Nyama Mama: The restaurant’s rise, legal troubles and uncertain future

The story of Nyama Mama, a popular local restaurant chain, is one of rapid growth, intense legal battles and now, an uncertain future.

The restaurant chain, owned by Good Earth Group (TGEG), has faced a series of challenges over the past three years, from the impact of the COVID-19 pandemic to legal disputes.

The directors were accused of using false documents as collateral to obtain a Sh520 million loan, a controversy that has spooked investors who may have insulated the company from the coronavirus pandemic and even provided a solid foundation for it to seek expansion into the region.

The Future of Nyama Mama Looks bright In a way, it’s full of doubts now.

Since 2021, the company’s directors, Ninaa and Jayesh Shanghavi, have had to deal with battles in and outside the courts and were arrested by the Directorate of Criminal Investigation (DCI) as detectives were probing allegations of fraud.

However, on July 11 this year, the Milimani Chief Magistrate’s Court in Nairobi dismissed the case against the company and its directors as the Office of the Director of Public Prosecutions (ODPP) said evidence showed that it was a civil case and not a criminal prosecution.

TGEG twice had investors willing to inject capital to help the company pay down some of its debt and avoid the worst effects of the coronavirus pandemic. However, disputes with banks caused investors to flee.

“The company succeeded in finding an investor who was willing to pay $4.5 million (Sh585 million) as full and final settlement to Victoria Commercial Bank,” the directors said in a letter to the ODPP protesting the charges, adding that they made the offer to the bank but it was rejected.

The letter stated that the bank only offered to release one security upon payment of Sh585 million.

“The potential investors were not satisfied with VCB’s stance and therefore withdrew their bids.”

The second investor made the same commitment, offering to pay Sh400 million, in addition to which the couple pledged their shares in the bank, valued at Sh220 million.

Nyama Mama opened in 2015 with just two branches and quickly expanded to eight restaurants by 2020. Known for its modern take on traditional Kenyan cuisine, the chain has become a household name.

In addition to Nyama Mama, TGEG has also launched two other brands, Yao and Blue Door, which have become one of the success stories in the local hotel industry.

At their peak in early 2020, the three brands had 350 employees and ambitious plans to expand into other parts of Africa.

As the coronavirus pandemic hit, their revenues fell and the burden of servicing debts and paying suppliers and landlords began to impact business.

Perhaps the heaviest debt for Nyama Mama is the loan from Victoria Commercial Bank.

Between 2018 and 2020, the company had loans totaling Sh975 million, which had been reduced to Sh860 million by February 2020, when the coronavirus pandemic hit.

As security for the loan, the couple offered various assets to the bank as collateral, including a plot of land on General Mathenge Drive in Nairobi valued at Sh250 million, a family home on General Mathenge Drive valued at Sh76 million, and shares in I&M Bank valued at Sh6.5 million.

They also provide personal TGEG’s Guarantee directors, TGEG bonds, shares in Victoria Commercial Bank worth Sh70 million, while $174,000 from his personal account was also provided as security.

When the coronavirus pandemic hit TGEG, the company successfully obtained a moratorium on loan repayments from March 2020 to March 2021, by which time the situation was expected to improve.

Faced with an uncertain future due to reduced revenues caused by the COVID-19 lockdown, TGEG began looking for potential investors in 2020. The directors noted that this would “raise funds to rescue the company and pay for the VCB facility”.

However, the whole process turned muddled when the bank claimed that one of the guarantees provided by TGEG for the Sh520 million loan was fraudulent.

In May 2021, the bank complained to the DCI that TGEG directors Ninaa and Jayesh had obtained a Sh520 million loan from the bank using alleged false documents.

However, the court agreed last month with the attorney general that the case would be better resolved through civil proceedings rather than criminal prosecution.

“I do not find any prejudice to the complainant and the ODPP has the power to initiate, maintain and withdraw criminal cases under Act 157 of the Constitution of Kenya 2010,” Senior Magistrate Wandia Nyamu said in his ruling.

“The reasons given by the ODPP for withdrawing the case are reasonable and I do not find it necessary for the observer counsel to address the court on any other issues and the case is hereby withdrawn pursuant to section 87(a) of the Criminal Procedure Act.”

Previously, TGEG pleaded with the ODPP to drop the criminal investigation in a letter in March 2022, saying it had provided the requested documents, adding that they were “not aware” that the matter had turned into a criminal case and that “the matter is of a civil nature and we have been discussing it with the bank”.

While the July 11th withdrawal of the lawsuit may bring some relief to the Nyama Mamas, TGEG is still heavily in debt, and with all of its restaurants closed, getting any of the brands back on track will be a difficult task.

In their appeal to the ODPP, the directors said the case had caused huge losses to them and the company.

“During the 2020 coronavirus lockdown, TGEG sought potential investors for the catering business in order to raise funds to save the company and pay off the VCB loan,” the couple said in their letter to the DCI.

The directors said that after at least two investors pledged on separate occasions to save the restaurant, the bank refused to proceed with the rescue plan despite signing the agreement.