Gaborone - Botswana's leading supermarket chain and one the fastest growing regional grocer, Choppies’ strategy of creating a strong African supermarket business is facing uncertain future following the suspension of group chief executive officer, Ramachandran Ottapathu, last week.
Ram, as he is affectionately known in the business community, confirmed his suspension by the board but would not provide details.
“Yes it is true I have just been given the letter of suspension by the board. The only communication I got is to remain suspended or resign,” he said. While details are still sketchy as to why Ram was suspended, the company has since issued a statement explaining that his suspension was in relation to the financial mess that the retail group was currently embroiled in after it failed to release its full year results last year.
In a statement, the Choppies Board of Directors said it had resolved to suspend “the company chief executive officer, Ramachandran Ottapathu, until further notice.”
The company further explained that the suspension took effect from 22 May 2019 following a board meeting held on the same day.
“The suspension of Mr Ottapathu takes effect from Wednesday 22 May 2019 and will subsist until such date as the board determines the action, if any, to be taken in implementation of the recommendations made in the investigation reports that will follow the completion of the legal and forensic investigations announced by the company on 5 March 2019,” Choppies said in a statement to shareholders.
The legal investigation was anticipated to conclude by the end of May 2019, having been extended from the end of April 2019. The forensic investigation is anticipated to conclude by the end of June 2019.
The statement also added that a chief restructuring officer, Redford Capital, had been appointed.
“Redford is a South Africa based firm with over 25 years’ experience in providing business related services that include assisting its clients to resolve challenges and meet strategic and operational objectives,” the statement says.
As chief restructuring officer, Redford will review the Choppies business and identify action plans to improve the business, the notice read.
The JSE and the Botswana Stock Exchange has suspended the trading of Choppies' share as the company is yet to publish its financial statements for June 30, 2018. Choppies further stated that the shares remain suspended until the publication of results.
Reports indicate that the retailer’s shares fell 76% in one day on the BSE last September, before it was suspended from the local exchange.
Choppies, which operates chain stores in Botswana, Namibia, South Africa, Mozambique, Kenya, Tanzania, Zambia and Zimbabwe, now faces serious challenges as its expansion strategy into other countries in African remains in doubt.
The company said in September last year that the delay in publication of results was due to an audit for the year ended June 2018. The chain supermarket then appointed a new auditor in early 2018 after parting ways with KPMG, its long time auditor. Choppies also explained at the time that the board and auditors had been working together to reassess the past accounting practices and policies.
“The reassessments currently being undertaken relate to historical purchase price allocations on business acquisitions, depreciation and amortization accounting, valuation of inventory and impairment assessments of property, plant and equipment, intangible assets and deferred tax assets,” the company said in a statement in 2018.
Choppies further explained that the reassessments were complex by nature, requiring careful analysis in order to determine the impact on prior and current periods. The retailer added that its board of directors and its new auditors, PricewaterhouseCoopers (PWC), had uncovered a number of matters relating to the current and earlier financial periods, which required independent verification and expert legal analysis before disclosures could be made.
“Certain transactions and business relationships hitherto were not made fully apparent and were therefore not sufficiently considered in preparation of historical annual financial statements,” read part of the September 2018 cautionary statement.
“The transactions and relationships referred to include certain business acquisition transactions undertaken by South African subsidiary during the 2017 and 2018 financial years. Also part of the scrutiny is the ramifications of the ‘well published shareholder dispute in Zimbabwe’, the company said in apparent reference to the dispute involving the family of former vice president Phelekezela Mphoko.
Choppies and the Mphoko family have since announced in a brief statement that they have severed ties amicably.