A dispute between pawnbroker and second-hand goods retailer Cash Crusaders and one of its suppliers, DMX Africa, has lifted the lid on an alleged cash constraint facing the franchise group.
In an email trail between the group and DMX Africa, which Business Day has seen, Cash Crusaders CEO Brent Topat alleges that it is facing “profound cash flow and liquidity problems”.
“Hi [name withheld]. I regret to advise that we are currently experiencing profound cash flow and liquidity problems. We propose a payment schedule in which we will settle this invoice [totalling more than R330,000] in increments of R50,000 per month,” the email to DMX reads.
DMX is an experiential marketing solutions company best known for its diverse music repertoire on DStv. According to DMX CEO Craig Cesman, the company entered into a contractual agreement with Cash Crusaders four years ago to display promotional content in their 240 stores. DMX provided two screens per store at no cost, with an agreement for their return at the end of the contract.
The contract ended in March and DMX sent a schedule of missing or damaged equipment in June, which Cash Crusaders agreed upon. However, Cash Crusaders, facing a liquidity crunch, has only paid one instalment of R50,000. Cesman said DMX has not taken legal action yet.
“The background is that my company, DMX Africa, supplied digital signage services to Cash Crusaders for several years. At the end of the contract they were required to return the equipment or pay for equipment lost or damaged. They agreed to pay this amount totalling R334,236 inclusive,” Cesman said.
“Yet on July 28 constantly failed to do so. On October 6 we received an email (attached) from their CEO stating that they ‘are current (sic) experiencing profound cash flow and liquidity problems’ and trying to force us into accepting a R50,000 per month repayment plan,” he said.
Threats
“When we declined the repayment plan and demanded full payment, he effectively threatened a ‘take-it-or-leave-it’, paid the first R50,000 on Friday, October 10, and responded saying any legal action will be defended,” said Cesman.
In his response to Business Day’s questions, Topat dismissed the allegations, saying that DMX was reacting bitterly to the termination of an overpriced contract. He said the franchise group was performing strongly with plans to roll out more new stores, taking the total to 280.
Key Takeaways
- Cash Crusaders allegedly faces severe cash flow and liquidity issues, according to an email from its CEO.
- DMX Africa, a supplier, claims the group owes over R330,000 and has only paid one R50,000 instalment.
- Cash Crusaders denies financial problems and says DMX is bitter over a cancelled contract.
- The group also had a legal battle during a 2023 franchisee revolt.
- Industry challenges like rising costs, power outages and online resale platforms pressure margins.
“No, we do not have cash flow problems; business has never been better. We will end the year on 280 stores, which reflects a growth of 30 store this year.
“DMX are embittered because we negotiated an end to their usurious contract and replaced their second-rate equipment with high-quality digital advertising panels from China where we own the solution and do not need to pay them R600,000 every month as we have in the past,” he said.
“DMX’s final invoice is outrageous, with them charging inflated prices for such supposedly missing accessories such as SD cards and adapters. We are in the process of settling their invoice but resent the way they have looked to extract as big a chunk of flesh with their final, ridiculous invoice.”
Franchisee revolt
It remains unclear whether Cash Crusaders’ alleged financial distress is linked to the 2023 franchisee revolt that landed the group in a legal dispute.
In September 2023, about 78 franchisees — making up about a third of Cash Crusaders’ franchise network and representing 40% of its royalty income — broke away to form a rival company, Cash Xchange.
However, a court ruled in October last year that the breakaway franchisees must revert to trading as Cash Crusaders until the dispute is settled through arbitration. Cash Crusaders initially lost an earlier attempt to force the franchisees to remain, and multiple legal applications have been filed by both sides.
In court filings, Cash Crusaders stated that the loss of royalty and marketing income was a “staggering loss” and that it might be forced to retrench more than 150 head office staff.
In late 2024, Cash Crusaders’ lawyers reported that all parties were in discussions to try to resolve the dispute, which was described as a “family disagreement”. However, the company has not publicly confirmed if the financial threats have been averted. Cash Crusaders has shown some resilience with no public filings of insolvency or liquidation reported.
Cash Crusaders’ troubles mirror the challenges faced by the industry at large. They include joblessness, rising food prices and limited wage growth that contribute to squeezing household budgets. While this drives demand for affordable goods, it also translates to price-sensitive consumers, making it hard for retailers to maintain margins. Frequent power outages, which disrupt store operations, are some of the issues that increase costs and reduce foot traffic.
According to Mobility Foresights, this sector also faces a challenge from digital resale platforms such as Yaga, Facebook Marketplace and Gumtree, which offer consumers convenience and low prices.
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