Enrich Stores, the first Basotho chain store founded in 2019, will resume business after being shut down due to a myriad of challenges including bad financial behaviours and lack of good leadership. In this an interview with theReporter’s Matṧeliso Phulane, Enrich Stores’ board chairman Thato Damane also blames the co-founders for running the giant store as a ‘spaza’ shop and failing to heed sound business advice. He however, paints a bright future for the store after the Lesotho National Development Corporation came to Enrich’s rescue.
Enrich Stores’ mission was to generate sustainable economic development, create permanent jobs, and support local businesses and produce. It also sought to exceed the expectations of customers, clients and shareholders by excelling.
Why did Enrich Stores close shop in the first place?
Bad financial management from both the store and the fitness facility set up in Ha Thetsane led to Enrich’s closure. The store was no longer able to pay rent which went on to balloon to about M1 million over time.
Ever since I joined the board with other five members in May this year, there were already several problems which led to some board members resigning. There were only three members remaining when we came in.
It doesn’t mean Enrich only started having problems when we came on board. In actual fact, we were called in to rescue the company, which was already sinking due to financial challenges.
The store found itself in deep debt as a result of bad leadership and bad financial conduct by the co-founders or brains behind Enrich. Some of them took the company as their own baby, which nobody could say anything about or know abouts other than themselves; that is why they ran it like a spaza shop.
What efforts did you make to save the supermarket from collapse?
The first thing we did with my team was to analyse Enrich’s situations like; how many debts it has and who are its creditors?
Apart from that, we also examined if the company could survive under such a situation or it needed extra funding. However, we found out that the company could not survive and it needed a lot of financial injection.
I say the shop was run like a spaza shop because there were no clear financial records and information on creditors.
The board further tried to collaborate with both the suspended chief executive officer John Maine and chief operating officer Refiloe Monaheng. We requested them to hand things like books relating to the company’s operations before they left but the handover did not happen at all. Such documentation would help us understand Enrich’s situation better.
The six of us as members of the board did not get the smooth welcome we expected and we couldn’t do much in the absence of the little information that we found.
Our meetings were also not very productive, considering the urgent situation that the company was in because we struggled to get information to make effective decisions.
We then decided to form committees to work hand in hand with us in coming up with a business plan since Enrich did not have any. The new team tried to acquire an overdraft from Standard Lesotho Bank and Lesotho Post Bank but both applications were not successful. Instead of giving us an overdraft, the banks demanded a couple of things which we could not provide.
We finally decided to open rights of shares worth M2,000 each to raise M9.7 million. This was calculated from the number of shareholders we were given. This has to be achieved in the next two months.
Apart from that, we are still negotiating with our creditors for them to not become harsh on us. We request that they give us time until we are prepared to pay them.
Are there any chances that the store will reopen in future?
Yes, there are chances but they are limited to time, that’s the problem. If the two months’ time frame ends without getting any help, then it means it will be impossible for the store to reopen, more so because we are still within our landlord’s building.
We recently held a meeting pleading with him (landlord) to give us time and he understood our plight. But my fear is that he might confiscate our equipment while we’re making efforts to sort ourselves out.
What has been the impact of the store’s closure on employees and suppliers?
Losing a job is one of the most stressful things and may even lead to mental health problems. Employees have to pay for their insurances, school fees, rent, and other basic needs and they depend on salaries to meet these.
How many shareholders does Enrich have and will they be compensated for their investments?
So far those who are verified are 4,962, but we have been told that they are about 6,000. We’re in the process of having a clear data base.
Rumours doing the rounds say Enrich Fitness sank the store into debt and its closure was therefore inevitable; what is your response to this?
Yes, it is true. Enrich co-founders started the fitness centre without a proper plan. It was a business on its own which required a plan. For instance; where it would be located? What equipment would be required for the centre and how much would it cost? And what kind of customers would the business serve, as well as it strengths and weaknesses? None of those were there. Rather they (founders) took money which was supposed to support the store to operate the fitness centre. That was a M1 million loan from the bank which they diverted to the fitness centre. The loan was in the name of Enrich Stores.
Sadly, there were not even projections of how much it would generate to pay its own rent as well as to pay employees. All that was paid by the money from Enrich which was performing well.
That bad decision was made without the board’s approval; this is why some board members resigned.
Will the workers who had gone for five months without getting their salaries eventually be paid?
It is not possible for the workers to get paid. They can only get paid if the store becomes functional again. We also have creditors to pay.
Did Enrich Stores have competent and experienced management from the beginning to run a project of this magnitude?
Enrich’s downfall was caused by lack of experience and incompetent leadership. The store operated without a formal business plan or proposal. It merely existed 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. It operated like a spaza shop.
Furthermore, the store has never undergone any auditing procedures since its establishment, resulting in the non-availability of records or receipts to indicate the sale of goods.
The absence of documented records pertaining to previous board meetings poses yet another formidable challenge in retracing past activities.
In cases where there were meetings or something was written, there are no signatures to attest that sittings did take place.
What lessons can Basotho entrepreneurs learn from Enrich’s experience?
Basotho could learn a lot, such as to not establish a business without having enough knowledge about it. Even if one has an idea, they should find someone with knowledge to assist.
One other problem with us Black people is that we have more love than objectivity. Most businesses do not fail because there are no skills but we tend to put more love into business than to mind or its principles. For instance, we neglect mistakes done by employees because you believe we are all Basotho and have to feel pity for each other. But business is a separate entity on its own which requires its own skills.
I also believe the government should have taken serious measures to ensure that the company does not collapse. They would say they tried but to me they did not do enough.
Enrich’s situation has stressed me so much; I receive endless calls about it. I no longer have time for my family, but we keep fighting.
The plan was to grow Enrich to Botswana and South Africa and fill its outlets with Basotho products. The dream was also to see Enrich all over Lesotho because the aim is to embrace Basotho.
I therefore, urged Basotho to buy the M2,000 shares we have opened because it is through them that the company can bounce back. If they fold their arms they should not blame anyone. The store had a lot of potential.
The Lesotho National Development Corporation has reportedly come up with a financial rescue package for Enrich. Can you tell us more about this? Yes, that is true. LNDC has given us M25 million. It will disburse M15m in the first phase and the remaining M10 million will come later. This has changed our situation a lot. To me as an individual and also as Enrich board chairperson, it’s a dream come true. I can now rest a bit and strategise on the way forward with a calm mind. However, it’s just the beginning of a long journey to success for Enrich, a mission which requires a lot of attention, determination and patience. To be honest with you, most people never believed I could lead this company to a re-birth; rather they believed I was going to confirm its death. But you see, the opposite has happened under my leadership, confidence and competence.
