Enrich Properties auction put on hold on the 11th hour
RETHABILE MOHONO
MASERU – The much-talked-about auction of Enrich Store’s properties expected last Friday was averted on the 11th hour after the store’s two landlords accepted last minute letters of intent to settle the bills. Last Friday, Moosa Group of Companies and PEG PTY Ltd, the owners of the store and gym premises, were issued a letter of intent by the Lesotho National Development Corporation (LNDC).
LNDC has decided to assist Enrich Holdings to overcoming its debts of about M2 million by providing intent letters to the landlords. The letters stated that it has come to the corporation’s attention that Enrich Store has a summary judgment for arrears 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. Thato Damane, Enrich Board Chairperson, said the auction was cancelled by both landlords upon receiving letters on Friday last week.
Damane added that LNDC is currently conducting assessments until December 15. “LNDC is expected to provide feedback to the landlords on December 15 in order to determine the next steps,” he said. Nevertheless, he emphasized that once the rent matter is resolved and the store is operational, all individuals involved in the store’s failure would be held accountable for their actions. Apart from that he said Enrich Store is currently seeking a business or company to collaborate with for the Enrich Board Assessment, which seeks to reduce the number of board members.
The announcement was made earlier this week through a circular letter signed by the Board Chairperson. The letter specified that interested companies should possess expertise in retail knowledge and experience, risk and compliance associated with retail, human resources, and finance. Interested parties are required to submit their proposals by Tuesday, December 12, 2023. This decision follows the intervention of the LNDC, who issued intent letters to Moosa Group of Companies and PEG PTY Ltd, the landlords of the store and gym premises, in order to prevent the auctioning of Enrich properties last week Friday.
Enrich Stores, a Basotho chain store that opened in 2019 at Mafafa Building on Kingsway and had a fitness centre in Thetsane, Maseru, is facing financial difficulties and has accumulated significant debts in just two or three years. As a result, the store’s assets were set to be sold at an auction. 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 ordered the auction of Enrich Chain Store’s properties, including a truck, a Madza Demio, and gym equipment. This formerly promising local retailer 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, LNDC has taken intervened to assist Enrich Holdings by providing intent letters to Moosa Group of Companies and PEG PTY Ltd, the landlords of the store and gym premises. “A decision on this possible support will be reached latest by the 15th December 2023,” the letters read.
In a previous interview with Damane, it was disclosed that LNDC is contemplating a financial rescue package of M25 million for Enrich Stores, in the form of a loan.
Nevertheless, he said that the loan shall be disbursed in tranches, commencing with an initial instalment of M15 million. This amount is anticipated to alleviate the burdensome debts of the establishment, covering 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. In response to the inquiry regarding the rehiring of former employees, the Damane expressed their intention to commence anew. They 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 but initiate a fresh hiring procedure, and select individuals based on their qualifications and expertise. he further exposed that LNDC has appointed the transactional adviser who is working hand in glove with enrich board. Even though this might be some sort of a relieve, Damane said his fear is to see Enrich being stripped apart.
“The intend letter is not a binding documents, therefore we are still in fear that the store properties can still be auctioned,” he said. During the 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 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 at the time of the earlier interview that the cost of rent though very high is merely a small portion of the store’s financial obstacles, as it grapples with numerous other monetary burdens demanding vast sums of wealth.
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 store also has a loan of M1 million from Standard Lesotho Bank, only half of which has been settled.
“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 one million maloti, he said that is when the gym idea started. “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 months of unpaid 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 it was not enough, Damane said other reasons 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, 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 that out of the 6000 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 sale of goods.
Meanwhile, Damane said, the absence of documented records pertaining to previous board meetings poses 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 seating did took place,” he said complaining that nothing was ever professional about Enrich.
In addition to that, he said there were over generous seating allowances of M 3000 seating allowances for board members, further exacerbated the financial hurdles that Enrich was already grappling with. “Although Enrich had an agreement of four seating in a year, but there were countless seating 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, includes the fact that he was judged to be ineffective in his managerial position and was failing to file tax returns on time to the point where the company was functioning without a tax clearance.
The memo revealing his incompetence followed the special board meeting held on March 20, 2023, where the CEO was deemed to be unqualified. Furthermore, the irresponsibility of the CEO was demonstrated in his decisions to neglect 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 clear signs that the store was going down, that it got to a point where former CEO wrote an open letter to Enrich management where he said he doubted 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 lead to Enrich closure in weeks, we don’t know what suppliers may do in a complete new management…,” he said on his open letter.
However, with the arrival of the new board members and management, anticipation arose for a transformative shift within the ailing vessel. Damane said the new team tried to acquire an overdraft from the same bank which gave the store a loan to sort rent issues, however the bank denied the store an overdraft. “Instead of giving us an overdraft, the bank demanded us to settle the loan which it was vivid that we are incapable of paying it,” he said.
Damane however mentioned that they are willing to take sell rights shares to shareholders for M2000 each to at least make M2 million to settle rent. Rights shares also known as a rights issue, is an offer given to the extant 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.
