Gaborone - Hundreds of jobs are at risk in the retail sector as regional grocer, Choppies, continues to downsize its operations across SADC.
Touted as one of the promising retailers to emerge from the Southern African region, the troubled grocer has since laid off scores of people working in some of its operations. Choppies has pointed its fingers at its auditors for the mess it finds itself in as it continues to lay off employees.
The Botswana Stock Exchange and Johannesburg listed supermarket informed shareholders in a notice that despite KPMG signing off on the auditor’s report in respect of the company and consolidated group financial statements for the 2017, audit reports for the annual financial statements of the group’s Botswana and South African subsidiary companies were not signed off by KPMG for the 2017 and, in some cases, the 2016 financial year.
“This situation came to light around November 2019 where after the company engaged with KPMG to rectify the situation but without any success leading up to KPMG refusing to complete such audits and ‘terminating’ all agreements with the group and its subsidiaries in a letter dated 21 January 2020,” Choppies said.
The Company said it responded to the letter, with particular reference to the “termination” of agreements, and reserved its position as against KPMG.
“However, the situation is that KPMG has refused to complete such audits,” the company revealed.
But the problems mounted as PwC Botswana signed off the audit report for the group and holding company annual financial statements for the year ended 30 June 2018 without signing off the audit reports of the Botswana and South African subsidiary companies for the same period.
“The company has advised the Botswana Accounting Oversight Authority, the Companies and Intellectual Property Authority and Botswana Unified Revenue Services and the South African regulatory and tax authorities of the situation,” Choppies said.
On 16 March 2020, PwC Botswana gave notice of termination of their role as auditors of the Botswana subsidiaries of the company on the basis of regulations published by the Independent Ethics Standards Board for Accountants (IESBA) as adopted by the Botswana Institute of Chartered Accountants (BICA) in respect of actual or threatened litigation by an audit client or shareholders or management of an audit client which may constitute a threat to independence.
PwC 10 is citing threatened litigation in an action for damages by significant shareholders of the company, namely Messrs Ramachandran Ottapathu and Farouk Ismail, who are also directors of the Botswana subsidiaries on account of alleged failure by PwC Botswana to act on an actual or perceived threat to its independence, breach by PwC Botswana.
According to Choppies, an unjustifiable delay in the completion of auditor’s report of the company in respect of the financial year ended June 2018 which allegedly resulted in the suspension of and a prolonged period of suspension of the shares of the company trading on the Botswana Stock Exchange and Johannesburg Stock Exchange.
“It should be noted that by virtue of the fact that PwC signed the auditor’s report in respect of the financial statements of the company and consolidated group financial statements for the financial year ended 2018 on 13 December 2019, PwC must have considered the financial statements of the subsidiaries of the Company,” Choppies said.
PwC Botswana resigned as auditors of the company in respect of all financial periods after 30 June 2018, thereby creating a casual vacancy in the office of the auditor to the company, Choppies said.
In order to stabilise the business and enhance shareholders’ value, Choppies said that it had exited all the loss-making markets and its progress in this regard is as follows:
- Mozambique operations closed in September 2019 and majority of the equipment had been moved to Choppies Zambia.
- Tanzania operations closed in November 2019 and all efforts were being made to sell the equipment and clear the outstanding liabilities.
- Kenya operations have since been scaled down to only two stores and negotiations were on-going to sell equipment to local operators and/or existing landlords to clear some of the outstanding liabilities.
Meanwhile, Choppies said, on 25 February 2020, the Competition Commission of South Africa issued a merger clearance certificate in terms of which the commission approved the merger brought about by the acquisition by Kind Investment (Pty) Limited of the shares and claims of the company in its four South African subsidiaries, without conditions.
The conditions precedent to the agreement for the sale of shares and claims in the South African subsidiaries of the company have thus been fulfilled. The effective date of the sale is, in terms of the agreement, 1f April 2020.
Late last year, Botswana Stock Exchange (BSE) and Johannesburg Stock Exchange (JSE) lifted the ban in the trading of shares of the company following the suspension of the company from trading on both stock exchanges.
The reason for the ban was in order for the company to provide clarification to the market in respect of the announcement released on Friday, 21 September 2018, with regards to the delay in publication of the financial results for the year ended 30 June 2018.