File - Two KwaZulu-Natal businessmen claim they’re drowning in debt as a result of a Spar deal that went sour. Picture: Jacques Naude/African News Agency (ANA)
Durban - Two KwaZulu-Natal businessmen have accused the supermarket group Spar of “using them” as fronts to benefit from BBBEE funding.
Nhlanhla Makhanya and Sfiso Ngwenya, who own a Spar store in Vryheid, northern KZN, are at loggerheads with Spar Group which seeks to recover millions from them that they accumulated through stock the company supplied to them.
The pair purchased the store in 2016 for R10.5 million. However, the store which now includes a Tops liquor shop, according to Spar, had been operating at a loss. Spar has since taken over its operations, although it was still registered under Makhanya and Ngwenya’s names.
The partners had obtained funding from Masisizane Fund, a non-profit funding entity that provides enterprise development to black-owned and women-owned small, medium and micro enterprises. Speaking to Sunday Tribune, Ngwenya said on finding out the store was operating at a loss, Spar advised them to sell the shop back to them for R2 million.
He said they were surprised by the low value because they had added a liquor shop, which was not there when they bought the franchise in 2016.
He claimed that Spar had never given them full rights to operate. “They imposed a manager on us because we did not have experience in retail and he has been managing the shop since we took ownership.
However, despite him being experienced, the store never made a profit. We are in debt because they delivered stock to us on credit. We still owed Masisizane Fund while we accumulated more debt setting up Tops. “The company took over the store from 2019; it continues to operate under our names and it uses our liquor licence.
But we are not getting any financial gains from the business, yet we have to pay the debts,” he said. The Spar Group took the matter to the Pietermaritzburg High Court, seeking over R2m from the men who took stock on credit.
In the court papers, the company said the goods it supplied to the business were sold at Spar’s usual prices, with value-added tax. It said Ngwenya and Makhanya had failed or neglected to make payments. Ngwenya said the deal had left them in debt and Spar “used” them to access funding and grants available to black-owned businesses.
“From inception to date, we were never granted a genuine opportunity to run their business as intended. Even post the purchase of Tops, Spar remained in complete control of our businesses. “The company appointed a mentor to manage our businesses. The manner in which it completely absolves itself of accountability is distasteful. “There has never been an agreement for Spar to take over our business.
We believe that we were drawn into a trap by Spar and we are being used as a front to fulfil the BBBEE element.
We will be approaching the Department of Trade and Industry for further investigations,” he said. Gordon Pentecost, Spar’s legal advisor said a management agreement was entered into between the two businessmen and Spar to assist them in running the business.
“Unfortunately, they had run the business at a loss, and we entered into an agreement to ensure we could fund the business to ensure that it remained operational. Both individuals were paid a salary for their efforts.
Unfortunately, it was uncovered that they were abusing their managerial roles and using business funds for personal gain. This situation could not be allowed to continue, and as a result the management agreement was cancelled.”
He said Spar assisted in respect of their personal bank loan, which they were unable to service, and the company was left with no choice but to take control of the business.
He said the pair were kept abreast of the developments of the business and 2022 financial information was discussed. He denied the claims that Spar was using them to benefit from the BBBEE.
“The securing of the funding of the purchase of the business was done by themselves without Spar involvement. Spar has not benefited from any BBBEE grant funding in this store.”
The matter will be heard at the Pietermaritzburg High Court in April for the consolidation of all matters into one case.
SUNDAY TRIBUNE