Steely re­solve builds an em­pire

Hum­ble be­gin­nings didn’t hold him back: in fact, it’s the rea­son he’s where he is to­day

Finweek English Edition - - People -

WHILE MOST 11-year-olds spend their time play­ing with friends and avoid­ing home­work, one lit­tle boy started grow­ing his very first busi­ness. Now – 35 years later – Rafik Mo­hamed (46) runs a suc­cess­ful bil­lion rand steel mer­chant and man­u­fac­tur­ing com­pany called Pro Roof Steel and is one of this year’s fi­nal­ists in the cat­e­gory Best En­tre­pre­neur in the SA chap­ter of Ernst and Young’s World En­tre­pre­neur Awards.

“I’ll never for­get the day I gave my dad R1 100. He cried,” says Mo­hamed. “From that day on­ward we be­came very close and shared an in­sep­a­ra­ble bond – both of joy and dif­fi­cul­ties.” That mo­ti­vated Mo­hamed to be­come the en­tre­pre­neur he is to­day.

Four months into his ma­tric year he quit school to care for his sick par­ents. Soon af­ter, his dad passed away. “He was more than a school or uni­ver­sity to me,” says Mo­hamed. “One of the fun­da­men­tal lessons he taught me was that your name is your most valu­able as­set. You can make money, you can lose it and you can make it again but if you lose your name you’ve lost it all. And I built my busi­ness on that fun­da­men­tal les­son and I’ve never looked back.”

Af­ter tak­ing over his fa­ther’s hard­ware store Mo­hamed be­came aware of the de­mand for roof sheet­ing, some­thing he had to source from secondary sup­pli­ers. It wasn’t long un­til he sold his idea of open­ing a roof sheet­ing man­u­fac­tur­ing busi­ness to a steel com­pany called Wedge Steel. “Some­how they gave me the credit lines, I set up the busi­ness and at the point where we had to sign a deal they opted out,” says Mo­hamed. “But they did a very hon­ourable thing at the time – they still gave me the credit line I needed.”

In 1988 Pro Roof Steel was founded. “I was the driver, the man­u­fac­turer, the ma­chine op­er­a­tor, the or­der taker, the ac­coun­tant, the re­cep­tion­ist: I was ev­ery­thing in the busi­ness,” he says. With a R30 000 loan from his un­cle Os­man,

Mo­hamed be­gan sell­ing 3 000 tons of steel a year. “The sup­ply of build­ing ma­te­ri­als is dom­i­nated by the In­dian com­mu­nity, so I had a strong cus­tomer base I could call on. By word of mouth I was able to make a break­through in my own com­mu­nity and they gave me the sup­port I needed.” In its first month Pro Roof Steel broke even and by the end of its first year Mo­hamed had made R1m profit. “My growth rates were phe­nom­e­nal over the first 10 years,” says Mo­hamed. “On av­er­age we were grow­ing be­tween 35% and 40% a year.”

But it wasn’t al­ways easy. Pro Roof Steel was com­pet­ing against sig­nif­i­cant play­ers in the in­dus­try. “Those guys had 95% of the mar­ket share. But I al­ways be­lieve when there are mo­nop­o­lies, there are op­por­tu­ni­ties. Those conglomerates – with their ex­ces­sive over­head struc­tures – could never com­pete with in­di­vid­ual op­er­a­tors who run their busi­nesses on a leaner struc­ture,” says Mo­hamed.

Along with com­peti­tors, Mo­hamed found it dif­fi­cult to gain ac­cess to fi­nance and credit lines. But that sim­ply mo­ti­vated him to try harder. “I es­tab­lished my­self by sell­ing goods at min­i­mal mar­gins and I de­vel­oped a marked rep­u­ta­tion in the steel in­dus­try. The credit lines to buy my ma­chin­ery were given to me purely based on my hon­esty and in­tegrity – the level of which fun­da­men­tally till to­day drives my suc­cess.”

De­spite the suc­cess of his busi­ness, Mo­hamed was ready to give it all up when his brother and busi­ness part­ner, Shi­raz Mo­hamed, died trag­i­cally in an air­craft ac­ci­dent. “When I lost him I went to my com­peti­tors and I begged them to buy me out. At the time I of­fered the busi­ness for R50m. They laughed at me. I said please take it, be­cause if I get stuck in it’s go­ing to cost you R500m to buy me out. And that’s ex­actly what hap­pened.”

Mo­hamed di­ver­si­fied the busi­ness be­yond roof sheet­ing into a fully fledged steel mer­chant and man­u­fac­turer, with a keen in­ter­est in the lower-end mar­ket. “Low-cost hous­ing – that’s where our core fo­cus is. I don’t think in the next 20 years they’ll be done with hous­ing – and that’s where our growth comes from.”

Pro Roof Steel cur­rently em­ploys 800 peo­ple with eight man­u­fac­tur­ing fa­cil­i­ties spread through­out SA. It sells more than 150 000 tons of steel a year, its turnover ex­ceeds R1,4bn, earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion are in ex­cess of R80m and its net profit is more than R25m. And the re­ces­sion hasn’t slowed it down. “His­tor­i­cally, I’ve made the most money dur­ing a re­ces­sion be­cause there’s al­ways a gap in good times and bad times. In bad times big com­pa­nies pull back and guys like me move in.”

While the re­ces­sion may be boost­ing busi­ness, the com­mod­ity cy­cle has hit SA’s steel in­dus­try se­verely. “You can talk to peo­ple who have been in the in­dus­try for 50 or 60 years and I don’t think they ever ex­pe­ri­enced what we ex­pe­ri­enced last year,” says Mo­hamed. “The price of steel rock­eted from roughly R5 000/t to R10 000/t in six months. We made a lot of money. But it was un­usual, so I never spent the money, I banked it.

“Since Au­gust last year to July this year we have given it all back. I knew it was com­ing: prices went down from R10 000 back to R5 000/t. “We have to carry in­ven­to­ries of up to 10 000 t in stock and we had to de­value our stock ev­ery month by R5m be­cause of the price re­duc­tion. So that caught us.”

De­spite that set­back Mo­hammed says the busi­ness can grow to more than R4bn/ year. “It took us a while to in­crease the bas­ket of prod­ucts we have but I’m nowhere near where I want to be yet,” he says. “Pro Roof is ag­gres­sively looking at op­por­tu­ni­ties in terms of ac­qui­si­tions and merg­ers.” Along with those pos­si­bil­i­ties a fu­ture list­ing may be on the cards. “I don’t think the dy­nam­ics of the econ­omy will al­low for a list­ing at the mo­ment but when the op­por­tu­nity comes we will,” he says.

Mo­hammed is also looking to ex­pand the busi­ness be­yond SA’s bor­ders. “We see great op­por­tu­nity in Africa, be­cause Africa is the only con­ti­nent in the world that of­fers great op­por­tu­ni­ties.”

With his com­pany con­tin­u­ally grow­ing, Mo­hammed has only one wish: that his late brother and his par­ents were around to wit­ness the suc­cess of their teach­ings.

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