No one will lend a thebe to Choppies where Absa is keeping tabs on the goings-on to prevent excessive exposure of itself and a host of other banks who are now calling for the reinstatement of suspended CEO Ramachandran Ottapathu because his singlehanded approach to deals and transactions means he is the only person who can save the ailing multinational conglomerate. KEABETSWE NEWEL & TEFO PHEAGE report

Should the status quo there drag on, it is highly possible that the trouble-ridden retail conglomerate, Choppies Enterprises Limited, could be headed for a bankruptcy in which commercial banks would be exposed by amounts in excess of P1 billion, shareholders’ hundreds of millions vanish in eroded value and suppliers and other creditors lose heavily, capital market analysts have warned.

Choppies board of directors, led by former president Festus Mogae, recently suspended CEO Ramachandran Ottapathu. Three parallel investigations – forensic, financial and legal – are ongoing at Choppies and are expected to be completed in a week or two. The results are expected to guide what happens next at Choppies, including paving the way for the release of financials. There have been questions over valuation of Choppies stock and its true financial position, especially its South Africa and Zimbabwe operations. After Ram was suspended, the board announced that a South African company called Redford Capital, was appointed as Chief Restructuring Officer (CRO).

According to brokerage firm Motswedi Securities, this means Choppies will use Redford Capital’s services to holistically assess and provide recommendations on how to improve Choppies’ business plan. Says head of Research at Motswedi, Garry Juma, “More often than not, when a company employs the services of a CRO, it should ring warning bells in the ears of investors. This is because a CRO is usually engaged when a company is in major distress and sometimes when the company is headed towards bankruptcy.”

The Botswana Gazette has established further that financiers, especially commercial banks, have been rejecting Choppies’ efforts to raise funds to finance its operations. The banks are jittery because they cannot ascertain Choppies’ financial position which, should it be in a bad state, would lead to serious exposures on their side.

This publication has established that Rand Merchant Bank (RMB), which is a corporate banking unit of First National Bank (FNB), as well as Stanbic Bank and ABSA, are exposed to the tune of over P1 billion in Choppies. It emerges that they have since expressed concerns with the goings-on at Choppies and privately called for Ram to be reinstated because he is the one who has always been managing the company. The three banks have nominated ABSA to be their representative in private talks with Choppies, according to information sourced by The Botswana Gazette. Close sources say the banks have demanded to meet with Choppies twice a week to get updates on the goings-on there. Further, suppliers are also edgy, with some revising their payment terms and even calling for some of their debts to be paid off immediately.

“Without Ramachandran, suppliers are refusing to extend credit to Choppies,” says an insider who reveals that Ramachandran so singlehandedly crafted deals, transactions and credit facilities that only he can best manage. At FNBB Acting Director Marketing and Communications, Peo Porogo, has confirmed that Choppies is a customer of the bank through its corporate investment division RMB. Quizzed on how exposed the bank was to Choppies she only said as a regulated financial services company, FNBB was not at liberty to share customer details with third parties.

Keabetswe Pheko-Moshagane, Managing Director (MD) at Barclays Bank Botswana, has also declined to reveal how exposed the bank is to Choppies. However, this publication has established that ABSA (Barclays) has the highest exposure to Choppies. As a result of this, the banks are not willing to issue further funding to Choppies. Ramamachandran has confirmed to The Botswana Gazette that indeed the banks and other financiers have been rejecting Choppies’ requests for funding. “They cannot fund Choppies until the financials are released because they need to assess the balance sheet,” says Ram.

According to him, Choppies is already struggling to fund operations at some of its subsidiaries. “We are planning to shut down in Mozambique or sell the business completely,” he says. Further, Choppies has cash-flow challenges in Kenya, prompting Ram to conclude that Choppies could run into problems if the status quo persists. He also speaks of himself as being the only person who could save Choppies if the board was not taking reckless decisions.

At Kgori Capital, Investment Analyst Kwabena Antwi says raising capital during this period when Choppies shares have been suspended and financial statements have not been released would be challenging. “Debt financiers require audited financial statements as part of their credit evaluation process,” Antwi explains. “With financial statements unavailable, their ability to provide finance to Choppies is restricted. An equity issuance to institutional market participants is not possible as the shares are suspended and cannot trade on both the BSE and the JSE.” However, he says, it is possible for a private equity vehicle or wealthy investor to inject capital into the business.

“I can bring in capital together with Farouk,” says Ram whom Motswedi Securities’ Juma says the board erred by making an impromptu decision to suspend. “Retail is a complex business,” Juma points out. “The board should have had a succession plan and brought in someone to understudy the CEO for two or three years to enable a smooth transition. That rushed decision could bring Choppies down.”


Ram says heavy investments which need to be protected at all costs were made in Choppies. In agreement, Juma says investors could lose money in cases where Choppies’ financial position is seriously bad because the value of Choppies will decline and consequently the share price, should the BSE lift its suspension. “Further, by closing some branches, the market value of Choppies will decline but shareholders cannot do anything because shares are under suspension. Normally, they could sell, but now they cant,” he notes.

At 19.5 percent, Ram is the largest shareholder in Choppies. He is followed by Farouk at 14.8 percent. Standard Chartered Private Equity Ltd owns 13.3 percent, Allan Gray 11.3 percent while African Alliance Advisory (Pty) Ltd owns 10.2 percent. Kgori Capital, BIFM, Stanlib and Investec are also exposed.