensive material possessions. He continued his modest lifestyle as a tenant in his mother’s back yard in Soweto.

“I had to plough the money back into the business by purchasing the necessary equipment to operate it properly and efficiently,” he explains.

Today, Moseme is one of South Africa’s four biggest, wholly black-owned civil engineering companies. Its growth strategy was for a long time bolstered through joint ventures with some of the large construction companies, among them Murray & Roberts and Group Five. At the height of the 2010 FIFA World Cup preparations,

the company’s order book was over R500 million

($60.1 million).

Moloi appreciates the good intentions that underpin the BEE legislation, especially since he has benefited from it. However, he feels that in civil engineering, not enough is being done to ensure that the intended beneficiaries garner the big contracts.

“The updated BBBEE (Broad-Based Black Economic Empowerment) scorecard removed the HDI clause which gave black contractors an advantage with the 10% black-ownership rating. That killed a majority of black-owned companies because that was the only advantage they had to help them grow,” he says.

The new level rating is virtually color blind and therefore gives white-owned businesses the advantage because they are far more established and resourced. “This is throwing us outside of the market as white businesses can also source business in the private sector, which is predominantly white-owned anyway,” he says.

Moloi’s suggestion to government is that it strategically award contracts to black-owned companies that have made it in the industry on the basis of joint ventures with emerging contractors. This, he believes, could be the solution to combat fronting and therefore, gradually eliminate domination of the industry by white males.

His other concern is that fronting denies true black-owned companies the opportunity to develop, adding that already established black-owned companies should be supported.

“We are hopeful that the recent announcement of R800 billion ($96 billion) infrastructure development by Pravin Gordhan, Minister of Finance, will bring more work and we will be able to rehire.”

For Moloi to succeed as an entrepreneur, he credits his personal philosophy of patience and being thick-skinned. “Don’t be afraid to fail, and before pursuing a business idea set goals and do your homework.”

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Related Topics: #Development, #Ernest Moloi, #FIFA World Cup, #July 2012, #Moseme Road Construction, #Property, #Roadfix, #Urbanization.