Gaborone - Troubled regional grocer, Choppies Enterprises, has hinted at the possibility of exiting the South African market.
In a detailed statement released last week, Choppies informed its stakeholders that it was considering exiting the South African market.
Choppies informed its shareholders that the board of directors of Choppies had completed a strategic review of its South African business.
“As a consequence, the board has concluded that exiting the South African market is the appropriate strategic decision for the company,” the company said.
Accordingly, Choppies said it had commenced a process which may result in the divestment of Choppies Supermarkets SA (Pty) Ltd in whole or in part and which if successfully concluded, may have a material effect on the price of Choppies securities.
The board also informed stakeholders of the appointment of Redford Capital (also engaged as ‘Chief Restructuring Officer’ of the Company), to the role of Sole Lead Co-ordinator and Advisor on behalf of Choppies in respect of advising on and executing the divestiture transaction process.
The company said that as per the announcement published on 1 November 2018, the trading of the company shares on both the Botswana Stock Exchange (BSE) and Johannesburg Stock Exchange (JSE) remained suspended until further notice. The company’s primary listing is on the BSE and its secondary listing is on the JSE.
In relation to the Legal Report and the Forensic Report, the board noted that the company’s suspended chief executive officer, Ramachandran Ottapathu, had not had an opportunity to respond in writing to their respective contents nor had disciplinary charges been put to him.
“The board is, however, in the process of instituting such disciplinary proceedings. Mr Ottapathu has reserved his rights in respect of such proceedings. If disciplinary charges are put to Mr Ottapathu as arising from the Legal Report or the Forensic Report, he will be afforded the right to defend himself fully,” the company said.
Such rights include, but are not limited to, the right to respond to the Legal Report and the Forensic Report so that his side is on record.
“Mr Ottapathu has been afforded the right to record a written reply to the Legal Report and the Forensic Report, which reply shall be circulated...by the Company on or before 27 August 2019,” the company said.
Ottapathu has since denied any wrongdoing and has vowed to challenge his ouster in court. He was suspended in May over accusations of financial discrepancies.
According to the company, the work required to be completed by the company in connection with the Audit Queries has been completed by the company and submitted to PricewaterhouseCoopers (PwC) for audit.
“There may be a concomitant impact on finalisation of the Audit Queries once the group has fully considered the possible financial accounting and disclosure impacts of outcomes and recommendations set out in the Legal Report and Forensic Report,” the company said.
According to Choppies, the Forensic Report found evidence that various agreements supporting the store acquisitions were created and backdated in order to falsely create audit support for the transactions through which cash was then paid back to the business seller.
“Such backdated agreements were signed on behalf of the group by members of senior management,” the company said.
The creation of supporting documents went as far as to include the creation - after the fact (and acting on request from the group’s senior management)- of relevant documents by professional advisers in a manner to create the impression that these existed at an earlier date.
“The Forensic Report found that the group’s Zimbabwean accounting records reflect cash receipts for bulk sales. However, there were inconsistencies between operating records routinely used to report and control physical cash receipts and the accounting entries recording receipts in settlement of the Bulk Sales,” Choppies said.
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.