ENRICH Stores, a once-rising local retailer, faces the closure of its store and fitness centre due to exorbitant rental expenses, surpassing M2 million.
Nov. 10, 2023
7 min read
Enrich Stores closes down
Metro Audio Articles
Catch our weekly audio news daily only on Metro Radio Podcast News.listen now
Despite commencing its journey in 2019 as the premier Basotho chain store, situated at the Mafafa Building on Kingsway Road, and its fitness centre located in Thetsane, Maseru, Enrich Stores found itself engulfed in mounting debts within a mere span of two to three years.
The chairman of the company, Thato Damane, lamented their eviction from both the store and the fitness facility, attributing it to their inability to fulfil the financial obligations associated with the rent.
“Due to bad leadership and bad financial behaviour by the co-founders or brains behind Enrich, the store found itself in deep debt. Sadly, I have to reveal today that the store is closed,” he said.
He emphasised 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 Stores 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 that were never filled out since the store was established,” he said, adding that the store also has an unsettled loan of M1 million with Standard Lesotho Bank.
“The people who came before us acquired a loan of M1 million, which was not part of the original plan,” he said.
The company started the gymnasium with that money, Damane also said.
“That is when even bigger troubles began because the gym was unable to pay its rent; therefore, it relied solely on 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 said.
As if it were not enough, Damane said another reason that also posed significant challenges for this once promising establishment was a 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 the 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 6,000 shareholders, only 14 individuals are officially recognised, or rather appear as shareholders, with the Ministry of Trade, while the rest do not appear.
Furthermore, he also exposed that the store has never undergone any auditing procedures since its establishment, resulting in the 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 take place,” he said, complaining that nothing was ever professional about Enrich.
In addition to that, he said each board member received a sum of M3000 in seating allowances to attend meetings, which further exacerbated the financial hurdles that the company was already grappling with.
“Although Enrich had an agreement of four seatings in a year, there were countless seating arrangements by the board that affected the store financially,” he said, emphasising that lack of good leadership and bad financial behaviour were some of the main reasons why the store folded up.
Despite the evident challenges that arose when former Enrich Chief Executive Officer 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 the 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 irresponsibility of the CEO was demonstrated in his decisions to boycott paying rent amounting to almost half a million maloti in rented facilities where Enrich Stores and Enrich Fitness Centre operated.
Ever since then, there were vivid signs that the store was going down, and it got to a point where the former CEO wrote an open letter to Enrich management, and 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, making relationships with suppliers and all stakeholders. This decision may lead to Enrich's closure in weeks; we do not 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 arose for a transformative shift within the ailing vessel.
Enjoy our daily newsletter from today
Access exclusive newsletters, along with previews of new media releases.
Damane said the new team tried to acquire an overdraft from the same bank, which gave the store a loan to sort out rent issues; however, the application was unsuccessful.
“Instead of giving us an overdraft, the bank demanded we settle the loan, for which it was clear that we were incapable of paying,” he said.
Subsequently, he revealed their relentless pursuit of aid from the Lesotho National Development Corporation (LNDC), a parastatal of the Government of Lesotho charged with the implementation of the country’s industrial development policies that ultimately proved hollow.
"For some time, LNDC gave us hope; it even promised us buildings in Maputsoe and Leribe; however, nothing seemed to be falling into place,” he said, expressing his disappointment in LNDC, which he deems in favour of foreigners.
“The LNDC matter was prolonged to such an extent that we were ultimately forced to vacate both of our operational locations. Presently, we are inundated with numerous court orders as we are unable to settle our debts,” he said.
However, he said he still has hope that Enrich will rise from the ashes.
“What’s so sad about all this is that I feel like I am a failure; I feel like I am responsible for what happened to this establishment. Enrich is the pride of Basotho, a brand that was a beacon of hope to Basotho, so I still believe in its vision.
Damane said their next step of action will be to sell rights shares to shareholders for M2000 each to at least make M2 million to settle rent.
Rights shares, also known as rights issues, are an offer given to the existing shareholders of a company to purchase additional shares. Under this offer, the company provides its shareholders with securities called rights.
“If this could work, I believe we can go back to business within two months’ time,” he said.
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.
“It is an undeniable truth that Enrich's downfall was caused by incompetent leaders.”
On the other hand, there are certain shareholders who, upon learning about the store's closure, have expressed their dismay towards the Enrich leadership.
They expressed that there were perpetual indications that there were problems, yet they held firm in their conviction that they would successfully address them internally.
“The board and the shareholders perpetually suffered from a lamentable lack of effective communication. Regrettably, the store's predicaments often surfaced on social media platforms long before they were conveyed to the shareholders,” Damane also said.