May 2022 is last month for PTC to be able to pay staff salaries as it has now depleted all its working capital

PTC head office at Ginnery Corner in Blantyre 

* As PTC management reveal it is receiving personal threats from creditors and continue to put their lives at risks

* By trading when they know the company is not capable of paying for the services in the absence of any capital injection

* Tafika Holdings does not have the capacity to bail us out in a situation where PTC is declared bankrupt 

By Duncan Mlanjira

Senior management of People’s Trading Centre (PTC) are pleading with Press Corporation Plc to inherit the equity injection of K6 billion which was acquired on paper by Tafika Holdings Limited or to advise them to proceed in winding up PTC following the normal legal route for voluntary liquidation.

In its letter to PCL’s acting group chief executive officer, copied to Tafika Holdings executive chairman, Arson Malola, the management has asked Press Corporation to the terminate the sale of the historic chain of stores company — citing that the equity investor is failing to meet his obligations of the deal.

They indicate that the investor has grossly violated terms of the agreement, saying the violation impacted on PTC as a company, its employees, its suppliers and Malawi as an economy.

While Tafika Holdings — owned by South Africa-based Malawian Arson Malola — maintains that the share purchase agreement (SPA) it has with Press Corporation Plc concludes in the next few weeks, the senior management indicates a serious concern that May, 2022 is the last month that PTC would be able to pay staff salaries as it has now depleted all its working capital through paying the monthly remuneration.

“Ideally, the company should be paying salaries from gross profits but it has operating without stocks and it has been paying salaries by reducing stocks from K885 million as at December 31, 2021 to K260 million as of May 16, 2022.

“This is no longer sustainable and an indication that the sale has failed to achieve it intended purpose,” says the letter dated May 18, 2022 and stamped as received by Press Corporation on May 20.

The management requested Press Corporation to respond within 7 days of writing the letter to enable them to attend to staff and suppliers, who are issuing personal threats from creditors.

They contend that they continue to take the risks to their lives “by trading when we know that the company is not capable of paying for the services in the absence of any capital injection” and stressed that “Tafika Holdings does not have the capacity to bail us out in a situation where PTC is declared bankrupt”.

Press Corporation is also being advised to inject the required equity if it is in agreement with the termination of the SPA, saying the decision to find one in the initial stage was “noble and management applauds PCL for that decision”.

“In view of the 3 month wasted, the equity injection has moved from K6 billion assumed by Tafika Holdings to K7.5 billion in addition to the K12.5 billion already assumed by PCL.”

The K6 billion injection by Tafika Holdings — to be honored within 60 days or enter into settlement agreement with all the suppliers within 60 days of signing the agreement — assumed liabilities that included the Pension Fund arrears at K351 million; Medical Aid Society of Malawi (MASM) arrears at K31 million; PAYE tax arrears at K180 million and ESCOM arrears at K495 million.

The concerned management indicates that members of staff were particularly concerned about their pension and MASM arrears who were assured as well as suppliers that things will improve by end of April latest being mid-May 2022 when the investor deal would be concluded.

But as of May 16, 2022, Tafika Holdings is reported to have “failed to honour its commitment to pay the assured liabilities within 60 days” as per SPA and of particular concern is that the financial position of the company continues to deteriorate and the creditors continue to increase at the rate of around K300 million per month.

Management expects that in the three months to May 31, 2022, they “are already estimating a growth in creditors by around K1 billion”, which they assume Tafika Holdings might not meet because the investor — as according to PTC auditors, Deloitte indicates that it has failed to prove “it has financial capacity or has adequate financial facilities or adequate financial resources to honour the K6 billion purchase consideration.”

The failure to pay the ESCOM arrears of K495 million, which is part of the K6 billion purchase consideration, has prompted ESCOM to issue an advise that it will disconnect power at all post-paid PTC sites across the country on May 31, 2022.

Tafika Holdings is also reported to have failed to pay Rab Processors Limited K309 million that it committed to pay within 60 days of assuming the business and that has led Rab Processors to file in the High Court of Malawi to declare PTC insolvent and push for a forced liquidation of the company.

Tafika Holdings has also failed to pay the pension arrears of K351 million also part of the K6 billion purchase consideration which were also supposed to be paid within 60 days after the signing of the SPA in February — that has also led the Principal Officer of the PCL Pension Find to write to PTC management advising the seriousness of the matter.

The company’s staff are threatening to engage the Governor of the Reserve Bank, who is the Registrar of Financial Institutions, to take action on PTC as regards to the pension arrears.

But Malola responded — not to the petition by PTC senior management— but as his reaction to what is circulating on social media, describing it as just “rumors [which] are without basis and are without merit”.

He indicates that the source of the story is from a journalist, who is quoting internal sources and “has not made any effort to contact Tafika Holdings Ltd directors to confirm the status of the transaction”.

He explains that the sale and purchase transaction was signed and finalised in March 2022 but is subject to regular approvals, which is a contrast to what the senior management indicates being done in February.

“Whilst Tafika Holdings Limited has taken over management of the business, the closing of the transaction will take place in the next weeks,” he wrote, emphasizing that “currently, the business is in transaction — hence the low stock levels.

“However, Tafika Holdings is planning to commence and committed to stocking the stores in the next week or so. The delaying has mainly been caused by supply chain constraints currently experienced in the country and regionally.

“Tafika Holdings is working tirelessly behind the scenes to ensure that our customers are served with the right range of products at affordable prices going forward as we implement robust internal controls

“Whilst the company is undergoing the transition process, we request that all stakeholders to be patient and bear with us for the next few weeks [as] Tafika Holdings is committed to recapitalizing the business and champion the turnaround and implement the growth.”

The growth implementation, as according to Malola, “entails, amongst others, the expansion of the number of People’s Stores to not less that 200 stores in the next five years across Malawi, thereby creating employment”.

“PTC is one of the largest retail stores of consumer goods in Malawi and is the leading retailer of groceries operating 20 stores in Lilongwe, Blantyre and Zomba, with the majority of its stores in Blantyre.

“It operates under People’s, SPAR and Food Lover’s Markets under licwnce and franchise respectively,” said Malola in his statement.