Choppies shareholders will soon find themselves having to choose whether they will place their confidence in their board or the suspended CEO, to drag the regional grocer out of the doldrums it is in.
Members of Choppies’ eight member board this week suspended Ramachandran Ottapathu, the multi-millionaire credited with transforming the grocer from a family “spaza” in Lobatse to a regional giant employing more than 15,000 people.
Choppies has been in crisis since last September when the Botswana Stock Exchange (BSE) halted trading of its shares and requested clarification on the reasons for a delay in results for the year ended June 30, 2018. Choppies’ subsequent clarification triggered a 76.3% share price drop on the BSE, after the group said its new auditors were reassessing historical figures related to business acquisitions, value of inventory, property and a shareholder dispute in Zimbabwe.
In November, with forensic and legal probes underway at the group, the BSE suspended Choppies, meaning investors were unable and still cannot offload their shares.
The board, led by former president Festus Mogae, suspended Ottapathu on Tuesday pending the outcome of the legal and forensic investigations later this month. Under Ottapathu’s stewardship, the former president was appointed Choppies chairman in 2008, his ascension seen as a bid to build political muscle by the nascent group, which opened its first store outside Botswana that same year.
From that period, the CEO and chair built a strong personal alliance, leading the group to a dominant local and regional presence during which revenues sailed past P1 billion.
The relationship was on show last year when Mogae famously attended an Ottapathu family wedding in India, allegedly an all-expenses paid affair where the CEO picked up the bill.
Sources familiar with developments within Choppies told Mmegi that while the suspended CEO had been under pressure as the investigations intensified, it was expected that Mogae would stand by his long-time ally.
Yesterday, the suspended CEO, who earlier this week told Mmegi that he was the victim of a boardroom conspiracy, was in an uncompromising mood when talking about the latest developments. “The shareholders should know that those characters on the board had no role in building that company up.
“It was Farouk and I who built it up.
“They came after we recorded the billions (in revenue). “The shareholders can see that for themselves,” he told Mmegi. Farouk Ismail, Choppies founder, is a strong, long time Ottapathu ally who brought the India-born CEO on board in 1992 when the group was still based out of a single location in Lobatse. Ismail has previously credited Ottapathu with being the brains behind Choppies’ metamorphosis into a regional grocer, during which both men have become multi-millionaires.
Ottapathu had equally strong words for the chair, Mogae.
“If you look at the attendance by the chair, he is always travelling, absent, but he collects the millions from the company for that.” Mogae is the country’s leading statesmen, travelling the continent on diplomatic assignments.
In the 2017/18 financial year, the last year for which records are available, Mogae received P596,058 but attended only half the meetings he was supposed to.
The previous year he received P662,724 and attended all four board meetings. The Choppies chair receives P33,333 for each board meeting he attends, besides a salary of P529,392.
Ottapathu, who himself collected P10.6 million in remuneration in 2017/18, said his lawyers have officially engaged Choppies to seek both reasons and documentation, supporting the suspension.
The suspended CEO plans to take his fight to the shareholders where he expects to gain support that could even lead to the board’s dissolution. “
I’m challenging the suspension and I’m going back to my shareholders to find a solution because at the end of the day, we need to be worried about the company. “When we go back to the shareholders, the board has to report to them and the shareholders will decide if the board must continue or not.
“Anyone who has this company’s interest will stick with me and I will repay that trust.
“I am determined to prove that and this should never happen to anyone else.
“If shareholders want this company to grow, they must stick with me.” Ottapathu, at the last count, was Choppies single biggest shareholder with a 19.5% stake, followed by Ismail at 14.8%. Other major shareholders are asset managers, while Mogae is reported to hold under two percent of shares. Yesterday evening, authoritative sources said tensions around Choppies were already manifesting themselves in a loss of confidence amongst suppliers.
Mmegi is informed that some suppliers were withholding their goods on concerns that Choppies would not make good on payments, a situation worsened by the absence of Ottapathu’s assurances. For the financial year ended 30 June 2017, representing the last available accounts, Choppies had trade payables of P948 million, all on an interest free, 30-day terms. Trade payables are amounts other companies owe for supplies made for everyday business.
Ottapathu’s suspension appears to have set off jitters, as the former CEO carries the Choppies brand and its good faith to suppliers, Choppies insiders told Mmegi.
“Mr Ram is Choppies and there is no Choppies without him. Suppliers are reluctant to deal with anyone else.
“They know him and they have been dealing with him over the years. They trust him.
“The shareholders will have to decide who to put their trust in, in such a scenario,” insiders said. Yesterday, Mogae’s aides said the former president was not available to engage with the media on developments at Choppies.