BEE at its best: KZN Oils

Following government's black empowerment efforts, Rajen Reddy, CEO of KZN Oils, has built his dream into a multimillion rand business. He talks to Africa Outlook.

By Ian Armitage

You've read a million times what it takes to be a successful entrepreneur: intelligence, vision, drive, perseverance, and a strong work ethic.

But instead of analysing how an entrepreneur behaves, you should instead look how they think.

No two entrepreneurs do things exactly the same way.

I know one entrepreneur who is probably one of the laziest people you'll meet, but he's started two successful businesses.

It defies logic. But it's true.

Research by Saras D. Sarasvathy, professor of business administration at the University of Virginia's Darden School of Business, found that if you looked at how entrepreneurs think, reasoned, approached obstacles, and took advantage of opportunities you'd fine some remarkable similarities.

In the face of an unknown future, they act. More specifically they:
1. Take a small smart step forward.
2. Pause to see what they learned by doing so; and
3. Build that learning into what they do next.

Now this is the perfect point at which to introduce a man that the Mercury labelled "The oil baron of KZN" - Rajen Reddy.

Mr Reddy certainly ticks those boxes and he is famous for building up his own oil and fuel distribution company, KZN Oils.

With headquarters in Durban and a turnover of more than R1 billion, KZN Oils supplies lubricants and fuel to Transnet's port operations. Under that core fuel and oil business, Mr Reddy also owns 30 petrol stations and is a major fuel distributor for Chevron/Caltex garages in northern KwaZulu-Natal.

It hasn't been an easy road. But Reddy is nothing but determined.

"I've tried my hand at construction, plumbing, motor repair, fuel and oil and stationary," he says. "I've done it all."

While getting supplies for a construction firm he was running in 1988, Mr Reddy noticed a Shell fuel station site that was about to be expropriated by the municipality.

This is where the story starts.

"I harassed them completely, I really did harass them, to get the site and I actually convinced the municipality – maybe they just wanted to get rid of me? Who knows - to give it to me on a month-to-month lease while they decided what to do with it long-term," he says. "It was my dream from a boy to run my own petrol station, it really was. I also ran a tuckshop and motor repair facility from the site. I tried my hand at a lot of things in those days."

Things took a twist in 1996.

"Basically I was in with my bank and my banker told me about new opportunities for black business people," Reddy says.

The spark had ignited.

"My banker talked me through opportunities coming up with the port, for black empowerment, through what is now Transnet," he adds. "I thought 'what great potential' and went straight out and canvassed business from them."

It took time to crack.

"The oil industry is a tough nut to crack and you know for a while I earned money selling stationary. That is absolutely true. But I had ambitions for my fuel businesses and I knew it was a matter of time. I knew that if I had a fuel contract I could make it happen and despite it being very difficult I had latched on the idea and I wasn't about to quit. To start, the port wouldn't listen unless I got a fuel supply contract and the oil company bosses weren't interested. None of them believed government empowerment was coming. How wrong they were."

Mr Reddy's big break came on January 2, 2012. That was the day KZN Oils was born, he says.

"I remember that day very well. That's the day zero, the day it began. It is when I got my very first contract from the port to supply lubricants. It was my big break. With the contract in my hand, I went to Total. They agreed to supply me."

The rest is history. Today KZN supplies Transnet, other parastatals and private companies like Anglo American and De Beers with two million litres of lubricants and more than 200 million litres of fuel annually.

"We do approximately two million litres of lubricants and we do collectively about 220-240 million litres of oil and I think we have the potential for much more. But yes, we have grown a lot and improved. We've opened new partnerships of supply.

"Without sounding unappreciative, the oil industry is massive. As we say, 'volume buys the whisky', so you need a lot of volume."

Last year, KZN Oils struck a deal with Chevron to supply and operate 29 Caltex stations in Northern KZN.

"What happened there is that Chevron moved into three strategic locations – Cape Town central, Gauteng central, and Durban central," Reddy says. "They have then divided the nine provinces into north and south. We were fortunate to get KZN North. We started off with 29 service stations where we look after the supply and branding for 15 years. We are one year and three months into the contract.

"It started off with serious challenges because we had a national shortage of fuel. One had to overcome that. We also had to deal with supply constraints. One had to deal with a logistics constraint. We now have 32 road tankers. So we are adding more to our fleet. Yes, serious challenges, but we are moving along well and in fact we added another service station to our offering. We have 30 now and in two weeks we add another. We are hoping to have another three or four in 2013."

The deal has had positive spin-offs. KZN has been working with Chevron on its own lubricants brand.

"We have developed and we've got our own brand of lubricant called KZN Oils. It is about a year and a half now that we have our own brand. We have Caltex manufacturing our lubricant. That was quite innovative, even if I may say so, because they don't really promote house brands as they focus instead on their own brand. I managed to convince them otherwise and we are hoping to convince other majors to blend for us."

The future is bright, he says.

"Oh yes. I think we have got very good infrastructure and I always believed this is the way we should go. We are going to be 15 years old on January 2. I bought our warehouse some seven years ago and that again shows we work on a different model to the oil companies."

Mr Reddy is a poster boy for BEE. He acknowledges that, if it wasn't for the government's black empowerment efforts, he wouldn't be where he is today.

He also believes his bank and his management team and staff at KZN Oils have played a major role.

"What is critical to our success is the financial institutions," Reddy says. "Even though they are a stickler for policy and things like that they have really helped. FNB is our bank. They have really come to the party so far. They want to invest where they can make money and mitigate risk. We offer that.

"A business plan is vital," he adds. "Entrepreneurs like me don't like rules and regulations, boundaries, censors, or anything like that, but I am beginning to learn that you can't be a maverick. You can be exciting, but can't do whatever you like. The financial institutions and everyone else plays a vital role in the realisation of your plans. Part of it, with De Beers and Anglo American, they take us more seriously as we move along. We have a fantastic team here. People like my chairman Pete Linnegar and Neil Biggs. People like that make a company. They make the difference. You must not think you know it all."

Mr Reddy's story is fantastic. To learn more visit www.kznoils.co.za.

Image: Supplied











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