THE DEFINITIVE TRUCKING SITE

Nov/Dec 2008

	In our October 2008 edition, we featured Part 1 of a face-to-face interview with Jo Grové, CEO of Unitrans Holdings. In this edition, Patrick O'Leary continues the interview in which he solicits the views of this respected industry leader on a wide range of  subjects pertinent to the industry.
Power Broker  Jo Grové, CEO of Unitrans Holdings, is a hands-on, street-wise trucking ‘boykie’ who has his finger firmly on the pulse of the challenges, issues and daily grind of South African trucking.

JG: We have heard some politicians say in the past that if people don’t believe in this country, they must leave. But that doesn’t make sense because people love this country and are very patriotic. However, crime has done some horrible things to people and the patriotism tends to disappear when your best friend’s wife has been raped and the husband has been shot in their home. When it gets personal, people understandably look for safer places to live and that affects our entire economy in that fewer skills are left behind to man the economy. 

To me, crime is a major issue because crime acts on the psyche. You lose good people because they fear for their safety. We’ve got people in our organization - young people - who are being targeted all the time by overseas companies. We’re losing their skills because for these guys, their primary instinct is safety and security for their families. So crime is having a very serious effect on the country’s skilled workforce and the government needs to act decisively to beat crime. I really believe it can be sorted out but it needs an iron rod so that you get people to understand that if they don’t toe the line, they’re going to get into big trouble. Of course, enforcement is the big issue and here you need leadership. With the forces available to Government, they could sort out the crime problem but it needs strong leadership to drive the fight. Up to now, there has been zero leadership on this front. It’s actually very sad.  

FW: Apart from causing a skills exodus, do you see crime adding costs to the company? 

JG: Yes, we are seeing this. It goes in spikes but we’re certainly seeing an increase and especially in our fuel business. Fuel is black gold and is very valuable. Unfortunately, there are instances where there are insiders involved; where there are drivers involved in the crime. Not all the time, but there are those instances. It is a difficult one to manage. 

FW: The general perception is that most truck hijackings involve internal collusion. Would you agree with this? 

JG: I don’t have the stats and it would be a bit arrogant of me to say that was the case because I don’t really know. But certainly we have had a number of instances where a fuel truck has been hijacked and we’ve found that the driver was involved. But generally speaking these guys are sitting ducks to that. The guy drives a fixed route day in and day out. He’s a sitting duck when someone stops him. We have tracking devices and use technology to the best of our ability but in the climate of high crime in which we live, when someone’s concentrating their efforts and their time on catching you, they’re going to catch you. 

FW: With the lack of skilled workers such as diesel mechanics being a reality, a lot of companies are relying on OEMs to do their vehicle servicing through maintenance contracts and the like. Is this a trend for the future? Is it something you like or do you prefer your own in-house workshops and controls? 

JG: I’ve got mixed feelings about it. It’s an easy way out for the transport operator but those contracts are fraught with small print. There are a lot of potholes in this. For example, when they take the vehicle back after a three, four or five year period, the residual value is not as you thought – but it’s there in the small print. The guys then fall short on their trade-ins. 

I think the manufacturers saw it as an income stream and kind of tried to make it easy for the operators. The operators have been caught between a rock and a hard place in the sense that they can’t get good diesel mechanics and can’t afford to put up expensive work bays with all the diagnostic equipment. So having one centre where all trucks could be sent to, as opposed to having five of their own centres, is seen as a way of keeping costs down. 

Generally though, I don’t believe it’s been good for the industry because the maintenance of a vehicle is your primary responsibility – there’s no question about that. If you’re in the trucking business, maintenance is a core part of the business and we’ve seen that in Namibia where we operate older vehicles and do all the maintenance ourselves. We have to maintain those vehicles because they’re older. People look at a truck-tractor today as a disposable item. They say it’s got a life of two years – or four or five depending on the operation – they sign a maintenance contract, try outsource everything around it and hope the guys maintain it properly and then trade it in after three or four or five years. It’s a bit of a cop-out, of which we’re also guilty. 

FW: Let’s talk road to rail. What’s your message to those people who want goods moved from road to rail? 

JG: I’ve been over the statistics and I think something like 87% of all products in this country are moved on road and 13% on rail. The interesting thing is that in Germany, which is a sophisticated country, the numbers are quite similar. So road transport plays a vital role in keeping the wheels of an economy moving. That said, I also believe there are certain products which do not belong on road and as a road transporter, I say that not with tongue in cheek but really meaning it. Mining products, bulk products, belong on rail not on road. That, to me, is where Transnet’s rail operation should be concentrating its efforts. Coal is a very successful commodity for rail but there are also others. 

FW: I know that for the past few years you have been trying to get Spoornet to buy into your RoadRailer multi-model concept. What is the progress on that? 

JG: It’s actually about six or seven years that we’ve been working on that – without much success. The concept has been operating successfully in the U.S. for twenty years where they take a train of about 150 road units and with one locomotive, move them between major centres. What they are effectively doing is taking 150 trucks off the road every time that train operates. 

If this system were introduced on the Durban- Johannesburg and the Johannesburg-Cape Town corridors, you could move a lot of product that’s running on those roads onto rail and then have distribution at either end where you could create an enormous number of new jobs. A 150-unit train coming into Cape Town needs 150 primary movers to move each of those units to its final distribution point. 

Through this, you will create lots of BEE opportunities where small operators running a few vehicles can operate close to their home base, close to their maintenance facilities and make money. That makes a lot of sense to me. 

FW: And it gets trucks off the road. 

JG: Exactly. And that’s what you want to do. You want to take a big volume of vehicles off your major routes. So it’s been very disappointing for us that Spoornet - or Transnet Rail – hasn’t embraced this technology that has been so successful in the US and which we have been trying to introduce here for the last six or seven years.

FW: But surely importing such units would make them prohibitively expensive. Are there any plans to build them here? 

JG: We would never build them anywhere else. We would have to build them here and we have the rights to do so under license to the US manufacturer. All the skills are here to do it and here again, new jobs would be created. And what I can’t understand is that Transnet Rail would benefit as we want them to be a partner in the business as they need to guarantee the line and charge a fee for it. It’s new business for them and that is why I cannot understand their reluctance to make a decision on this.

FW: Let’s talk global warming. How in touch is Unitrans with this subject? Is global warming and your role in minimizing environmental impacts by, for example, using biofuel, discussed round the boardroom table? 

JG: It is. But, we don’t make fuel. Rather, we use what’s available to us and unfortunately, I think the global push for biofuel has backfired in that it has been taken to the point where we now have a food crisis. So much maize and stuff has been diverted into biofuel production that we now have a global food shortage which is a major problem. So I think one has to be realistic. Certainly I’m not suggesting that one has to stick with fossil fuels for the rest of time because one clearly can’t do that. However, I think that on a continent like ours, to have a major biofuels industry is going to be expensive. It’s not something we want to get involved in, it’s not our business and all the vehicles we run at the moment run on fossil fuels. However, if they could run on biofuels and could switch, we would happily do so. But where do you buy the fuel from? 

FW: Have you done any tests on vehicles using biofuel?

JG: No we haven’t and it’s not something we can really influence at this stage. I think we are a bit of a follower as opposed to a leader in the sense that fuel is not our business. We’re a consumer of fuel and our contribution is therefore to use the best low-emission vehicles we can find to minimize our carbon footprint. There’s a big push to do that and we support that one hundred percent as emissions are a major concern to everybody these days. In this sense, we have a relatively young fleet and don’t run old vehicles. But I must say again that if there is enough biofuel available and we can run it, clearly we would happily do so. 

FW: With 3 000 vehicles in your national fleet, you are a major fuel user. How else, apart from buying low emission trucks, can you lesson your environmental impacts? 

JG: As a fuel user, we have a responsibility to be as frugal as possible in our consumption of fuel and to this end, we place a lot of accent on driver training as well as on maintaining our vehicles to the highest standards. We take the approach that if you don’t maintain your vehicles, they’re going to burn more fuel than they should. Ensuring fuel efficiency through driver training and maintenance is a major contribution we can make towards reducing our impact on global warming. 

FW: What are your feelings on Black Economic Empowerment? There are many who feel the BEE route has failed in its intentions? 

JG: I think if you spread the wealth among the poor, you will have succeeded with empowerment so to me, empowerment - like charity - begins at home. The best empowerment deal you can do is to empower your own people in each company. Instead of having one major Black shareholder, rather have the 4 000 Black people who work for you become shareholders in the business. That’s empowerment because now you’re spreading the wealth. And each one of those people supports a family of four or five so when you expand that to 20 000 people in one company with 4 000 employees, man, that’s empowerment.

More importantly, when the employee retires, he sells his shares and he’s got a really good nest egg he can retire on. And I don’t say you should exclude the Whites from that. Why should I exclude a guy who works for me as a mechanic because he happens to be White? He must be part of the team. It doesn’t have to be racial because 80% of the workforce are previously disadvantaged anyway. So everyone is going to benefit from this if you spread it right across the workforce. I think empowerment, as has been broadly practiced, has failed in many respects. It’s been enrichment, not empowerment. 

FW: What’s the good news for Unitrans going into the future? 

JG: Our supply chain business, as we call it, is growing well at the moment. We’re very thrilled with the growth in the business and have won some major contracts. Our strategy of creating supply chain solutions has really worked well for us so we are very bullish about the future of this business. And as I say, it’s not purely a trucking business. It’s more of a supply chain business of which a big element is trucking. You can’t be in a supply chain if you’re not in trucking. So we’re pretty positive about the future and I think there are great opportunities. Also, I don’t say this with any malice or arrogance but the hard times facing the industry will bring about consolidation and that’s going to create more opportunities for us, which is good for us. Trucking is a good business to be in.

Maintenance Maintenance of vehicles is a primary responsibility of the operator, but many are hampered by the lack of good diesel mechanics and the cost of expensive work bays and diagnostic equipment.