Enrich loses M15m cash injection
Power struggles and missing millions, the fall of Enrich Stores
RETHABILE MOHONO
MASERU – The Lesotho National Development Corporation (LNDC) has withdrawn M15 million in financial support for troubled Enrich Stores. The money was meant to revive the struggling company.
This latest blow comes amid an ongoing power struggle within Enrich Holdings, where internal conflicts and suspensions have further deepened the crisis.
The company, which has been battling severe financial strain, now finds itself embroiled in a heated boardroom power struggle amid mounting debts and operational uncertainty.
The suspension of board chairman, Thabo Qhesi, last week by Enrich Holdings, citing allegations of misconduct and incompetence, has added another layer of controversy. Enrich Holdings said they exercised their executive authority to suspend Qhesi through internal structures.
However, the power dynamic shifted this week when Qhesi presented a letter suspending Enrich Stores Acting CEO, Peter Morolong, indicating that the battle for control is far from over.
The letter to Morolong, shared with this publication, stated that he was given an opportunity to present reasons why he should not be suspended for alleged gross misconduct.
With the timeframe for his response having expired, the letter officially notified him of his suspension and instructed him to return all Enrich Holdings’ property to Director PM Mosuoe’s offices in Maseru.
He was also informed that a hearing date regarding his case would be communicated soon.
This internal turmoil comes at a time when Enrich Holdings is already struggling to recover from significant financial setbacks.
The board’s controversial decision to push forward with operations despite unresolved debts and an expired trading license has put the company in an even more precarious position. Enrich Holdings is burdened with M687 000 in unpaid taxes, while a bank loan of M547 000 continues to accumulate penalties and interest.
Morolong has strongly opposed the board’s approach, warning that proceeding without addressing these financial obligations exposes the company to immense legal and financial risks.
“This decision increases business continuity risks and opens the company to potential court orders because unpaid creditors will pursue legal action,” he stated.
Morolong has also emphasized the importance of financial accountability, particularly regarding company expenditures.
“As CEO, I have to ensure every expense, including board fees or sitting allowances, provides a return on investment,” he added, suggesting that financial mismanagement within the Board has contributed to the company’s decline.
Enrich Stores, which initially shut down in 2023 due to financial distress, seemed to be on the path to recovery but now faces renewed instability.
Established in 2019, the business originally operated at Ha Mafafa along Kingsway Road, with a fitness centre at Ha Thetsane, Maseru.
However, it quickly accumulated massive debts, leading to its financial collapse.
Qhesi is the second board chairman to be suspended in less than six months. His predecessor, Thato Damane, was also dismissed under similar circumstances late last year.
Damane, in a previous interview with this publication, expressed his shock at his removal, stating that he was accused of causing delays despite structural challenges that hindered the company’s revival.
“I was removed from the board for purported misconduct and lack of leadership, leading to delays in assistance for Enrich,” he explained. He further revealed that his suspension occurred during an unannounced meeting, which he found highly irregular.
Damane highlighted that one of the major factors slowing Enrich’s recovery was LNDC’s decision to convert Enrich’s contract into a Special Purpose Vehicle (SPV), a process that took nearly six months to finalize.
“Now, the LNDC plans to fund the SPV, which in turn will finance Enrich, creating additional delays,” he noted.
This arrangement has sparked further concerns, as Morolong has warned that the SPV is being transformed into an operational entity rather than serving as a financing tool as initially intended.
He expressed concerns that LNDC’s control over the SPV effectively means that the corporation has, in essence, borrowed money from itself, a move he claims is not legally permissible.
“This means LNDC will be deemed to have borrowed itself the loan, which is not legally permissible,” he stated.
Morolong further argued that the SPV is financially independent of Enrich Holdings, yet the parent company will still be held accountable if it fails to meet its obligations.
“Obviously, Enrich Holdings,” he asserted, adding that despite repeated requests, the board has refused to address these concerns.
Another contentious issue is the allocation of M6.5 million, which was supposedly earmarked for debt settlement. M1.4 million has already been paid to two creditors.
Why are Basotho businesses not being paid? There is no way Enrich Stores will operate without settling its debts. It owes the Lesotho Flour Mills, where are we going to get credit?” he asked.
Morolong insists that the SPV must comply with the original loan agreement and settle all outstanding debts, arguing that delaying payments will only exacerbate Enrich’s financial woes.
Concerns have also been raised about the qualifications and competencies of the board members overseeing Enrich Holdings. Morolong contends that the board lacks key expertise needed to navigate the company’s crisis.
“Our Board members were not appointed through a rigorous process. A skills gap analysis was not performed, and key competencies like financial literacy, industry expertise, and regulatory experience are lacking,” he asserted.
He further emphasized that professional scepticism and independence – essential qualities for sound governance – are missing from the current leadership, compromising the Board’s ability to make informed financial decisions.
Adding to the instability, internal conflicts have resulted in inconsistent decision-making. The suspension of various executives and board members over the past year has left the company in a state of perpetual crisis.
CEO John Maine, who was dismissed in 2023, had predicted Enrich’s downfall in an open letter.
“If Enrich closes in the next few weeks, which is highly likely, especially in the total absence of its founders, I want to make it clear that I am not liable for its closure,” he wrote at the time.
Maine was removed for incompetence, failure to file tax returns, and accumulating nearly half a million in unpaid rent. His dismissal marked the beginning of Enrich’s turbulent decline.
Meanwhile, Qhesi has reported that the LNDC board has officially withdrawn the M15 million support that was supposed to assist Enrich Holdings.
“The representatives of Enrich Holdings Ltd were informed of this decision during an emergency meeting, which will be followed by a formal letter explaining the reasons,” he said.
He further accused Morolong of attempting to undermine the LNDC by continuously writing letters to Enrich Holdings board members, framing LNDC’s actions as hostile.
“This situation puts Enrich Holdings Ltd in a position where LNDC’s funds cannot be considered secure under a compromised management system,” he said.
Morolong has dismissed Qhesi’s claims of suspending him, stating that they are misleading and that Enrich Holdings, as the employer, has the right to suspend him if his performance is deemed unsatisfactory.
“His relationship with the company is governed by the law of contract, which grants Enrich Holdings the authority to terminate his services if they are deemed poor,” he said.
He emphasized that the board’s role is oversight, while the executive has the authority to make management decisions. Ultimately, he added, the decision on Qhesi’s future will be determined by the shareholders in a special meeting.
As Enrich Holdings continues to struggle with financial uncertainty and internal power struggles, its future remains highly uncertain. Whether it can navigate through this crisis or if these latest developments mark the beginning of its final collapse remains to be seen.
