- Pocket millions by the load from a failed project
- Choppies SA bought by a Johannesburg-based company
TEFO PHEAGE
After months of negotiations with several bidders, the owners of Botswana’s retail giant Choppies have sold their South African branch to a Johannesburg-based company, The Botswana Gazette can reveal.
Choppies first entered neighbouring South Africa in 2008, opening a store in the country’s North West Province’s rural town of Zeerust. But the store struggled to grow, owing partly to the rand’s volatility against the pula, which meant that the losses made in South Africa are even worse in terms of pula. To offset this, Choppies used profits made in Botswana to pay its South African employees much better while keeping earnings in Botswana depressed.
The company’s Chief Executive Officer, Ramachandran Ottapathu, who is better known as Ram, would neither confirm nor deny the sale when approached by this publication this week but Choppies recently announced that it would be exiting the South African market four years after expanding into the country.
In a statement issued in August this year, the company said its shareholders had completed a strategic review of its South African business and appointed an adviser for a divestiture process “in whole or in part” which may have a material effect on its stock price. “As a consequence, the board has concluded that exiting the South African market is the appropriate strategic decision for the company,” it said.
At a time when the company was the subject of a forensic investigation, it was found that, bulk sale items in South Africa were recorded separately in the inventory from November 2017 onwards.
“There is a strong correlation between the creation of these records and inventory losses reported as arising from stock counts performed from 19 October 2017 to 28 February 2018,” read the summary of the report.
Following exiting South Africa, the company’s next move is now to withdraw from Kenya which it also wants out of. This came four years after acquiring Ukwala Supermarkets in East Africa’s largest economy. Choppies had identified Kenya as a key market for the company in East Africa. “The current retail market in Kenya is moving towards consolidation,” said Ram in October 2017. “This should benefit us in growing our footprint more rapidly than originally anticipated.”
In South Africa, independent analyst Ryk de Klerk once told the media: “Choppies found themselves in a low operating margin space and is concentrated in (the) North West Province which is highly dependent on the volatile mining industry. It also seems that with the apparent accounting scandals, Choppies’ total financial position may be worse than that reflected in previous financial statements that would trigger asset sales to improve liquidity.”