Enrich properties go under the hammer today

. . . retailer M3.9 million in red

RETHABILE MOHONO

MASERU – Properties of debt-riddled Enrich Chain Store and its fitness centre are set to be auctioned today. Enrich Stores, a wholly Basotho chain store that opened in 2019 at Mafafa Building on Kingsway and had a fitness centre at Thetsane, Maseru, is facing financial difficulties and after accumulating significant debts in just two to three years. As a result, the store’s assets will be sold at an auction to offset some arrears.

Enrich Supermarket owes M1.2 million in rent, while the fitness centre owes approximately M636,000, totalling close to M2 million. As a result, the court has ordered the auction of Enrich Chain Store’s properties, including a truck, Madza car, and gymnastic equipment.

This formerly promising local retailer, has recently ceased operations due to its overwhelming debt. The company’s financial obligations include a bank loan exceeding M500,000, outstanding salaries of nearly M140,000 owed to former employees, unpaid bills totalling M1.7 million to suppliers, and a tax debt of over M687,000, to name just a few.

In total, the company’s debts are estimated to be a staggering M3.9 million. However, Lesotho National Development Cooperation yesterday moved to rescue Enrich Holdings by providing intent letters to Moosa Group of Companies and PEG PTY Ltd, the landlords of the store and gym premises.

The letters outlined LNDC’s intention to conduct due diligence on Enrich Holdings, which has been experiencing a decline in business performance. This document can also be used to clarify specific points in a business transaction.

This publication saw a copy of the letter yesterday evening. It stated that it has come to the corporation’s attention that Enrich Store has a summary judgment for arrears of M636,000.00 and M588 000 of rent due to PEG Pty Ltd and Moosa Group of Companies, respectively.

Both letters separately further highlighted that LNDC pleads with PEG Pty Ltd and Moosa to place on hold demand on dues owed while LNDC finalises exploration of suitable support to render to Enrich.  “A decision on this possible support will be reached latest by the 15th December 2023,” the letters read. In an exclusive interview yesterday Enrich Board Chairperson Thato Damane, told this reporter that the Lesotho National Development Corporation (LNDC) is contemplating a financial rescue package of M25 million for Enrich Stores, in the form of a loan.

Nevertheless, he said the loan would be disbursed in tranches, commencing with the initial instalment of M15 million. This substantial amount is anticipated to alleviate the burdensome debts of the establishment, encompassing the exorbitant rent and the recuperation of valuable inventory.

 “Our intention is to allocate the funds for rent yet, regrettably, the landlord of one of our premises has expressed their unwillingness to continue collaborating with our store. Consequently, we have secured an alternative location within town, should we fail to reach a mutual agreement,” he said.

Additionally, he emphasized that the remaining funds will be allocated towards replenishing the store’s inventory and acquiring technological solutions to safeguard against any recurrence of theft incidents, thereby ensuring the preservation of the store’s impeccable record.

Public Eye a few months back published an article detailing the prevalence of pilferage among staff members at the store. In response to the inquiry regarding the rehiring of former employees, the Damane expressed management’s intention to commence anew. He emphasized the necessity for transparency and professionalism throughout the company, from management to the recruitment of personnel.

Consequently, instead of rehiring previous staff members, Damane said they will honour their outstanding salaries, initiate a fresh hiring procedure, and select individuals based on their qualifications and expertise.

He further revealed that LNDC has appointed a transactional adviser who is working hand in glove with the Enrich board. Even though this might be some sort of a relief, Damane said his fear is to see Enrich being stripped apart. “The intend letter is not a binding document, therefore we are still in fear that the store’s properties can still be auctioned,” he said.

During a previous interview with this publication, Damane highlighted the unfortunate downfall of the store, attributing it to the lamentable presence of inadequate leadership and unsatisfactory financial conduct. These pivotal concerns demand immediate attention and thorough examination as the store embarks on its journey to prosperity once more.

“Due to bad leadership and bad financial behaviour by the co-founders or brains behind Enrich, the store found itself in deep debts. Sadly, we have to reveal today that the store is closed,” he said.

He emphasized that the cost of rent merely scratches the surface of the store’s financial obstacles, as it grapples with numerous other monetary burdens demanding vast sums of money.

Since its inception, Damane said, Enrich Store has consistently neglected its tax obligations, regardless of the prosperous state of its business during its initial year.

“This means we owe Revenue Services Lesotho tax returns which were never filled since the store was established,” he said, adding that the store also has a loan of M1 million from Standard Lesotho Bank, only half of which has been repaid.

“The people who came before us acquired a loan of one million maloti, which was not part of the original plan,” he said. With the that million maloti, he said, that is when the idea of a gym was conceived.  “That is when even bigger troubles began because the gym was unable to pay its rent, therefore it relied solely from the money made by the store.

“The dire financial situation also led to employees working without compensation for five months,” he said. Despite initially employing 150 individuals, the store was forced to downsize to only 50 employees due to the overwhelming difficulties it faced. Consequently, not only did countless Basotho lose their jobs, but local producers who relied on the store as a market also suffered significant losses.

“About 200 different locally produced goods were sold in the store, so with the store closed, locals also lost their market,” he cried.  As if that was not enough, Damane said another reason which also posed significant challenges for this once promising establishment was lack of experience by both management and workers, incidents of staff theft, and the absence of clear regulations.

Apart from that he said the store operated without a formal business plan or proposal but was merely existing as an idea in the minds of its founders, with no written documentation to guide its operations.

“One would wonder how they managed to acquire a loan at bank without a business proposal and a business plan,” he said, explaining that Enrich operated like a ‘Spaza’ shop.

Astonishingly, he revealed out of the 6 000 shareholders, only 14 individuals are officially recognized or rather appear as shareholders at with the Ministry of Trade, while the rest do not appear.

Furthermore, he also revealed that the store has never undergone any auditing procedures since its establishment, resulting in a complete absence of records or receipts to indicate the sales of goods.  Meanwhile, Damane said, the absence of documented records pertaining to previous board meetings poses a yet another formidable challenge in retracing past occurrences.

“In cases where there were meetings or something was written, there are no signatures to attest that the sitting did took place,” he said, explaining that nothing was ever professional about Enrich. In addition to that, he also cited the case of M3 000 sitting allowances bestowed upon board members, which he said further exacerbated the financial hurdles that Enrich was already grappling with.

“Although Enrich had an agreement of four sitting in a year, there were countless sittings by the board which affected the store financially,” he said emphasizing that lack of good leadership, bad financial behaviour are some of the main reasons why the store faced closure.

Despite the evident challenges that arose when former Enrich CEO John Maine was suspended from his position, Enrich’s current CEO Thabang Nthako attempted to conceal the company’s issues in previous interviews.

Looking back,  among other things that led to his suspension, he was judged to be ineffective in his managerial position and was failing to file tax returns on time to a point where the company was functioning without a tax clearance.

The communiqué was subsequent to the special board meeting held on March 20, 2023, where the CEO was deemed to be unqualified.

Furthermore, the irresponsible conduct of the CEO was demonstrated in his decisions to boycott paying rent amounting to almost half a million maloti in rented facilities where the Enrich Stores and Enrich Fitness operate from.

Ever since, then, there were vivid signs that the store was going down, that it got to a point where the former CEO wrote an open letter to Enrich management where he said he doubts the store would be sustained for even two weeks after he was removed from the managerial position.

“…I am unsure what the newly selected management and board will do about this, and how quickly they will take action to save Enrich. If Enrich closes in the next few weeks, which can be highly likely, especially in a total absence of founders, I want to make it clear that I am not liable for its closure. We had several challenges since inception, but we never closed because we started this from zero and did everything, made relationships with suppliers and all stakeholders. This decision may led to Enrich closure in weeks; we don’t know what suppliers may do in a complete new management…,” he said in his open letter.

However, with the arrival of the new board members and management, anticipation rose for a transformative shift within the sinking vessel.

Damane said the new team tried to secure an overdraft from the same bank which gave the store a loan to sort rent issues, however the bank declined.

“Instead of giving us an overdraft, the bank demanded us to settle the loan while it was clear we are incapable of paying it,” he said. Damane, however, said they are willing to take sell rights shares to shareholders for M2 000 each to at least make M2 million to settle rent.

Rights shares also known as a rights issue, is an offer given to the shareholders of a company to purchase additional shares. Under this offer, the company provides its shareholders with securities called rights.  In the pursuit of a transformative approach, should the store emerge triumphant from its financial burdens, Damane expressed the resolute commitment of the new board. With an astutely crafted business plan already in place, the board ardently embraces the notion of employing accomplished leaders, adorned with exceptional expertise, while embracing utmost transparency in their financial records.