Content uploaded by Adrian D. Saville
Author content
All content in this area was uploaded by Adrian D. Saville on Oct 17, 2017
Content may be subject to copyright.
1
Preserving the Delicate Balance to Manage
a Thriving Business in South Africa – the
Adventure of OneLogix
Abstract
This teaching case describes how the OneLogix Group, a niche logistics provider in South
Africa, balanced its needs to be entrepreneurial, while maintaining efficiencies, to survive –
and to ultimately thrive – in a highly competitive, uncertain and volatile business
environment. The case provides a rich contextual description of how the organization
embraced and implemented various mechanisms, ranging from effective leadership and
business strategies, to organization structures, policies and routines that enabled the
organization to achieve the fine balance between entrepreneurship and efficiency. Students
will view OneLogix’s challenge of balancing competing demands through the eyes of Mr
Ian Lourens, CEO of OneLogix Group. As CEO, with his retirement on the horizon, and the
listed company facing increasingly demanding legislation and regulations, Lourens
recognized that the organization is challenged with the task of maintaining this critical, but
delicate, balance to sustain its success that was steadily built from the early 2000s.
Students are expected to discuss the challenges and opportunities, as well as suggest
solutions to address this management challenge.
Introduction
Struggling to keep the ship afloat with the constant bombardment by huge waves in gale
force winds, the veteran captain scanned the environment to look for clues to make the right
maneuvers. The captain knew that the survival of his ship, and its crew, rested on his
capability to “predict the unpredictable”, his courage to make sensible bets, and his ability to
convince his crew of his convictions and rally their efforts to support his vision. As the
captain made swift and clear decisions to navigate through the storm, the crew was busy
working hard to ensure the ships essential functions were intact.
This was one of the scenes in a movie that Mr Ian Lourens, CEO of OneLogix Group, was
watching.
1
Wearing his favorite yellow silk tie, and his signature black suit, he sat in a large
leather chair in the comfort of his home with his eyes glued to the large 52’ movie screen. He
had just returned home from the annual general meeting with the shareholders of his
company, OneLogix.
As the scene of the storm engulfing the ship flashed in front of his eyes, his mind drifted.
Unfortunately, this was in a direction that would not allow him to relax. He could not help
but to relate the situation that the captain faced to his own. He recalled vividly the traumas,
the anxiety, and the fears that his company had faced since its formation in 2000 – in
particular the company’s early years. Indeed, the ‘near death’ experience of OneLogix in the
early 2000s mimicked the kind of challenges faced by the ship’s captain.
OneLogix was bursting with enthusiasm when it listed on the Johannesburg Stock
Exchange’s main board in 2000. The South African economy was in a high growth phase
1
Ian Lourens is the CEO of OneLogix Group. He was appointed to the position in 2003, having
established and headed PostNet, one of OneLogix’s key subsidiaries. This case study is based on two
formal interviews conducted with Ian Lourens as well as numerous other personal communications,
meetings and interactions between the authors and key people from OneLogix.
2
and the company’s diversified logistics offering seemed perfectly placed to take advantage of
the imminent consumer boom as well as an evident migration to using technology-based
logistics solutions. However, reality panned out somewhat differently to management’s
plans. It became increasingly evident that OneLogix was “a hodgepodge of a variety of
businesses Lourens and his equally fearless business partners had bought giving little
thought to how the final product would function” (Doneva, 2011).
In the words of Lourens:
We started with a bang and ended with a whimper ... Far from our initial vision of being
“something for everyone”, by 2002 we were faced with some difficult decisions about
what to do with the company. PostNet [OneLogix’s Parcel Delivery Business] was one of
the pillars of the business at this stage, as was VDS [OneLogix’s Vehicle Delivery
Services Business]. As such, VDS, PostNet and another business Media Couriers, were
the one real substance of the business, and there were probably eight or nine other
businesses inside the group that were hopeless failures. Do we close this business down
and lose a lot of money? Take our businesses that we brought to the table back off the
table and hope to recover in that sense? Or was there another route to take? We were
faced with tough choices and needed to take some difficult decisions.
Amid the challenges, he fondly remembered his management team’s grit to bite the bullet
and continue with their business almost against all odds to eventually emerge stronger, so
that a decade later the business had transformed to a flourishing enterprise that was
profitable, increasingly diversified and faced a range of exciting opportunities. For this
reason, above all, Lourens valued his company’s entrepreneurial approach to solving
challenges. Against the backdrop of uncertainty and the highly competitive business
environment in South Africa, the entrepreneurial growth strategy appeared to be a critical
success factor. Perversely, the same entrepreneurial growth strategy evidently carried
significant risks that had almost resulted in the collapse of OneLogix in the early 2000s. As
Lourens noted, this entrepreneurial spirit inside of the group had been critical to the success
of rebuilding the business:
When we knew there was a market and we had a customer, we would say, "Yes,
there's business, let's go and get it." To be honest, we didn't write a business plan, and
articulate the whole thing and say we have a five-year plan and we ought to do this.
We just said, "Here's an opportunity, let's go." We were still in that mindset, that
classic entrepreneurial mindset, which is not something to be that proud of, because
you don't really think through to the long-term that thoroughly.
Despite having instilled formalized control structures to limit the risks of this informal
entrepreneurial approach, many stakeholders of the company still found the approach too
risky. This risk seemed to be heightened by the fact that by 2014 many members of the
senior management team were moving towards retirement. As a result, with the group now
in healthy shape, there was growing pressure to set up more formalized structures that
would position the company for the next wave of growth. By 2014, it was evident that a
balance between entrepreneurial activity and business efficiency had facilitated the recovery
of OneLogix and, ultimately, fostered the group’s success.
But, this begged a critical question: “Could this balance be maintained?” That was the main
concern Lourens had as he peered forward from the captain’s position in 2014:
I can't see that the transition [to become more formalized in planning] is going to be
too traumatic, but it's going to be something the management across OneLogix will
have to apply their minds to. We're going to have to be more explicit and more
mindful of exactly what it is we're doing as opposed to our current culture, which
3
starts with allowing it to happen organically and then we come along and we hold it
together. I think those days are probably behind us, so we're going to have to get
much more formal in our approach. I'm hoping we don't lose the essence of the
entrepreneurial approach; I don't think we will but that's going to be a big challenge.
Organization Background
OneLogix was listed on the Johannesburg Stock Exchange in 2000, as a conglomerate group
of a number of companies specializing in logistics services in South Africa. Since its
inception, growth of the group had been driven by its entrepreneurial internal start-ups and
the strategic investing and selling of companies in order to develop its core competencies and
establish its leading market position in the specialized logistic industry.
Supporting the group’s operations was a well-defined operating model that had an emphasis
on a decentralized management structure. Leaders of the companies under the group had
been empowered to build its businesses through entrepreneurial acquisition and/or internal
startup as long as it is aligned to the OneLogix’s operating model. Exhibit 1 depicts the
operating model of the group and the specific business model to which existing companies in
the group, or companies targeted to be acquired, must conform.
Exhibit 1: OneLogix’s Operating Model
In explaining the spirit and ethos of this model, Lourens noted:
OneLogix’ executive directors typically identify an acquisition opportunity and then
enter into somewhat lengthy, detailed and confidential discussions with the
entrepreneur of the company that OneLogix is interested in investing in. These
discussions are broad based and are aimed at determining the suitability and
propensity of the business and entrepreneur to fit into the OneLogix operating model.
This process is multifaceted since it also addresses purchase price, legal obligations
4
that we'd expect the entrepreneur to commit to, such as signing restraints and
employment contracts, and many other issues relating to our requirements, such as
fleet commitments. Our process also determines the culture and ethics of the
operation, its market positioning, competitive advantages and growth potential,
strength of management and so on. Upon this hurdle being sufficiently addressed, a
heads of agreement is put in place to establish the parameters of the deal subject to
various legal obligations faced by us, including the fulfilment of a suitable due
diligence. Typically this due diligence is undertaken by the executive team of
OneLogix, together with a credible professional agency, if necessary.
The point to note is that OneLogix executives are intimately involved in the process
and are continually making judgments as to the suitability of the acquisition. So once
a decision is taken to proceed, all the necessary acculturation of the acquired business
is completed at the highest level. This obviates most of the difficulties that may arise
in the post-acquisition integration phase. So the platform for an efficient integration
is set.
Unlike in the days when OneLogix was first formed, from the mid-2000s onwards, the
leaders of the companies under the group had a growing list of group’s services at their
disposal to support them in driving business growth in the niche specialized logistic service
market. The group’s services established the necessary efficiency and effectiveness in helping
each company to align to the group’s operating model especially in the area when they were
considering which companies they would like to invest in and how these companies would be
integrated into the group.
Drawing on the observations made by Lourens in 2014 about the acquisition and integration
processes:
The integration process essentially revolves around finance and administration;
information technology; human resources; and operations [Exhibit 1].
In the case of finance and administration, as the due diligence progressed, we would
get a clear idea of the strength and quality of the new finance department of the
company that OneLogix was investing in. Typically, we would require adherence to
our standardized management reporting, as mandated within OneLogix’s operating
model, which sets out formal monthly reporting requirements and dictates financial
controls for debtors, creditors, cash books and so on. We have a very good, tried and
tested cash flow management and reporting model, which would be implemented by
the new company at the outset. Simultaneously, our internal auditors would visit the
company and provide an independent verification of financial and
operational controls and set up regular interactions. Aside from monthly executive
reports and meetings, continual informal interaction between the Group Financial
Controller and appropriate staff in the acquired company would commence. Initially,
this would be at a fairly intensive level, but once an appropriate equilibrium is in
place, this would be on a less intensive basis. Our treasury excess cash and
deployment methodology is also immediately put in place. A big change for most of
our acquirees is the introduction of a formal budgeting system, which is again
implemented at the outset and formally monitored at the monthly Group Executive
meetings. Capital allocation for the company is now assumed by OneLogix and is
dealt with in the budgeting process. IFRS auditing and accounting standards are
implemented by the Financial Controller. This entire process is implemented on a
formal and informal basis, with both processes running concurrently and interacting
with each other.
Similarly, integration of payroll systems occur as is the case with implementation of
5
information technology systems, in similar rigorous and collaborative ways between
OneLogix’s group services and the acquiree. Levering of group procurement
synergies, such as purchasing of fuel, tires and spares is also immediately activated,
the extent of which is determined by the specific needs of each new acquiree.
Similarly, tried and tested operational efficiencies are introduced on and as-and-
when needed basis by appropriate staff, including in workshops, driver management,
training, storage and health and safety procedures.
General strategy is a continuing process and flows naturally and seamlessly out of the
initial discussions held between senior management teams. This process has worked
well for the group over the past few years, although we're continually learning and
adapting our process to better add value and efficiency to the entire acquisition
process.
It is noted that while the group’s services provided a rigorous and systematic process to
ensure, as much as possible, the smooth integration of the company that is being acquired
into the group. However, as Lourens noted, the leaders of each company still are very much
able to exercise their entrepreneurial instinct in managing the company. The
entrepreneurial spirit is encouraged to include identifying companies that are most suitable
to invest in and identifying new areas in which to operate:
We would set ourselves targets and we would look at ways to achieve these targets.
For instance, we're thinking about Africa right now. Everybody knows that they must
go and find what's going on in Africa and bring back ideas … I'd be sitting in my office
and somebody would walk in and say, "I've got an idea," and I'd stop and I'd listen to
them … There's a huge amount of informal interaction that goes on in our
organization, which then works its way into the formal structures. In the formal
meetings that we have, we will identify things that we have to do, and then they just
take a life of their own in terms of morphing, through the informal structures and
entrepreneurial activities, into an outcome. We don't sit around the table and say,
"Now we're going to think laterally. Let's have a think session." We've never had a
thing where we'll sit around the table and say, "Let's write down all the ideas we want
to do." We've never ever done that.
In studying OneLogix’s recovery from the depths of 2003, it is evident that these
decentralized management structures, with support from the group’s services, were
increasingly important success factors in helping the group nurture a strong entrepreneurial
culture across all its companies. In turn, this business culture helped OneLogix grow its
revenue rapidly and bolster profitability significantly over the years. In describing the model,
Lourens noted that the OneLogix operating model has been to focus on organic growth,
supplemented by suitable acquisitions and internal company start-ups. More specifically,
Lourens observed:
Organic growth is the result of a continual, coordinated and multi-faceted approach.
Strong and committed management teams are in place who inherently understand
their market dynamics and how best to realize delivery of sustainable services. This
prized strength is underpinned by the group’s “center” which has the ability to speedily
anticipate and adapt to opportunities and circumstances, supported by an ever-
improving business management system … OneLogix has an established record to date
of successful implementation and integration of acquisitions. Typically the group
targets a controlling interest in businesses operated by the founding entrepreneurs that
have a compelling value proposition in well-defined markets and complement and
extend the reach of the group’s existing market offering.
6
Critically, beyond a series of successful acquisitions, OneLogix has seen a number of new
enterprises born inside of the group. Arguably, the group executive team’s proven
entrepreneurial capabilities has enabled kick-starting new ventures to take advantage of
market opportunities. As an example, OneLogix Linehaul, which is 75% owned by the group,
was started in 2014 and has proven to be profitable from the outset. In keeping with the
business model of specialized logistics, OneLogix Linehaul specializes in the cross-border
movement of commodities and general freight. Perhaps more important to note is that
OneLogix Linehaul was the third successful startup born within OneLogix, the others being
CVDS (2007) and OneLogix Projex (2010).
As at the end of 2014, the group had 11 companies under its portfolio with shareholding
interests in these companies ranging from 40% to 100%. The group had a common vision
that each of the group’s companies be the supplier of preference to its respective market in
recognition of its product quality and customer service excellence. In the words of Mr Sipho
Pitanye, Chairman of OneLogix:
The group defined its purpose as being at the forefront of world-class logistics and
related services for the entire southern African region. This purpose is being achieved
by the group, and moreover I am proud to confirm that OneLogix helps drive an
efficient logistical infrastructure in the broader region, which is critical to global
competitiveness.
Exhibit 2 shows OneLogix’s reporting structure and shareholding interests.
7
Exhibit 2: OneLogix’s Group
One of the most valuable businesses in the group’s portfolio is its Vehicle Delivery Service
(VDS) business under the company OneLogix’s VDS. OneLogix’s VDS was the lifeline of the
group during its most difficult time. Besides providing the necessary revenue streams that
helped to keep the group afloat, OneLogix’s VDS allowed the group to develop new
innovations in logistics and test out the innovation’s efficiency and effectiveness before
rolling it out to all its businesses. This not only enabled the group to grow its specialized
logistics services rapidly, but also gave the group a capability to extend its influence and
acquire leading market positions in Southern Africa’s logistic industry. Exhibit 3 shows the
group’s geographic footprint as of 2014.
8
Exhibit 3: OneLogix’s Geographic Footprint
The main service that generated more than 90% of the group’s revenue came from its
specialized logistics services business. The other two revenue generating services were retail
courier services (contributing to 2% of its revenue) and other logistics-related services
(contributing to 7% of its revenue). Because the majority of the revenues were generated
from well-defined market niches in the specialized logistic services industry in which
OneLogix had established a strong market position, the barriers to entry faced by entrants
also were relatively high. The full details of each of the companies owned by OneLogix and its
associated customers and operations were provided in Exhibit 4.
9
10
Exhibit 4: Businesses Owned by OneLogix
As a result of the well-managed entrepreneurial activities and the efficiency of these
activities, the group had been able to flourish financially. Compound annual growth over the
five years from 2010-2014 was 20.8% for trading profit, 25.1% for headline earnings per
share, 24.8% for core headline earnings per share and 29.3% for earnings per share. In the
2014 financial year group revenue increased by 25% from R1,040 million to R1,304 million
11
on the back of continued organic growth, as well as the maiden contribution of OneLogix
United Bulk for a full financial year. Also, newly acquired Madison, and recently formed
OneLogix Linehaul, had contributed to revenue for the first time in the latter half of the 2014
financial year. Perhaps equally important is that growth had been underpinned by strong
cash flows from operations. In the 2014 financial year this figure has increased 37% to
R133.4 million due to the demonstrated ability of the group to convert earnings into cash in
light of a keen focus on working capital management.
Exhibit 5 shows the five-year financial statement of OneLogix for the period 2010 to 2014.
Exhibit 5: Five-Year Financial Statement of OneLogix from 2010-2014
The market also had responded to the group’s financial performance, and OneLogix share
price appreciated and outperformed the JSE index (Exhibit 6a) as well as peers, competitors
and comparators (Exhibit 6b) by wide margins. In addition, relative to its peers, competitors
and comparators, the group also did well operationally and financially, as shown in Exhibit 7.
12
Exhibit 6A: Share Price of OneLogix versus JSE ALSI Index
(2003 to 2015)
Exhibit 6B: Share Price of OneLogix versus Peers (2003 to 2015)
13
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
OneLogix
Revenue Growth (%)
-2.2
19.3
45.6
58.2
56.9
94.6
-20.0
21.1
41.3
27.6
16.2
25.3
EBIT Growth (%)
-0.4
0.8
0.2
0.2
0.7
0.8
-0.3
0.3
0.4
0.2
0.0
0.3
Headline EPS Growth (%)
-79.1
233.3
123.3
16.4
23.1
41.7
-14.0
81.2
-10.4
28.9
2.4
39.4
Return on Assets (%)
-26.5
15.6
21.0
15.8
11.7
10.9
5.9
8.8
8.6
9.9
9.5
8.9
Return on Equity (%)
-53.2
29.1
37.3
29.2
27.2
26.9
14.2
20.7
20.3
23.1
23.5
24.3
Net Debt-to-Equity (%)
15.5
7.2
20.4
44.0
71.6
63.0
50.4
23.6
34.8
25.9
56.9
60.4
Cargo Carriers
Revenue Growth (%)
5.1
9.9
-7.1
-4.8
20.1
-1.2
15.1
-8.1
23.1
8.7
21.5
26.3
EBIT Growth (%)
23.2
61.6
49.0
5.7
-2.6
-11.7
-17.5
48.4
-16.4
33.3
11.1
35.9
Headline EPS Growth (%)
-46.1
249.1
41.5
52.0
-9.8
38.5
-57.0
44.1
-32.7
-24.6
110.0
72.0
Return on Assets (%)
1.7
5.6
7.2
9.7
7.2
8.5
3.3
4.6
2.8
1.9
3.4
5.3
Return on Equity (%)
3.9
12.8
14.4
17.6
13.4
15.4
5.8
7.9
5.1
3.7
7.4
11.5
Net Debt-to-Equity (%)
38.3
-7.9
-4.1
3.6
19.9
29.3
6.5
7.6
34.3
42.1
46.5
22.9
Imperial
Revenue Growth (%)
14.8
9.1
21.2
27.0
0.6
2.7
-6.6
2.3
21.0
25.0
14.3
12.1
EBIT Growth (%)
21.3
4.8
37.0
32.0
-25.0
-10.4
-18.0
33.2
37.0
27.6
10.3
0.6
Headline EPS Growth (%)
22.1
13.9
33.1
10.0
6.0
-47.2
-25.0
101.7
32.7
15.3
10.8
-1.9
Return on Assets (%)
7.1
7.2
8.6
6.9
6.7
-2.1
4.3
6.0
7.2
7.2
6.8
5.9
Return on Equity (%)
18.6
19.3
26.4
25.1
24.7
-7.9
14.9
18.6
22.2
22.4
21.3
20.0
Net Debt-to-Equity (%)
55.6
58.4
78.0
91.4
82.1
81.1
49.6
38.8
30.6
39.0
49.7
63.2
Barloworld
Revenue Growth (%)
-3.9
6.0
2.8
13.3
-6.9
17.8
-3.3
-9.8
22.0
17.5
1.6
4.4
EBIT Growth (%)
21.7
57.0
-15.2
20.9
-43.7
11.4
-8.5
-30.3
44.6
31.7
11.6
15.1
Headline EPS Growth (%)
-25.1
31.3
16.3
35.6
30.8
-61.1
-40.6
-65.0
281.5
53.3
0.0
9.5
Return on Assets (%)
4.4
5.8
6.5
7.3
6.8
3.8
2.1
0.0
3.6
4.7
4.2
5.1
Return on Equity (%)
10.8
14.5
16.4
18.7
18.3
10.3
5.4
-0.1
8.9
12.3
11.4
13.3
Net Debt-to-Equity (%)
52.1
59.5
63.5
61.7
81.7
35.3
66.2
54.6
35.5
56.7
47.5
40.9
Grindrod
Revenue Growth (%)
-9.9
54.4
150.4
67.9
43.5
88.0
-17.9
6.1
22.1
-24.0
-42.6
-11.2
EBIT Growth (%)
32.8
294.2
42.3
-14.0
78.3
84.4
-53.3
-23.1
-13.5
-27.2
-18.7
38.1
Headline EPS Growth (%)
42.7
141.5
53.1
19.1
19.3
80.3
-59.4
-11.1
-35.3
27.7
40.4
-25.9
Return on Assets (%)
12.0
23.1
22.7
17.5
14.8
18.8
7.1
6.3
3.4
4.2
4.9
3.5
Return on Equity (%)
42.4
75.7
61.4
42.3
41.0
44.6
15.1
13.5
7.0
8.7
10.6
6.8
Net Debt-to-Equity (%)
85.9
80.6
49.5
19.9
23.9
-8.5
3.8
34.3
14.3
1.7
-22.9
-20.7
Value Group
Revenue Growth (%)
22.3
8.1
29.3
23.4
16.7
14.7
15.4
-1.2
17.5
13.2
8.2
1.5
EBIT Growth (%)
117.1
12.2
5.3
50.2
-66.6
123.9
71.8
3.8
6.7
11.6
-3.5
4.3
Headline EPS Growth (%)
215.7
26.7
18.6
35.1
-78.3
242.3
90.5
9.7
7.3
21.8
-7.3
8.7
Return on Assets (%)
8.8
10.5
10.4
10.3
1.8
5.3
8.4
8.7
8.2
8.4
7.3
7.6
Return on Equity (%)
20.6
21.6
21.4
21.3
3.9
12.9
20.6
20.0
19.1
20.2
16.5
16.2
Net Debt-to-Equity (%)
14.7
6.7
4.8
17.1
38.0
27.1
23.2
13.8
39.0
42.8
21.4
11.5
Exhibit 7: Comparative Statistics with OneLogix’s Peers, Competitors &
Comparators
14
In 2015, due to the high efficiency and effectiveness of the group’s services, OneLogix was
awarded the Top Employers South Africa certification. This certification was awarded by the
Top Employers Institute (TEI) to companies that demonstrate the highest standards of
employee offerings (TEI, 2015). TEI conducted a comprehensive independent research on
OneLogix and assessed the company on all the critical areas of its human resources
environment. Evidence of the research demonstrated the continuous efforts by OneLogix’s
management to optimize its employee conditions and the company’s market leadership in
human resource practices, especially in the development of people. As Lourens noted at the
time:
We focus on excellence. Distinct customer service is non-negotiable, and a proactive
approach to continuous improvement in our operating model ensures we deliver. We
care about what we do, how we do it and all of the people involved. Good faith,
straight dealing and professional conduct define the group.
Africa’s Business Environment
Since the end of apartheid and the establishment of democracy in 1994, the economy of
South Africa had more than tripled in size from just over $100 billion in the early 1990s to
$400 billion in 2014. At the start of 2015, the economy was the second-largest in Africa,
having recently been overtaken by Nigeria, although Nigeria’s population of 160 million was
three times that of South Africa.
Because of the rapid growth in economy over the last two decades, the country displayed a
swiftly growing and sizable middle class. Notably, the main contributors to the country’s
growth of the last twenty years can be traced to the rapid growth in private-sector and
public-sector consumption. Yet, since the recession of 2009, that had followed the global
financial crisis, the economy had been struggling to fully recover, especially with export
volumes and private-sector investment displaying weak performances.
To make matter worst, the country was plagued by two serious structural problems. The first
of these related to social aspects. The official unemployment rate as at 2015 was more than
25%. The situation was so serious that many people in the country had given up searching
for a job. This meant that extended unemployment was much higher than the official rate
and amounted to about 36% of the workforce (see Exhibit 8). Consequently, notwithstanding
relatively strong economic growth over the period 1994-2014, the income inequality and
poverty rates of South Africa had remained high. This, in turn, has contributed to a high
crime rate, which spanned from acts of petty theft to violent crime. All put together, these
attributes of the South African socio-economic landscape had served to deterred much
needed foreign direct investment. The factors at play were captured by Mr Colin Coleman
(in Kangarlou, 2013), the managing director at Goldman Sachs in South Africa:
Perhaps the most striking successes since 1994 are the creation of a growing and
sizable middle class, increased real wages for the employed, and the extension of
social welfare and services to underprivileged communities … Structural
unemployment and racial economic inequality continues to plague South Africa. Five
million jobs have been added in the past 20 years, but insufficient to lower the overall
rate of unemployment. Now 14 million people are working and 7 million are not.
15
Exhibit 8: South Africa Unemployment Statistics (STATSSA, 2014b)
The second structural problem related to physical infrastructure, especially energy
infrastructure, which had not been able to keep pace with growing commercial activities
within the country. Since 2008, the country had faced regular power cuts, estimated to have
shaved at least 1% off annual economic growth. This had made it even more challenging for
businesses to operate in the country (see Exhibit 9). To this end, Mr Nhlanhla Nene, South
Africa’s Minister of Finance, noted (England, 2015)
Our primary challenge is to deal with the major structural and competitiveness
challenges that hold back production and investment in our economy. Electricity
constraints hold back growth in manufacturing and mining and also inhibit
investment in housing and raise costs for businesses and households.
16
Exhibit 9: South Africa’s Electricity Produced & Consumed Statistics
(STATSSA, 2014a)
However, it was not all bad news for South Africa. Driven by strong fundamentals, many
multinational corporations (MNCs) had set Africa as one of its growth priorities (Avasthy et
al., 2015). According to Avasthy et al. (2015), in 2013, growth in Africa had surpassed that of
Asia for the first time and it was forecast that, through ongoing structural reforms and
improvements, the economic growth rate of the region would continue to rival that of
emerging Asia. Amongst other things, the combined effects of a growing population,
improving health care, rising school enrolments, improved education systems, urbanization,
and an expanding middle class, meant good news for businesses. Coupled with Africa’s rich
natural resources, the result was an economic magnet that had drawn in significant foreign
investment in a short time. To this end, Avasthy et al. (2015) reported that between 2006
and 2009, annual private capital inflows had exploded from around US$30 billion to more
than US$80 billion, driven by high rates of return on investment. Notably, as the most
sophisticated economy in the sub-continent, South Africa was a natural choice of location for
a majority of firms seeking a home in the region.
Perhaps more notable for businesses such as OneLogix, operating inside of South Africa, as
well as for locally-owned and foreign-owned firms using South Africa as their base country to
pursue regional opportunities, it was critical that transport infrastructure and associated
logistics services lend themselves to ease of movement of goods, capital, information and
people. However, on this score, as much as the region offered opportunity, South Africa
faced challenges. Although South Africa was widely considered to be one of the best amongst
the BRICs nations in terms of transport infrastructure and ranked best when compared to
other African countries, the country was still far behind other developed nations. South
Africa’s transport infrastructure and logistics performance was average when compared with
approximately 180 nations according to the World Bank and the International Monetary
Fund (IMF). Moreover, a survey conducted by KPMG, that went beyond the evaluation of the
delivery aspects of supply chains, by examining the planning, sourcing and return aspects of
supply chains, not normally measured by the World Bank and IMF – found that, on these
criteria, South Africa did not perform well.
17
In taking this broader stance on assessing logistics and supply chain performance, it is
evident that, by 2015, South Africa faced a number of challenges or constraints. In the case of
road transport, limitations included the rising incidence of tolling roads; rampant fuel price
inflation aggravated by sharply higher tax rates on fuel; and high export costs caused by
inefficiency in port operations, bureaucratic inefficiency and high administrative burdens
(Watson, 2014). Rail transport also was expensive and inefficient (Fund for Research of
Industrial Development, Growth and Equality [FRIDGE]). The state-owned rail transport
business, Transnet, had freight rail tariffs that were about nine times higher than those in
the United States for coal (873 per cent), seven times higher for petroleum (708 per cent)
and more than four times as high for automotive and industrial commodities (431 per cent).
On average, rail tariffs were almost five times more expensive (486 per cent) compared with
US Class 1 tariffs. Despite this relatively high cost of rail, Faulkner et al. (2013) note that rail
is significantly cheaper than road transport in South Africa. Yet, lack of reliability and
flexibility, and low levels of efficiency, ensured that road freight remained the primary mode
of freight transport (Faulkner et al., 2013).
To boot, the predominance of road use imposed additional costs on domestic producers and
reduced the competitiveness of local exporters. Edwards and van de Winkel (2005) found
that the average mark-up in transport services was 101 per cent between 1994 and 2002 if
intermediates are excluded from costs and 47 per cent if they are included (Faulkner et al.,
2013). A further challenge to the effectiveness and efficiency of South Africa’s transport
infrastructure and logistics services was poor skills and low technology usage (Watson,
2014). Research project conducted by KPMG in 2013 to benchmark supply chain skills in
South Africa against BRICs nations showed that South Africa was under-skilled. KPMG
assessed skills in 27 competencies across three categories: foundational sills; professional
skills; and occupation-related skills. At a foundational level, the study revealed that South
Africa was on par with the BRICs on only two of the 27 competencies. The biggest gap
identified was in analytical skills, which are important in optimally executing the work
required in supply chain. Such a gap in the skills set of supply chain managers created a
barrier in achieving higher maturity in the industry in South Africa. Another equally
important factor is technology. In South Africa, technology had not been widely embraced.
In some facets of supply chain, available technology was optimally used, particularly in the
logistics sector (track and trace). However, as a rule, there was exceptionally low use of
information to optimize supply chain behaviors (Watson, 2014).
Finally, in acting as a conduit for regional transport and a provider of logistics services across
border, it is worth noting that South African service providers were met with conditions that
vary dramatically from country to country (Avasthy et al., 2015). While some countries in
sub-Saharan Africa sat in the top half of the World Bank's global "ease of doing business"
ranking, most of those in Central Africa were in the bottom quartile. Only one African
country, namely Ghana, was in the top quartile by this measure. Moreover, Africa was home
to nine of the 20 most corrupt countries in the world, according to Transparency
International. The quality of logistics infrastructure also varied significantly across the
continent (Avasthy et al., 2015). For example, by 2015, the airfreight hubs of Nairobi
(Kenya), Addis Ababa (Ethiopia) and Johannesburg (South Africa) had relatively good air
links, providing sufficient capacity to meet current demand in those regions. By contrast, air
cargo capacity in West Africa was still limited, although there were projects in Luanda
(Angola) and Abuja (Nigeria) that would deliver additional capacity within the next few
years, allowing those cities to serve as air hubs for West African countries, thereby
promoting regional connectedness. Similarly, relying on 2014 data, there were significant
variations in the logistics costs and lead times required to access different African markets;
this was due to differences in the ease of cross-border trade. For example, importing auto
parts through Port Appa, Nigeria, took more than three months. Importing the same parts
through Durban in South Africa took only one month, with port-capacity limitations and
longer handling times accounting for most of the difference. Similarly, clearing customs at
18
airports in the Democratic Republic of Congo could take more than 45 days, while customs
clearance in South Africa took only a few days. This meant it might actually be faster, if not
necessarily cheaper, to ship goods overland to the Congo from South Africa (Avasthy et al.,
2015).
Preserving an Entrepreneurial Approach & Sustaining
Operational Excellence
The Formative Years
The origin of OneLogix can be traced to April 1994 when several of its founders started a
company called PostNet. At the time of formation, PostNet’s primary focus was to provide
courier services to consumers via its business service centers. It was a much-needed service
amid South Africa’s changing political climate going into the country’s democratic transition
and given the capacity constraints of the state-owned South African Post Office. Not
surprisingly, PostNet grew in tandem with the country’s liberating political conditions and
accompanying economic growth. Indeed, from modest beginnings, by 2000, PostNet had
expanded to around 200 business service centers across the whole of South Africa, and
showed enormous promise as a company.
Over the same period, the “honeymoon” years of South Africa’s political transition had been
accompanied by a listings boom in small-cap stocks on the Johannesburg Stock Exchange.
The concept of fourth party logistics was in vogue and a widely followed favorite amongst
investors was a fourth party logistics company, DNA Supply Chains, that utilized intellectual
expertise to manage various supply chains by using outsourced physical infrastructure such
as warehouses, trucks and even people. The enthusiasm amongst investors towards
businesses, such as the recently-listed DNA Supply Chains, flowed from widely-held views in
industry that there would be a dramatic increase of outsourcing of the supply chain, as
companies realized the need to focus on their core businesses; that the logistics and supply
chain management industry was on the cusp of a dramatic move towards the use of internet-
based solutions; and that industry was becoming increasingly aware of the benefits of a well-
managed supply chain, including the substantial cost savings that could be achieved
(Halwindi, 2002). Demand from the market seemed strong, and expectations of high returns
levered off a low asset base. Businesses such as DNA Supply Chains epitomized this
revolutionary concept at the time.
In 1999 Tony Wiese, a chartered accountant and entrepreneur with a solid reputation in
assisting the growth of the successful logistics company, Super Group, approached the
finance house CorpCapital to set up a new company specializing in the logistics arena. In
early discussions serious consideration was given to naming the new company, DotLogix,
such was the belief that a new economy positioning would pave the way to a unique product
proposition in the market. Ultimately, by combining and blending mature and new
businesses, the group OneLogix was formed, with the aggregated business being described as
“an end-to-end supply chain fulfillment service”. In 2000, OneLogix was listed on the
Johannesburg’s Stock Exchange via a reverse listing into a cash shell called Venmil,
accompanied by abundant confidence and optimism.
Given that the businesses that were acquired to make up OneLogix were historically owner-
managed businesses, the OneLogix group structure followed a decentralized management
approach with no centralized control. This served to retain and promote the owner-managed
mindset, and each business in the group was purchased with a profit warranty over a period
of two years. There was a buzz about OneLogix, and the early days were marked by a
euphoria shared by management, staff, suppliers and even shareholders. The share price at
19
listing was some 80 cents which soon rose to 100 cents in September, some five months after
listing.
However, contrary to expectations, the profit warranties that were put in place on each
business, and the decentralized management structure without centralized control,
translated into material difficulties, most notably difficulty in integrating the various
companies into a cohesive group. To boot, the market buoyancy of the late 1990s started to
dissipate, and the strong economic environment that had dominated the conception period
of OneLogix came to be replaced by a much weaker environment in the formative years of
OneLogix. This resulted in fierce competition among logistics service providers, placing
pressure on OneLogix’ revenue growth and operating margin. This was further aggravated by
the slow-down of e-commerce activity worldwide following the bursting of the dot.com
bubble. The management of OneLogix quickly realized that the start-up businesses within
their portfolio were not working and that the successful business they envisaged was in
trouble.
OneLogix’ operations had been further challenged by a pro rata share repurchase
arrangement in June 2001, which saw R54 million from the once-cash-flush Venmil shell
returned to shareholders. This proved to be a divisive move by the listing partner,
CorpCapital, which by then was the 90% shareholder. Management was disappointed that
this amount of capital was taken from the company so soon after listing. CorpCapital had
certain short-term expectations from OneLogix, whereas management from the various
businesses had a longer-term horizon and the start-up businesses were consumed with
short-term start up issues. These various imperatives served to complicate the reaching of
consensus on the business philosophy and also caused confusion about where the group was
headed strategically. The start-up businesses posted losses, lacked productive operating
procedures and cultures, demanded valuable management time and spread seeds of division.
Exhibit 10 shows the reporting structure of OneLogix in 2000.
Exhibit 10: Reporting Structure of OneLogix in 2000
Consequently, the stock price of OneLogix fell by more than 40% by the end of the year. By
2002, many of the businesses brought into the group at the listing had “failed hopelessly” in
the words of Lourens, “to the extent that these failing entities had the ability to put the whole
OneLogix business under water”. Aside from the huge challenge of getting the disparate
group of businesses working together effectively and profitably, Lourens also noted the “huge
lessons learnt about private equity and the undue pressure that was exerted on the business
by the private equity owners to extract profit and capital to the detriment of the entire
OneLogix business.”
20
The Consolidation Years
From the time of the listing of OneLogix and into 2002, the group consisted of a diverse –
and evidently disparate – set of businesses with involvement inside and outside of the area of
specialized logistic services. By the time financial results were produced in 2002 it was
evident to insiders, as well as outsiders, that most businesses within OneLogix were not
working and that they were a huge drain on OneLogix’s limited cash resources. Whilst the
established businesses, including PostNet and VDS, were doing well, management needed to
rethink OneLogix’ business strategy and operating model, especially with regard to the
startup businesses that had been brought in at the time of listing on the JSE.
The decision take by Lourens and his team was to sell or close down loss making businesses,
and reposition the remaining profitable, cash generative businesses into a niche logistics
provider that was focused on high-margin, cash-generating businesses with more predicable
earning streams. This required the business to be restructured through the course of 2002,
and recapitalized in 2003, with the raising of R10 million through the issue of 100 million
shares at 10 cents a share. Private equity owners agreed not to participate in the rights offer
whilst OneLogix management drew on their private resources to fund the rights offer to their
fullest extent. The result was a business that by the second half of 2003 was management
owned, recapitalized to the extent that it had sufficient working capital and being reshaped
through closures and disposals.
This set OneLogix on a new course. Lourens noted:
Cash was generated primarily by VDS and PostNet; with PostNet giving us annuity
income. As VDS became more successful we used the cash flow from VDS and PostNet
to systematically expand our fleet and expand our property portfolio. We had decided
that we wouldn't lease property, we owned property because our requirements are so
specific. If we were to lease property, the rentals would be outrageous, because it's
such an atypical property. The free cash flow allowed us to do all that expansion. By
2008 the VDS fleet was more than 200 vehicles, representing very big growth.
This was a bold move by its senior management – but a necessary move to resurrect the
company’s financial health. In this environment, the executive management was under
enormous pressure to close down underperforming businesses and rationalize businesses
within a very short time. Because the businesses were performing badly, the bank funders
and equity owners became increasingly edgy about the future of OneLogix. As noted, this led
to the decision that saw several companies, especially the start-up businesses, disposed of or
closed.
The two guiding factors in the decision about what to sell were that either the business was
not profitable and deemed not worthy of rescue, or the business was not aligned to
OneLogix’ revised strategy to reform as a niche logistics provider. One of the first major
decisions was to sell off GoLogix Distribution, the biggest loss maker in the group. Control
over the business was unsatisfactory and, in most instances, pricing structures were
incorrect. In June 2002, this business was finally disposed of to a consortium which included
management of the business. ThinkLogix Strategic Sourcing, IQLogix, FPLogix, DotLogix
and BizzNet were closed at much the same time because buyers for these businesses could
not be found. The disposal and closures of these businesses consumed an inordinate amount
of management time and emotional energy. Lourens, COO at the time, conducted the
retrenchments interviews himself. Many small group sessions were held with the “survivors”
to openly discuss the financial situation and action plans for the way forward. Initially,
OneLogix Couriers was not closed down, but underwent a rigorous rationalization exercise.
Its major customer was the PostNet store network and closure was deemed too disruptive to
21
the existing profitable operation. Ultimately, this business, the last of seven that were culled,
was closed in October 2002. See Exhibit 11 for OneLogix’s reporting structure in 2008 after
the consolidation.
OneLogix
Media Express
Established in 1992, Media Express is a market leader providing
logistics solutions to the print and media industry.
PostNet
PostNet first opened its doors in 1994 when there was an urgent need
in South Africa for an operation that could deliver a range of efficient
business solutions.
Press Support-Magscene
Press Support is a distributor of printed news matter and magazines.
It was founded in 1995 and today has branches in Johannesburg,
Durban and Cape Town.
22
Vehicle Delivery Services
Vehicle Delivery Services (VDS) is a major operator in the auto-
logistics arena both within the borders of South Africa and
throughout the southern African region.
CVDS
Commercial Vehicle Delivery Services
Commercial Vehicle Delivery Services transports new commercial
vehicles over 3.5 tons on their own wheels to destinations throughout
South Africa and neighbouring countries.
4Logix-Gijima
4Logix and Gijima provide supply chain assessment, design,
realization and integration, adding value to clients’ businesses
through innovative supply chains solutions.
Exhibit 11: Reporting Structure of OneLogix in 2008
The net result was that a “new company” that was aligned to a strategy of specialized logistics
services was formed. This eventually evolved into the operating model that was shown in
Exhibit 1. This resulted in a lot of turnover and management movement across OneLogix’s
businesses to realign to this new business strategy. The OneLogix’s Financial Director
resigned and was replaced by Cameron McCulloch, who was at the time involved with
PriceWaterhouseCoopers who had managed the OneLogix’s audit. Later that year, the
founder of VDS, Neville Bester was made a main board member. Tony Wiese resigned as
CEO, another founding member resigned; and Lourens was appointed CEO. CorpCapital was
still, by far, the majority shareholder, although the extent had dissipated because vendors’
shareholding had been allocated post the warranty period which had come to an end. These
changes and disruptions added to the stresses of the already cash tight company. Staff
morale was at rock bottom and the share price of the company fell to its lowest possible price
of 1 cent in early 2003. Lourens recalled:
We closed down certain businesses, we had certain financial liabilities that we had to
address. I personally had to retrench 140 people at a company called GoLogix Careers
... That was my job, and that was one of the most difficult things I've ever done in my
life … You can see we consolidated our businesses between 2002 and 2004 …
Sometimes the prevailing feeling was this was not going to work and that we had
better get out with what we could. Whenever push came to shove we decided that it
was best to stay, because it had more potential for us than if we went our separate
ways. We've learned a lot of lessons. In this, we learned very clearly what doesn't
work, and we incorporate what we thought would work as a result of it. For example,
we agreed, budgeting would always be realistic. It was what could we really, honestly
deliver as opposed to trying to get blood out from a stone.
Fortunately, amidst all these challenges, the group’s PostNet and VDS businesses continued
to be profitable. This allowed the executive management to convince bankers and other
funders to provide a last minute reprieve late in 2002 with very strict conditions attached to
the turnaround strategy. The year ending May 2003 financial results reflected an R18
million Net Income after tax loss. Headline earnings per share were negative at 0.3 cents.
Numerous small group sessions were held with staff to communicate the latest
developments. They proceeded with a rights issue to allow the business to continue and
hopefully produced some compelling financial results. This action proved to be a decisive
one.
23
Neville Bester, founder of VDS was prepared to underwrite the offer, together with other key
OneLogix executives. The board decided to raise R10 million from shareholders to fund the
business. CorpCapital agreed not to participate in the rights offer. In May 2003, OneLogix
successfully completed a R10 million rights issue at 10 cents per share. Almost the entire
issue was taken up by management. Their strong relationships and collaborative effort paid
off. This activity entrenched management ownership in excess of 51% and for the first time
CorpCapital relinquished control of the group. CorpCapital at the time was preoccupied with
their own internal survival issues brought about by the damning accusations of one of their
non-executive directors. The message was clearly sent to the market that the management
team of OneLogix believed in the future of the business.
The management teams backing also demonstrated strong leadership and was a major boost
to staff morale. Very soon, after the success of the rights offer, OneLogix seized upon the
prevailing circumstances within CorpCapital, to purchase CorpCapital’s shareholding. In
May 2004, just a year after the rights issue at 10 cents a share, OneLogix repurchased
approximately 84 million shares (30% of the company’s ordinary share capital) from
CorpCapital at 12.5 cents per share. All repurchased shares were subsequently de-listed and
cancelled. A further 4.5 million shares were repurchased as a result of the consequent
mandatory offer to shareholders at the same price. These shares were taken up by Java
Capital, corporate advisors to OneLogix and heralded the complete departure of CorpCapital
from OneLogix. Java, at least, also believed in the future of OneLogix. Board changes were
effected to allow for Andrew Brooking of Java to take a seat on the board. In May 2004, the
group successfully transferred its listing from the main board of the JSE to the newly
established Alternative Stock Exchange (AltX), the market for shares in smaller companies.
OneLogix was the third company to list on AltX.
It was also during this time that the senior management of the group decided to establish the
group’s support services that were given the tasks to (1) monitor the financial performance
of each company; (2) control cash flow centrally; (3) engage senior management of each
company on potential ‘danger’ signals on the horizon; (4) provide strategic inputs to senior
management of each company where necessary; (5) stimulate new business ideas for growth;
and (6) perform human resource and information technology functions. This provided the
necessary structure to encourage tighter integration, coordination and cooperation among
the companies and the group, while still allowing the senior management of each company to
engage in entrepreneurial activities towards its strategic thrust in specialized logistic
services.
The new consolidated and balance approach worked. The group was able to drive huge
synergistic business growth through this approach, while minimizing their risk exposure.
Investments were purposeful and aligned to the new strategic direction and market
responded favorably to this approach. A strong focus was placed on cash management and
the generation of sustainable earnings. This necessitated a comprehensive review of
entrenching existing customers contractually, seeking out further strong customers, ensuring
improved business processes, greater employee motivation, job security and productivity
and getting suppliers to buy into the future of the business.
One of the key companies that enabled this turnaround of OneLogix was OneLogix’s VDS
business. Leveraging upon its renewed strategic thrust and group support services, the VDS
business flourished and established itself in the competitive specialized logistic service
market. This enabled the company to secure large contracts from big car manufacturers in
South Africa, including Volkswagen, General Motors and, perhaps, pivotally, Daimler-
Chrysler. As Lourens recalled:
Daimler-Chrysler (DCSA) had opened up a tender for the delivery of vehicles, and we
decided that we would submit a tender. In fact we got five percent of their work VDS.
24
It was quite a big thing for us; but it was also a nervous time for us because we had to
invest in new equipment, purchase new delivery vehicles and we were going to enter a
completely different market. The contract was with a very demanding customer that
required delivery of vehicles at the highest standards; exact, detailed proof of
deliveries; warehousing that we didn't have; and technologies, such as tracking and
tracing facilities, that we hadn’t yet developed. It was during the process of winning
this tender and meeting the tender requirements that we gave birth to and developed
our information technology systems that have become increasingly sophisticated and
that, today, represent a strong competitive advantage for OneLogix. We were so
diligent, and so scared to mess it up, that we produced the best thing our customers
had ever seen.
The enormous attention towards providing a high quality vehicle delivery service, enabled
through OneLogix’s increasingly enhanced information technology services, paid off. The
initial 5% of DCSA work grew to some 60% within one year. In addition, VDS offered
storage facilities to DCSA in the quest to offer a more effective supply chain management
offering. This necessitated the purchase of additional property. Given its efficiency and
growing market demand, VDS was now confronted with the traditional growth dilemma of
managing and balancing the competing demands of cash flow, service levels, staff
productivity and operational efficiencies. Almost all of the assets acquired during this
period were levered, to the extent that property, plant and equipment on the balance sheet
had grown from R13 million in 2004 to R60 million by 2006. But all of these multifaceted
demands were well managed and soon, after another tender process in 2006, VDS had
secured 85% of the DCSA contract. The invaluable lessons and experiences gained through
the successful VDS businesses were systematically embedded into the group’s support
services which allowed other OneLogix’s businesses to benefit hugely.
To comply with South African legislation aimed to redress the devastating economics
impacts on broader society, the group completed a Broad-Based Black Economic
Empowerment (BBBEE) transaction in August 2005 with Izingwe, who acquired a 25%
stake in OneLogix (Pty) Ltd, a wholly owned subsidiary of OneLogix Group Limited. The
25% included establishing a trust for previously disadvantaged employees of OneLogix’
representing 5% ownership of OneLogix. The chairman of Izingwe, Mr Sipho Pityane,
became the chairman of the OneLogix board of directors late in 2005.
The Growth Years
OneLogix had come a long way from the depths of failure in the early 2000s. For the
financial year ending May 2002, OneLogix recorded a loss of R33 million on revenue of R88
million. With the share price having fallen to the lowest possible price of one cent in the year,
the market value of the company amounted to just R15 million. By sharp contrast, in the first
half of 2015, OneLogix reported annualized revenue of R1.3 billon and bottom line profit for
the last 12 months of R70 million. The journey undertaken by the group to become a
specialized logistics company from 2003 to the present day is summarized in Exhibit 12.
25
Exhibit 12: Milestones of Company Acquisition and Sales
Following a share repurchase of 10.5% of their equity in 2013, the market value of the
business stood at R1.4 billion equating to a share price of 500 cents, some 500 times higher
than the one cent of 2002 and 50 times higher than the 2003 rights issue price. Moreover,
the environment in which OneLogix found itself seemed full with opportunity. As noted by
Prof. Pieter Steyn, principal at Cranefield College of Project and Programme Management,
today there is widespread recognition that organizations that “fail to increase their flexibility
and agility will lose their status as preferred [logistics] suppliers” (Gillingham, 2013).
Arguably, such recognition amongst companies plays to the advantage of businesses such as
OneLogix. As Kate Stubbs, marketing executive at South African-based Barloworld Logistics
noted (in Gillingham, 2013):
26
[Whilst] historically, logistics and supply chain management were perceived purely as
operational areas … this view has evolved to the point where they are seen as critical
business functions that drive business strategies … Most South African companies are
only too aware that they can use their supply chains as strategic tools to drive
competitive advantage.
At the same time, other industry experts argued that whilst there often was a clear vision of
the direction in which companies wished to move with regard to their supply chains, these
businesses also faced a number of constraints. Amongst other things, these constraints
included the costs of doing business, labor unrest, skills availability and infrastructure
issues. Also, it was evident that businesses were not working as closely as needed within
industries and across business sectors more broadly. Further to this, relationships between
logistics firms and state entities such as Transnet, remained strained and had a long way to
go to become functional. In this new competitive environment, it necessitated OneLogix to
be able to continue its entrepreneurial actions and retain high agility whilst, at the same
time, keeping a firm grip on managing risks and sustaining operational efficiency.
The Next Chapter
The movie ended with the captain successfully navigating his ship and crew to safety. The
crew caught their breath, as did Lourens. Aside from sustaining entrepreneurial flair,
maintaining risk controls and promoting efficiency, OneLogix was heading into its next
chapter faced with a tough, unpredictable business environment in South Africa whilst also
having to grapple with the issue of succession as Lourens was just a few years from
retirement.
While a successor had been identified by the OneLogix board, and was being groomed by
Lourens, he still worried a lot about the group’s future. Should the group continue with its
focused strategies on organic growth in specialized logistic services? Or should the group
consolidate its base at a time when they still had the luxury of a “breathing space”? The
logistics market was tightening which made for a more difficult environment. At the same
time, the more difficult environment might result in the opportunity to make acquisitions at
undemanding prices. If these opportunities came up, Lourens was challenged with resolving
whether the group should stay strictly within their self-imposed limits of logistics services or
should they branch out to other industries or services, where the group has competencies,
perhaps this could include activities such as franchising? Should the group go for big
acquisitive growth or focus on a number of small businesses? Exhibit 13 shows the material
issues and risks faced by OneLogix, as reported in their 2014 annual financial report.
Regardless, Lourens firmly believed that none of these strategies can be successful if the
group was unable to maintain the delicate balance between being entrepreneurial and
efficient in all its business entities. At the time, Lourens observed:
This entrepreneurial unstructured process is not going to last forever. The
entrepreneurs that are onboard in the senior management team are going to get older
and the businesses in which they are part-owners are going to have to get bought out,
so obviously the decentralized management structure is going to need a lot more
work, and we are going to get more formalized. It is inevitable that we have to move
in this direction. Also, as we've converted to growing by acquisition and starting
businesses, the question is going to be: "Are their business opportunities out there, and
can we identify the right one at the right time, at the right price?" Also, we have to
think about the decentralized management structure. How structurally are we going
to handle that? I've probably got three years before retiring, and time is not with us.
27
28
Exhibit 13: Material Issues and Risks Faced by OneLogix (2014)
Case Problems
1. Conduct an external environmental analysis on the business environment in which
OneLogix operates.
2. Analyze and discuss the industry life cycles of the different industries in which OneLogix
operates across the phases of its existence.
3. Describe and discuss the challenges faced by OneLogix in balancing creative freedom
among its businesses and the discipline and integration that are needed in order to
identify and meet its market demands.
4. Discuss the strategies that OneLogix can develop to enhance its ability to be
responsiveness to the changes within the volatile business environment in which the
group operates.
29
References
AVASTHY, A., DEKHNE, A., MALIK, Y. & WEYDRINGER, J. 2015. Winning supply chain
strategies for African markets [Online]. Supply Chain Quarterly. Available:
http://www.supplychainquarterly.com/topics/Strategy/20150331-winning-supply-
chain-strategies-for-african-markets/ [Accessed 11 May 2015].
DONEVA, S. 2011. "Profitable" mistakes. [Online] Fin24. Available:
http://www.fin24.com/Finweek/People/Profitable-mistakes-20110418. [Accessed 13
May 2015].
EDWARDS, L. & VAN DE WINKEL, T. 2005. The market disciplining effects of trade
liberalisation and regional import penetration on manufacturing in South Africa.
TIPS Working Paper Series, Working Paper No. 1 - 2005.
ENGLAND, A. 2015. Power crisis knocks South Africa economy [Online]. Financial Times.
Available: http://www.ft.com/intl/cms/s/0/e853a048-bce7-11e4-9902-
00144feab7de.html#axzz3dTEHTDsb [Accessed 19 June 2015].
FAULKNER, D., LOEWALD, C. & MAKRELO, K. 2013. Achieving higher growth and
employment: Policy options for South Africa. South African Reserve Bank Working
Paper.
GILLINGHAM, A. 2013. SA companies must join hands to improve supply chains [Online].
Business Day. Available: www.supplychainquarterly.com/topics/Strategy/20150331-
winning-supply-chain-strategies-for-african-markets [Accessed 12 June 2015].
HALWINDI, N. 2002. Supply chain outsourcing increase firm's turnover [Online]. Cramer's
Engineering News. Available: www.engineeringnews.co.za/print-version/supply-
chain-outsourcing-increases-firms-turnover-2002-11-22 [Accessed 13 June 2015].
KANGARLOU, T. 2013. South Africa since apartheid: Boom or bust? [Online]. CNN.
Available: http://edition.cnn.com/2013/11/27/business/south-africa-since-
apartheid/ [Accessed 11 May 2015].
STATSSA. 2014a. Electricity production declining [Online]. Statistic South Africa. Available:
http://www.statssa.gov.za/?p=4045 [Accessed 17 June 2015].
STATSSA. 2014b. Labour market dynamics in South Africa, 2014 report [Online]. Statistics
South Africa. Available: http://www.statssa.gov.za/?p=4445 [Accessed 17 June
2015].
TEI. 2015. Top Employers South Africa 2015 - OneLogix (Pty) Ltd [Online]. Top Employers
Institute. Available: http://www.top-employers.com/companyprofiles/ZA/onelogix-
pty-ltd/ [Accessed 18 June 2015].
WATSON, M. 2014. South Africa facing supply chain challenges [Online]. Communicate.
Available: www.communicate.co.za/_blog/Communicate_Blog/post/supplychain-
challenges/ [Accessed 12 June 2015].
