From Dirt Poor to Self-Made Millionaire: Lebo Gunguluza

From Dirt Poor to Self-Made Millionaire: Lebo Gunguluza

R60 and a whole lot of nerve. That’s what Lebo Gunguluza had on him when he arrived in Durban in 1990, determined to enrol for a BCom at the University of Natal. His father died when he was a child and his mother worked as a nurse. There was not much money to go round and what she had managed to save for his tertiary education went on getting him, his brother and his sister through high school in the turbulent late 80s.

“There were so many boycotts at the time that I missed two years of school, so my mother took her savings and sent me to Woodridge College, just outside Port Elizabeth, which was a multiracial school,” he says. “It was a great move on her part as I managed to get a really good education there, but it meant there was nothing left over for varsity.”

Driven from an early age

Gunguluza says his dream to study business was enabled by his appetite for risk. He had no money and no place to stay, but he also had nothing to lose. “Whatever you do, the higher the risk, the higher the reward. I had been accepted at the university, but I could not pay the fees so I was not allowed to register. But it didn’t matter – all I knew was that I had to get in so that I could do a business degree and become an entrepreneur.”

That level of resolve so early on in life, coupled with his understanding of how important a solid education can be, were to stand him in good stead later on at pivotal moments in his work life. It also highlighted how determined he was to lay a solid foundation for the development of his career.

By chance, and probably thanks to his colourful personality, he met a guy on campus who let him sleep over a few nights while he tried to arrange finance. On the last day of registration his tenacity paid off and he secured a bursary to pay for his studies at the Pietermaritzburg campus. It was to be the beginning of a turbulent but inspiring career. But, by mid-year, his funder decided to pull out of the country, leaving him high and dry. With no resources, he had to find another way to stay on and complete his degree.

“I’ve always been a creative thinker. At school I won a national essay competition on how to launch DSTV. I have applied that skill where possible throughout my life. I knew I had to earn some cash so I went to Edgars and offered to become an agent for the retailer on campus. I would sign up new accounts and they would pay me commission. They agreed, and I did so well that I ended up working in-store. I was making enough money to survive by working during the day and catching up on my studies at night. But it was a struggle to pay fees, so I got a loan to help me get by.”

Learning on the job

That meant that when he graduated in 1994, he had a debt to pay back. But, armed with a degree, some work experience and a formidable ability to sell, he took his pick from several job offers and went to work at the SABC as a sales executive.

“I wanted to be in an environment that was creative. I can’t stress enough how important it is to find out where your talents lie when you are young so that you can make choices that hone your skills.”

It was also at this time that he set his financial goals. “I had grown up so deprived that I was determined to make a lot of money and never experience poverty again. I set three goals: to become a millionaire by age 25, a multimillionaire by 35 and a billionaire by 45.”

Gunguluza did well at the SABC. His drive to succeed was unremitting; he was promoted four times in the space of two years and became marketing manager for Metro FM by age 24. But his impoverished family back in Port Elizabeth was still dependent on him and he was simply not earning enough to take care of everyone, even though they believed he was coining it in Joburg.

That was when he decided to save enough money to go to the US for a few weeks and do a specialised broadcasting course which would boost his earning potential. But his gameplan changed when he got back and was recruited by advertising mavericks, Herdbuoys.

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Making a million

“My salary doubled, but the ad industry is a tough business to be in. I was working really hard but still not making much headway. There was no way I was going to make that first million. Then something struck me. I was really good at throwing big parties at home. Why was I getting all these people to eat my food and drink my alcohol for free, when I could be making money from them?”

That was 14 years ago and he was then 26. He took the plunge once again, leaving Herdbuoys and the comfort of a monthly pay cheque behind. Fuelled by the desire to build a business that would earn him enough to take care of his family and achieve his first big goal, he started Gunguluza Entertainment.

He had no money for cash flow in the business, but he put his considerable ability to leverage situations to great use. In addition to being a skilled salesman, Gunguluza is a networker of note. It’s a talent that comes easy to a person who’s passionate about entertainment and media.

“There was a night club called Insomnia in Sandton that was not doing too well. I approached the owners and told them I would bring the crowds if they let me take the door. That way they could make their money by selling drinks.”

It was a great idea that took off immediately. Why? “Because there were no clubs for young and trendy black people in the north at the time. Most of them were in Hillbrow or in the townships. On the first night I made R7 000 and I knew I was on to a good thing.”

But like many young entrepreneurs, Gunguluza treated the money as his own and not the business’s. After a few weeks, however, he realised that he had to start saving the cash he made in a business bank account if he wanted to hire some help. For about four months he did really well, earning more than R5 000 per event. But then a copycat came along – a celebrity who had kept an eye on Gunguluza’s parties and started to throw his own. The clubbers descended in droves, leaving Gunguluza with an empty dance floor.

Changing direction slightly, he started to book artists he had come to know over the years and quickly became a popular talent manager. By this stage he was making about R100 000 per event, and also taking the opportunity to build his brand. “I made sure I was on radio all the time and I positioned myself as a local entertainment expert,” he says. Then, in 1997, he heard that a new youth radio station was about to be launched and his skill in sales came to the fore once again.

“I was far from reaching my R1 million goal, but I knew radio and I knew parties so I called YFM and convinced them to give me half a million rand’s worth of airtime to organise the launch event on their behalf. Kwaito was big at the time, and I knew all the stars. I met with sound, stage and lighting guys and used the media space I got from YFM to barter with them so that we ended up with R4 million production. I also made sure I partnered with a team who were used to hosting huge events in the white market because they had the experience. 15 000 young people came to that party, and they each paid R100 to attend. I made R1,5 million cash, with all costs covered, and YFM got a fantastic launch party.

“That experience reinforced what I found out early on in business. You don’t always need money to acquire things – it’s often possible to use your resources and barter when you don’t have cash. Without funding, tenders or loans, I had made my first million at the age of 27. It’s a principle I still live by today. I never borrow money from the banks. It can cripple you forever. The other problem is that many young people who secure a loan treat it as a lotto win and live the high life on it. That’s why so many projects are abandoned half way.”

Living the high life

Gunguluza knows what he’s talking about when it comes to squandering. He spent that first million in one year. Instead of using that money as seed capital, he bought a GTI and partied like there was no tomorrow. By the end of 1999, he was flat broke. His car was repossessed and he was blacklisted.

“I hit rock bottom for a few reasons. Aside from the flashy lifestyle, I realised then that you have to choose your market sector carefully. Entertainment is a fickle industry and promoters can be unscrupulous. Often we would not get paid on time. I made up my mind that whatever I went into next, it would be in a space that pays well and has structure.

“At that time I was sharing a townhouse with my cousin, and I was so down and out that I would walk to the CNA and stand in a corner reading business books that I could not afford to buy. Often the staff would come and chase me away so I’d go home, change my clothes and come back. I read about Aristotle Onassis, Richard Branson and Donald Trump and realised that if I wanted to succeed, I would have to change my mindset. These people had huge personalities which impacted their business lives.”

Three key points stood out for him:  Whatever business you go into, you had better know it inside out, down to the last bolt; you must always have a strong sales ability in the business; and cash is king, so whatever money you make, try to retain as much of it as possible and use it to advance the company.

Applying the lessons

Although he did not have much experience in communications, Gunguluza was a media maven. He approached Penta Publications and started to sell media space for them. It was a steep learning curve and Gunguluza took full advantage of it, getting to know the tough world of magazine publishing and corporate events. Satisfied that he had picked up enough, he left nine months later and started working on his communications business, Corporate Fusion, a name that indicated a new direction for him – the rigour of the world of big business. Within 18 months it was generating more than R2 million. He ran it from his townhouse with a single telephone line.

With his appetite for risk growing stronger, Gunguluza knew it was time for him to go to the next phase if he really wanted to grow the business into something substantial. He contracted with several big clients and, through his knowledge of radio and print media events, he launched several awards shows – lavish evenings that became the talk of the town.

He also began to build an extensive public sector network that saw him consulting on communication strategies with several municipalities. By 2003, at 33, his business was turning over R14 million, a result of several big ticket contracts he had secured with blue chip companies. He’d reached his next milestone before the age of 35 and had become a corporate communications specialist by applying his now considerable media and publishing experience.

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Living large, falling hard

But then he dropped the ball once more. Blinded by his success, he bought a Porsche and started travelling the world. Although he did not repeat the same mistake he’d made before with cash flow, this time round he left the business in the hands of others.

He soon lost touch with what was going on in the company and came home one day to the biggest crisis he had yet confronted. An event for one of the country’s largest financial services companies had turned into a shambles. It was so bad that Sunday Times columnist Gwen Gill went on about it for several weeks in her social pages, ripping the event to shreds. Gunguluza lost the client, as well as R7 million worth of other business in three weeks. Four months later he was in debt to the tune of R4 million. He could no longer pay salaries and had to retrench staff, a period he recalls as the most painful time of his life.

To quote Japanese-American academic Samuel Ichiye Hayakawa, “Notice the difference between what happens when a man says to himself, I have failed three times, and what happens when he says, I am a failure.”

Gunguluza refused to see himself as a failure. He sold the office building he had bought back to its original owners for R1 million, and bought a Primi Piatti franchise in Rosebank. With his background in entertainment, he and his wife were determined to build the restaurant and use the cash they made to pay back all their debtors. As a result of his flair for fun, it soon became one of the most popular Primi sites in the country, and turnover growth was high. It was the place to seen in Rosebank and was frequented by Joburg’s who’s who. But Gunguluza’s relationship with his wife soured and they separated in 2008.

He handed Primi over to his ex-wife and started focusing on the other business interests he had been growing quietly in the background. “I hardly ever slept at that time. When I was not at the restaurant I was developing a new media business and creating new partnerships. I had managed to settle all my debt and build a company that had already turned R2 million by the time I was out of Primi.”

The birth of an empire

Media, hospitality, technology, property and investment – those were the five sectors Gunguluza wanted to be in. “I wanted to use the media business to develop other companies within the GEM (Gunguluza Enterprises & Media) Group of Companies. I was now chasing my R1 billion goal, but I knew that if I started from scratch it would take far too long. My strategy was to acquire an interest in existing companies and triple their turnover by boosting their sales and marketing. Really, it was the same strategy I had applied years back to quadrupling the airtime I got from YFM, just on a bigger scale.”

Next, he partnered with Uhuru Communications, the publishers of SAA’s Sawubona magazine, that same year and several other youth and campus publications. He also leveraged his public sector experience by launching Municipal Focus, also in partnership with Uhuru, which covers the business of local government with a nationwide distribution to municipalities and government departments. He continues to grow his publishing footprint through a series of 12 publications.

The next phase

Indeed, there’s no rest for Gunguluza. He has acquired an interest in several hotels and also launched a car hire company that does not require credit cards and that will soon be providing flight services too.

Is there a logic to all these acquisitions? He says it’s part of his strategy to own every link in a chain – eat, stay, drive, fly.

He is also growing his capital interest through projects he invests in and which make him easy returns. That’s what’s enabled him to grow GEM into a multimillion rand business in just two-and-a-half years. The big news is that he plans to launch the first African television channel early next year – a concept along the lines of MTV Base – which he says is a R400 million deal that will turn GEM into a media powerhouse.

These days, he leaves nothing to chance. Each of the dozen companies in the GEM group has its own MD, with Gunguluza playing an operational role in running the group which now employs about 150 people.

“In the past, my HR was a mess. I would hire people just because I liked them. Today, we have strict hiring policies and procedures and we are particular about the people we employ.”

Gunguluza says that because he was born to sell and market, his focus as chairman is on building the brands of each of the companies in the group so that they can attract more business and seek out new opportunities.

Gunguluza has not forgotten his roots or his family. His mother, sister and brother all have senior positions within the group. His success is testimony to the impact that one person can have on a family and a community. Naturally, he is a far more cautious man now than he was in his 20s and 30s, but that goal of becoming a billionaire by 45 is firmly within his sights.

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Support for black business owners

Having seen his own star rise and fall many times, Lebo Gunguluza is determined to help young black entrepreneurs to understand the value of having a business plan and holding onto cash. That’s why he founded the South African Black Entrepreneurs Forum (SABEF) in 2008.

Its membership has grown to 30 000 and he himself has become a sought-after spokesperson for black entrepreneurs, as well as a popular motivational speaker whose journey inspires others.

There were several reasons for founding SABEF, he says. Following his divorce, he was alone and realised that he and others could benefit from some sort of support system. Many people were being retrenched at the time and he was also keen to help them see that it was possible to become self-employed if you did not have a job. There is no need, he stresses, to sit at home and wait for help from government. Beyond that no one realises more than he the value of structures and plans, which is something SABEF seeks to provide for young business owners.

“SABEF is not only a great network for entrepreneurs, it helped me to grow my own relationships with both the public and private sectors. I have a huge base of people to tap into, which has also enabled me to become a successful consultant to government.”

He is also the co-founder and chairman of the Local Government Business Network (LGBN), a voluntary organisation set up to promote the relationship between local government and the private sector. Find out more about SABEF at www.sabef.co.za

Lebo’s Lessons

  1. Cash runs out very quickly and it does not come back. Cash gives you flexibility and mobility so use it carefully.
  2. The customer is everything. How you treat your customers has serious implications for the business. Treat your clients badly and they will not only take their business elsewhere, but they’ll also tell as many people as they can what a terrible company you have. Don’t fob off customers. Always get back to them and maintain the personal touch.
  3. Respect compliance. If you do not comply with rules and regulations and have the necessary certificates,  you will never be paid.
  4. Chase your invoices. Make sure you are invoicing on an ongoing basis or you won’t get the cash.

Monique Verduyn

Monique Verduyn

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.