Spar is facing a legal battle with allegations surfacing from two KwaZulu-Natal businessmen alleging that the retailer is using them as fronts.
IOL reports that the two KZN businessmen are unhappy as they feel the supermarket group is using them to benefit from BBBEE funding.
Known as Nhlanhla Makhanya and Sfiso Ngwenya, the duo owns a Spar store in Vryheid, northern KZN, they 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 but it now has a liquor outlet, Tops and according to Spar, it 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.
According to IOL’s sister publication, the Sunday Tribune, Ngwenya alleges that 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.
Ngwenya claims that the grocery retailer 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,” he said.
“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 in 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.
Meanwhile, the Spar Group took the matter to the Pietermaritzburg High Court, seeking over R2m from the men who took stock on credit.
Spar argues that 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,” said Ngwenya.
“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 fulfill the BBBEE element.
“We will be approaching the Department of Trade and Industry for further investigations,” he said.
In their response, Spar’s legal advisor Gordon Pentecost explained that the 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,” he said.
The matter will be heard at the Pietermaritzburg High Court in April for the consolidation of all matters into one case.
