Gold Brands Investments feels the heat as creditors finally lose patience
AltX-listed casualdining group has cut staff to curb costs
We are prepared to pay them something, but not R160 000 for what we received Praxia Nathanael Gold Brands CEO
● Franchising company Gold Brands Investments has in the past year retrenched staff and is looking to move to smaller premises as it struggles to manage rising debt and pay suppliers.
The casual-dining group — it owns brands such as ChesaNyama and Blacksteer and listed on the JSE’s alternative exchange AltX almost two years ago — has left some who have done business with it out of pocket.
According to information provided to Business Times, as of December last year Gold Brands owed suppliers money after failing to make payments for services or goods provided.
Surprising
Praxia Nathanael, the CEO of Gold Brands, conceded that it was true that Gold Brands owed creditors, but said it had made provision to pay suppliers.
Yet the Franchise Association of South Africa (FASA) has sent the group a legal letter after Gold Brands had failed to pay R160 170 for taking part in a franchise expo last year.
Nathanael said in the past 10 years the FASA expo was set up in Kyalami rather than the Sandton Convention Centre. “We were very disappointed with turnout of the expo and the marketing around the event. When we arrived, what they had promised us is not what we found.
“I have made a proposal to FASA in writing, telling them what we are prepared to pay for [and] what we received on that day. We expected a lot more. We are prepared to pay them something, but not R160 000 for what we received.”
Vera Valasis, executive director of the FASA, said ChesaNyama signed the standard exhibition contract, which requires that all exhibition costs are paid before the opening of the expo.
“On the day of the opening of the show the exhibition manager prohibited access to the ChesaNyama stand by the representatives of Gold Brands due to unpaid exhibition costs.”
Valasis said Stelio Nathanael, Gold Brands COO, visited the exhibition manager shortly afterwards and gave her his personal undertaking that the exhibition costs would be paid immediately.
“He reneged on this undertaking and all the association’s follow-up calls and demands for the payment of the exhibition costs went unanswered. The matter was handed over thereafter for further action.”
Retrenchments
But it is not just creditors who are at loggerheads with Gold Brands.
According to an employee, there have been retrenchments, leaving just 17 people working at head office.
Nathanael said 49 employees were retrenched in the past year.
Excluding staff who were deployed at head office-owned stores that have subsequently been sold, there were now 61 employees at head office.
When the company listed two years ago it had more than 100 employees.
“We did have to let go of a few people — we were left with no choice. So we had to cost-cut in every area so that we could minimise our monthly losses as far as possible, so we’d slow down the losses,” said Nathanael, adding that the retrenchments also cost the company money.
According to the group’s latest results for the six months to August 31 2017, revenue declined 72.6% to R27.6-million, while gross profit fell to R13.04-million.
In the year to February 2017 Gold Brands opened 63 stores and took over 27 existing stores, said Nathanael.
The group’s share price has declined almost 50% to 6c since its listing two years ago. According to Bloomberg, the only analyst who covers the stock, Vunani Securities’ Anthony Clark, rated the stock as “avoid”.
One employee said some staff had not been paid for the past five months.
“They treat us like dogs. You live in fear every day when you come to work. You don’t want to come to work because you don’t know what the hell is going to happen to you today,” the employee said.
Nathanael denied the claims of abuse in the office as well as the claims that there were staff members who had not been paid for five months.
The employee said: “One thing that I know is that there is no money and they are battling to pay their creditors. One day the woman who works for the creditors [department] came and she gave in her resignation and left.
“She couldn’t handle it anymore because of the stress levels. They shout and they swear real bad, not the way you should talk to people. I cannot afford to be without an income, otherwise I would’ve taken my bags and left a long time ago,” the employee said.
A former employee at Gold Brands said during his time at the company, the working conditions were not necessarily terrible, but there was a “delay on three occasions when petrol was not paid and where my salary was paid on the ‘39th’ of the month”.
“A lot of us were subjected to the same delays in salary payments.”
Part of the cost-cutting exercise at the company is the sale of Gold Brands’ Centurion head office, which is on the market for R20-million.
Nathanael said the building did not belong to Gold Brands and was for sale because “it has become too big for us. If I do find somewhere else I’ll move, but I don’t have to move tomorrow and my staff are well aware of it. It has become too big for us”.
The building is owned by Nathanael.
“It [the property] does not belong to Gold Brands and why people are trying to make something negative out of Gold Brands, I don’t know.”
Not transparent
Some franchisees are also claiming that Gold Brands has not been transparent in its dealings when selling stores.
A former franchisee, who did not want to be named as he had signed a non-disclosure agreement with Gold Brands, recently had to close down his ChesaNyama store after it had been operating for just more than a year.
The franchisee said he was required to purchase 90% of his products from Gold Brands, as stipulated in the agreement. However, this became an issue when head office had not paid suppliers, meaning franchisees were not receiving any products to sell in their stores.
“It took four to five months for our shop to really hit rock bottom. We were evicted. I lost about R700 000 that just went down the drain and there was nothing I could do,” he added.
But while Nathanael said she was aware of the failures by head office to supply products, “from May last year there is absolutely no reason why franchisees should not be supplied from Gold Brands’ head office” if their account is up to date in line with group policy.
“We’ve changed the strategy completely and the business completely because of the outsourcing of the online store. Any franchisee is welcome to meet with me personally. I’m happy to meet with them,” Nathanael said.
A Gold Brands employee’s words reflected the uncertainty: “We’ve come here twice in the past month when the gates were still locked and we thought that we don’t have jobs anymore, but it was just people who were late. But that is the fear that we live in.”