CEO Series

Mustafa Centre Founder Was Top 40 Richest In S'pore - Now In Spotlight For Alleged Criminal Offences

If you live in Singapore and have not been to Mustafa Centre, you must have been living under a rock.

The 200,000 square foot retail giant that lies in the heart of Little India is known to many as a haven for groceries, garments, sports equipment, household items, and electronics.

Open 24 hours a day, there’s usually a massive crowd you have to navigate through to hunt down what you’re looking for.

Mustafa Centre could perhaps have been considered one of the ‘Wonders of Singapore’ over its nearly 50 years of history, but recent events have come to reveal that the behemoth establishment is far from a paradise.

mustafa centre
Image Credit: Kelman Chiang, NUS Singapore Research Nexus

As we heard the news on 6 August of the company coming under investigation by the Ministry of Manpower, we decided to revisit its journey in Singapore.

Here’s how Mustafa Centre started up from the ground, soared to success, and ended up swimming in troubled waters.

Mohamed Mustafa and Samsuddin Co.

Like some other historical companies in Singapore, Mustafa was opened by an early immigrant.

Mohamed Mustafa Majid Khan grew up in Uttar Pradesh, India, and travelled to Muar, Johor in Malaysia to make a living as a peddler in the 50s.

In 1956, he brought his 5-year-old son, Mustaq Ahmad, to Singapore where he began selling tea and bread from a pushcart.

Helping out with his father’s business at a young age, Mustaq Ahmad developed an interest in entrepreneurship, and even started a handkerchief stall with his own money.

The father and son later set up a makeshift stall to sell ready-made garments on Campbell Lane, which then turned into a proper shop space when the government banned street stalls.

In 1971, Mohamed Mustafa and Samsuddin Co. became a 500 sq ft clothing store, opened by Mr Mustaq, his father, Mr Mustafa, and his uncle, Mr Samsuddin.

Most people knew the store as simply, Mustafa.

Through The Transformation Of Serangoon Road

The family secured a second location on Serangoon Road to expand their business just two years later, and added electronics to their products.

A major hurdle came in 1985, when the government acquired the shop buildings for conservation. Mr Mustaq then decided to rent a much larger shop space at Serangoon Plaza, even though it was away from the popular Little India shopping belt.

When rental costs eventually skyrocketed, Mr Mustaq gave up the rented shop and set out to acquire his own buildings for the business.

Twenty shophouses he bought along Syed Alwi Road were torn down to make way for Mustafa Centre in 1995, a 75,000 sq ft department store with a 130-room hotel, costing them $45 million.

mustafa centre
Image Credit: Kelman Chiang, NUS Singapore Research Nexus

In 2003, the store began operating 24 hours a day, which saw a 20 precent increase in their customer base.

The next year, Mr Mustaq reopened a branch at Serangoon Plaza, and converted the hotel rooms at Syed Alwi into even more retail space.

With that, Mustafa Centre had 200,000 sq ft of shopping space comprising of a supermarket, jewellery mart, money changer, travel agency, and many other services.

mustafa jewelry
Image Credit: TK Kurikawa

Keeping A Budget Store Concept

The company attempted e-commerce in 1999, but shut their online store down in the same year due to losses incurred from credit card fraud.

They instead found that a business-to-business selling model worked well for them online.

Mustafa eventually ventured out regionally into India, Indonesia, and Bangladesh, while its store in Singapore doubled into a 400,000 sq ft shopping complex.

Through the years, Mustafa Centre continually sourced its products from the cheapest suppliers and imported them directly in bulk so they could offer prices lower than their competitors.

mustafa centre
Image Credit: living nomads

Even with fairly low profit margins on individual products, the company was reported to rake up an annual turnover of $725 million.

In 2011, Mr Mustaq Ahmad was ranked the 37th richest man in Singapore by Forbes Asia, with an estimated net worth of US$240 million.

Although Mustafa Centre’s Serangoon Plaza branch has permanently closed to make way for new developments, the remaining 200,000 sq ft store is still booming with business.

Falling On The Wrong Side Of The Law

Despite his colossal achievements, Mr Mustaq has been found on the wrong side of the law on several occasions.

The first incident was in 2010, when the company was found to be operating an unauthorised wholesale centre out of its warehouse at Kallang Pudding Road.

mustafa warehouse
Mustafa Warehouse / Image Credit: Hexacon

They initially applied to convert the six-storey warehouse into a wholesale centre, but this was denied by the Urban Redevelopment Authority.

When they were found to be selling goods from the warehouse, the company was fined $10,000.

Family Mis-Fortunes

In October 2017, Mr Mustaq Ahmad became embroiled in a lawsuit filed by his step-family, who accused him of increasing his own stakes while diluting their interests as beneficiaries of the company.

Mr Mustaq was born to the late Mr Mustafa by his second wife, Asia.

The children of Mr Mustafa’s first wife, Momina, believed that the family patriach intended for the company’s share to be split evenly between them upon his death.

However, Mr Mustaq allegedly made the rest of the Mustafa and Samsuddin estates minority shareholders, while he and his wife continually increased the value of their shares.

For example, Mr Mustaq’s portion grow to 61.25% of 13 million MMS shares from 42.57% of 9 million shares, while the rest of the Mustafa estate’s share fell from 22.07% to 14.89% in a 2001 share allotment exercise.

mustaq ahmad
Image Credit: Tokio Marine

Mr Mustaq and his wife, Ishret Jahan, were accused of misappropriating funds and assets, using their power to earn themselves directors’ fees “amounting to an average of 51% of the [company’s] net profits per year between 2001 and 2014”.

Mr Mustaq’s step-family also said that he fabricated transactions to create a false impression that MMS was indebted to B.I. Distributors Pte Ltd.

They claimed that B.I. Distributors Pte Ltd. was wholly owned by Mr Mustaq, and his deceptive arrangement was for the purpose of siphoning funds for his personal use.

Among other claims, Mr Mustaq’s step-family also accused him of overstating employees’ salaries on their work pass applications and pocketing the difference for his own benefit.

In July 2018, the High Court denied Mr Mustaq’s bid to strike out of the lawsuit, and the case is set to proceed with a full trial.

Former Mustafa Employees Lodge Complains

On 6 August, it was reported that the Ministry of Manpower is currently investigating Mohamed Mustafa and Samsuddin Co. for alleged employment offences.

After the MOM had received several complaints about the company, it is looking into various offences including work pass violations and receiving of kickbacks.

A former senior sales executive at Mustafa Centre, Mr Abdul Haq Siddique, reported that he was required to return $600 to $1,000 to human resources after receiving his salary each month, depending on how much he earned in overtime.

Mr Abdul said other employees were subject to the “cashback” practice as well, with only Mr Mustaq’s and Mr Samsuddin’s family members exempt from it.

The company stopped collecting kickbacks from employees when Mr Mustaq’s family lawsuit began.

However, the company instead informed employees that their S Passes would not be renewed, as “manpower costs for S Pass holders have increased due to the cessation of cash back collections”.

The Online Citizen found that another former employee was terminated by the company after he tried to seek clarification regarding his S Pass renewal.

Serious Consequences

If convicted with kickback offences, those involved can be fined up to $30,000 and/or jailed for up to 2 years for each charge.

Under the Employment of Foreign Manpower Act, employers found guilty of providing false information in any application or renewal of a work pass could also be fined up to $20,000, and/or jailed for up to 2 years.

I used to enjoy the cheap thrills of bargain hunting in the throes of Mustafa’s aisles, but the company’s reportedly questionable conduct changes my perception.

Sadly, most people will probably just continue to spend their money at the superstore instead of passing up on a good bargain.

Featured Image Credit: Tokio Marine / Kelman Chiang

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Check out the latest industry with the highest retrenchment rates in Singapore here.

 

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