Choppies’ long drawn out woes deepened this week with the regional grocer announcing it planned to pull out of South Africa.
This, while the eagerly awaited forensic and legal reports laid more damning allegations against directors for the hole the group finds itself in.
In addition, former president, Festus Mogae, who has chaired the pan-African group since 2008, also announced a plan to step down once the group’s 2018 full year results are released, a development expected in the next six to eight weeks.
In two announcements to investors made within hours of each other on Wednesday afternoon, the group revealed that it had already begun a process to identify investors to take over all or some of the 88 stores Choppies has in South Africa, largely in the North West province.
Court documents filed recently hinted that Choppies was facing capitalisation issues in the North West province and in Kenya, the former due to a downturn in mining activities and the latter due to cutthroat competition in the east African nation. “The board has 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,” reads a statement. The group first entered South Africa in 2008 and rapidly built up its presence, with the stores accounting for 36% of Choppies revenues as at the half year to December 2017.
Meanwhile, summary findings of the legal and forensic probes that have gripped Choppies since its new auditors raised the alarm last year, point to a breakdown of governance, lapses and numerous violations from managers all the way to the board itself. Ramachandran Ottapathu, the maverick CEO and single largest Choppies shareholder suspended in May, is due to face a disciplinary hearing soon, as the board has armed itself with the findings of the forensic and legal report.
Allegations against Ottapathu, popularly known as Ram, include he personally took up 50% of a rival supermarket chain, while purporting
The reports also found more than 100 undeclared business interests by three unnamed current directors, amongst other allegations.
Ram told BusinessWeek he was preparing a response to the allegations.
“I will be issuing a response to those allegations next week. The board has allowed me to put my response on the BSE and JSE as well and I will be doing that,” he said via telephone.
Choppies will hold an extraordinary general meeting (EGM) on September 4, 2019 where the suspended CEO has proposed the names of three new directors to the board.
In court papers filed last month against his suspension as CEO, Ram produced proof that more than 50% of shareholders were in favour of an EGM to vote on axing the current non-executive directors. Ram lost his High Court case to force an early EGM, a ruling that has given the board the opportunity to fully circulate the forensic and legal reports which are most against him, ahead of the crunch meeting.
According to Wednesday’s statements, Ram prevailed in his insistence that voting at the EGM take place by poll and not by show of hands. Choppies has been in distress since last November, when the group was suspended from both its primary listing on the Botswana Stock Exchange and the Johannesburg Stock Exchange after failing to publish results for the 2018 financial year.
New auditors, PricewaterhouseCoopers found historical irregularities in transactions, inventories and arrangements, leading to the forensic and legal investigations, as well as further audit enquiry.
Shareholders, meanwhile, have been unable to exit the stock due to the suspension of trade, while the absence of audited financials has heightened anxiety, even amongst lenders.