. . . as Enrich loses M15m loan over failure to meet key conditions
Mathatisi Sebusi
THE Lesotho National Development Corporation (LNDC) has abandoned its much-publicised M15 million bailout of Enrich Holdings, citing the company’s failure to meet critical loan conditions.
Enrich’s failure to put together a rescue structure and signs of deep-seated mismanagement also contributed to LNDC’s pullout.
A detailed LNDC evaluation report, seen by the Lesotho Times, paints a picture of internal contradictions, leadership instability and risks of possible fraud within Enrich — all of which ultimately convinced the corporation to walk away from the deal.
Enrich Holdings, a three-tier wholly owned Basotho company operating Enrich Grocery Store, Enrich Fitness, and Enrich Creative, was incorporated on 24 July 2019 and launched operations in September 2020.
Backed by 6,000 shareholders with a market capitalization of M19 million, the venture promised to be one of the largest entrepreneurial ventures wholly owned by a large number of Basotho.
The business originally operated at Ha Mafafa along Kingsway Road, with a fitness centre at Ha Thetsane, Maseru. For a time, it was hailed as a symbol of promising Basotho entrepreneurship.
However, the dream quickly unravelled after Enrich quickly accumulated massive debts, leading to its collapse in 2023.
Its landlords locked the company out of its rented properties over arrears, while one of its major creditors, Moosa Group of Companies, sued over unpaid rent.
According to the LNDC report, Enrich ran into financial crisis “as a result of the business being launched without a documented business plan, which later led into a series of challenges including mismanagement of funds”.
Bailout
Desperate to salvage the business, Enrich approached the LNDC in 2023 seeking M25 million to clear debts and recapitalise the business. The LNDC engaged a transactional advisor, who after assessment recommended a turnaround strategy that was “achievable.”
On that basis, the LNDC board approved M15 million in quasi-equity support — significantly less than the requested M25 million — with strict conditions attached.
A loan agreement was signed, and in December 2023, Enrich requested an urgent advance to pay rent arrears to stave off imminent asset auctions.
LNDC disbursed M1,466,539 directly to two creditors: Moosa Group (M975,554) and P.E.G (Pty) Ltd (M490,985). The Corporation emphasized that this was strictly meant to preserve the company’s assets and allow it to resume trading in order to repay both creditors and the LNDC itself.
But this was as far as the bailout went.
Contractual Breach
The remaining M13.5 million was withheld when Enrich failed to meet what the LNDC described as “the most critical condition precedent” under Clause 8.3 of the loan agreement.
“The borrower shall provide a share register and certificates that are up to date together with proof of contributions or acquisition of shares,” Clause 8.3 had demanded.
According to the LNDC, Enrich never complied.
“Despite the loan agreement and repeated requests, Enrich Holdings has not submitted a complete share register. Well-known shareholders are missing from the document, and it is not clear why they do not appear. The Acting Managing Director (not named) even admitted that some shareholders intend to exit and require payments for their shares. There is therefore a high potential that Enrich Holdings is insisting on a direct loan so they can access funds to pay off shareholders rather than revive operations,” the report stated.
The SPV
To mitigate the risks and fast-track assistance, the LNDC proposed a Special Purpose Vehicle (SPV), a new entity called Enrich Investments, in which both LNDC and Enrich Holdings would be shareholders. The arrangement was agreed to and signed by representatives of both boards.
Through this arrangement, LNDC Chief Executive Officer, Advocate Molise Ramaili, was going to be one of the Enrich Investment directors, in order to safeguard LNDC interests.
“The decision to utilize an SPV was understood and accepted by the Enrich Holdings board, as a representative co-signed the shareholders’ agreement,” the LNDC said in the report.
But just as the corporation was preparing to disburse the funds through the SPV, Enrich’s Acting Managing Director wrote to LNDC rejecting the arrangement.
“The letter stated that an SPV was not suitable as it carried too many risks and that Enrich shareholders did not understand what an SPV is. Instead, the company requested an outright loan,” the report explains.
The LNDC responded firmly, reiterating that the SPV was “the only available mode of assistance” under Enrich’s circumstances and requested a formal acceptance or rejection in writing.
Instead of providing a clear answer, Enrich reverted to the now-superseded loan agreement and demanded that LNDC explain the SPV structure to its shareholders.
“This back-and-forth created new risks, including leadership instability and potential fraud,” the LNDC wrote.
“Although an SPV had already been explained to the Acting MD — who confirmed understanding at the time — he later contradicted himself in official communication. One Enrich director even emailed LNDC distancing himself from the MD’s letter, but no formal position was ever issued by the company’s board.”
Mounting debts and questionable salaries
The LNDC report also exposes worrying signs of financial strain within Enrich. As of September 2024, the company’s debts stood at M4.1 million, including a wage bill of M632,759.
Alarmingly, M300,000 of this wage bill was allocated as the Acting MD’s salary, which, according to LNDC, “Enrich Holdings board members who also sit on the Enrich Investments board stated they did not approve”.
The report adds that the Acting MD repeatedly insisted that LNDC funds must be used to pay creditors immediately, refusing to consider deferring those payments until Enrich could sustainably service its debts.
The situation was further complicated when several creditors began approaching LNDC directly.
“These creditors were under the impression — based on communication from Enrich Holdings — that LNDC would pay their dues. This miscommunication created reputational risks for the corporation,” the evaluation notes.
LNDC pulls out
Faced with unresolved risks, the LNDC ultimately recommended to its board that the deal be closed.
“The purpose of this submission is to request the Investment Committee to consider closure and decline of the Enrich Holdings investment deal, following failure of the company to meet a critical funding condition and its subsequent indecision to accept a Special Purpose Vehicle derisking mechanism,” the corporation’d report states.
Enrich responds
Speaking to the Lesotho Times, Enrich Holdings Board Chairperson, Thabo Qhesi, admitted there had been miscommunication with LNDC, particularly regarding the approved loan and the SPV.
“Since Enrich Holdings could not provide an up-to-date share register and share certificates, the board and shareholders agreed to establish a new company under a Special Purpose Vehicle. That new entity was registered as Enrich Investment,” he explained.
Mr Qhesi revealed that the Acting MD acted outside his mandate.
“In his personal capacity and without informing the board, he wrote to LNDC requesting that the loan funds be deposited into Enrich Holdings’ account instead of Enrich Investment.
“But that account already has debts, and if money was deposited there, creditors would immediately demand payment. The funds would not serve their intended purpose of reviving operations.”
He stressed that the board stood by the SPV model.
“We still believe the SPV was the best route to safeguard the funds and ensure Enrich’s operations were revived for the benefit of thousands of Basotho shareholders who invested in this dream,” Mr Qhesi said.
Despite Mr Qhesi’s remarks, the fallout between Enrich and LNDC now leaves the future of the company uncertain. For the thousands of Basotho shareholders who once pinned their hopes on the ambitious venture, the collapse of the bailout represents yet another blow in a saga of broken promises and dashed expectations.
