Is Botswana retailer Choppies about to chop its EA business?

Monday August 26 2019

Choppies supermarket.

Botswana-based supermarket chain Choppies Enterprises has signalled it could exit the East Africa, a week after announcing plans to leave South Africa. PHOTO | FILE | NATION MEDIA GROUP 

The EastAfrican
By The EastAfrican
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Botswana-based supermarket chain Choppies Enterprises has signalled it could exit the East Africa, a week after announcing plans to leave South Africa.

The multinational retailer, which operates in eight African countries, including Kenya and Tanzania, has recently been characterised by empty shelves in its stores.

Indeed, the retailer listed on the Johannesburg and Botswana stock exchanges saw its shares plunge by more than 60 per cent since last September after announcing a delay in the publication of its financials.

Its shares were suspended on account of the inability by company’s auditors PricewaterhouseCoopers to finalise the 2018 financial statements due to alleged irregularities.

Now, as its woes mount following last week’s announcement of its South African market exit, the firm has called an extraordinary general meeting on September 4, hoping to resolve the squabbles that have brought it to its knees.

MONEY LAUNDERING

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The troubles are traced to a dispute between the board led by former Botswana president Festus Mogae and suspended founder and chief executive Ramachandran Ottapathu over the control of the retailer. However, some allege mismanagement and financial impropriety.

During the extraordinary general meeting, shareholders will vote on resolutions contained in legal and forensic reports emanating from investigations into the retailer’s business and allegations of financial misappropriation and money laundering against Mr Ottapathu.

Since late last year, Choppies has been hit by operational turbulence, including a failed rapid expansion programme, inability to pay suppliers and suspension from the Botswana Stock Exchange and the Johannesburg Stock Exchange.

In Kenya, it has been forced to close down two stores outside Nairobi in quick succession, owing to stock shortage, evoking memories of the demise of the country’s leading regional retail chains, Nakumatt and Uchumi.

EMPTY SHELVES

Recently, Kenyan shareholders of Choppies entered into a deal with the Association of Kenya Suppliers that will see the retailer settle a $5.7 million debt owed to suppliers in a measure to restock its outlets and ensure it remains afloat.

In the recapitalisation deal, Export Trading Group, which controls a 25 per cent stake, will settle debts owed to suppliers in three tranches. It was not clear if the Export Trading Group is seeking more stake or a buyout.

In Tanzania, employees were this week optimistic that the Choppies outlets in the Aura Mall and Mlimani City in Dar es Salaam will survive “for some time”. But when The EastAfrican visited the Mlimani City store, it had few items on the shelves.

For more than four months both the Makumbusho and Mlimani City stores have been virtually empty, with noodles and bean cans populating the shelves. The fridges and freezers are empty, with some switched off.

“We are closing down Makumbusho… this week is the last,” one employees told The EastAfrican.

Tanzania has become a difficult market for foreign-owned supermarkets in the past decade, and most of them have exited.

Experts blame it on low profitability and a poor shopping culture among Tanzanians. Former Kenyan giant retail chain Nakumatt exited Tanzania in October 2017, saddled with huge debts and rent arrears.

Uchumi had exited earlier over similar problems.

But locally owned supermarket chains such as Sifamart Supermarkets, Shoppers Supermarkets, Shrijees Supermarkets, TSN Supermarket, Village Supermarkets and Viva Marche Supermarket remain in business.

Much of what has gone wrong with Choppies is blamed on weak governance, and Mr Ottapathu’s courting politicians to circumvent national legislations on business ownership and to drive its expansion.

As a result, the company grew from one outlet in Gaborone in 1986 to 260 stores in eight countries — South Africa, Zimbabwe, Zambia, Kenya, Tanzania, Mozambique and Namibia — where it employs about 17,000 people.

SPILLING SECRETS

Choppies was seen as glimmer of hope on a continent where the death rate of indigenous retail stores was increasing. The expansion, however, helped mask deep-seated internal problems that have now returned to haunt the company.

Mr Ottapathu brought on board former Botswana president Festus Mogae and later former Zimbabwe vice-president Phelekezela Mphoko.

Besides the duo, at one time the Choppies board had a former Botswana minister and is also linked to politicians in Zambia and Mozambique.

By Beatrice Materu, Dorothy Ndalu and Njiraini Muchira

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