Retailer's curse now stalks Choppies

Monday July 01 2019

A Choppies outlet in Kenya. The retail chain with 260 outlets in eight countries has fallen into hard times amid a wrangle between the chairman, Botswana former President Festus Mogae and majority owner Ramachandran Ottapathu. PHOTO | FILE | NATION MEDIA GROUP


The curse of the retailer is stalking another of Africa's supermarket brands as Choppies, which started off in Botswana, battles boardroom squabbles, rapid expansion and pilferage in a bid to stay afloat.

Choppies closed one of its dozen stores that had opened in quick succession in Kenya on Thursday after failing to pay suppliers for months.

Last year, the retailer did not publish its annual accounts and its holding company, Choppies Enterprises Ltd, was subsequently suspended from the Botswana and Johannesburg Stock Exchanges.

Much of what has gone wrong with Choppies is attributed to weak governance where the company courted 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 now employs about 17,000 people.

Choppies was seen as glimmer of hope in a continent where the death rate of indigenous retail stores was swelling with the fall of Nakumatt and Uchumi Supermarkets in east Africa.


The expansion, however, helped mask deep-seated internal problems that have now returned to haunt the company.

The Zimbabwe experience, which appears to be replicated in Botswana, offers a glimpse.

Perhaps having perused through Tom Bower's book The Rebel Tycoon which details how Tiny Rowland grew his business empire in Africa on political patronage, Ramachandran Ottapathu, quickly brought on board former Botswana President Festus Mogae and later former Zimbabwe vice-president Phelekezela Mphoko.

Following the fall of long time ruler Robert Mugabe in 2017, a boardroom squabble erupted after Mr Mphoko was caught with his hands in the till literally.

He would at leisure go through the stores intimidating cashiers and supervisors to give him the days sales.

Once he was caught and with surcharges looming, Mr Mphoko laid bare the skeletons in Choppies cupboards including the fact that he had helped Mr Ottapathu flout the country's local majority ownership for such businesses.

Instead of surrendering 51 per cent of the business to Zimbabweans, Choppies only gave Mr Mphoko a seven per cent stake for free and was open for business.

This was done by separating equity from economic interest so that while Choppies on paper held 49 per cent of Nanavac Investments, its Zimbabwe operation, it controlled 93 per cent of the company's beneficial interest in secretive legal undertakings.

After a protracted dispute, Choppies was in January forced to pay Mphoko $3 million for the seven per cent stake to take control of the whole business, valuing Nanavac at $43 million.

Smarting from that "political loss," Mr Ottapathu appeared set to purge the company's board of politicians and trained his sights on Choppies chairman Mogae.

It did not go as planned and Mr Ottapathu, 54, was put on “precautionary suspension” as the board embarked on forensic investigations to establish the company's financial position.

The board appointed Redford Capital to review Choppies business and identify action plans to improve it, pointing to an imminent restructuring.

The investigations were supposed to be completed by the end of last month but there have been no public disclosures yet as promised by the board.

Mr Mogae's deputy in the board Farouk Ismail, 63, who founded the company before employing Ottapathu in 1992 as an accountant is now the CEO.

Ottapathu remains the company's largest sharesholder and became the CEO in 2000, a year after Choppies opened its first superstore in Gaborone.

Mr Ottapathu attributes the turn of events to his proposal in the board that a younger person replaces Mr Mogae, 79.

Mr Ottapathu, however, believes the suspension is part of a plot to elbow him out of business he founded.

After he made the proposal the board asked him to resign.

"“I could not in good conscience agree to resign because of Choppies’ current situation and my deep investment in the company," Mr Ottapathu said, terming allegations that he personally benefitted from transactions as character assassination.

"I have done anything wrong,” he said, giving a pointer to the mistake that Choppies, which bought off Ukwala supermarkets in Kenya, made from the very beginning.

“Choppies requires urgent governance and operational remedial interventions, including a review of board performance and composition,” Mr Ottapathu said.

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

The retailer entered the Zimbabwean market in 2013 after forming a partnership between Mr Mphoko’s Nanavac (51 per cent) and Choppies Enterprises (49 percent).

Mr Mogae argued in documents seen by Africa Review that he leaned on former Zimbabwe president Robert Mugabe to bend the country's indigenisation laws.

A letter written by the former Botswana leader to the Zimbabwean politician on June 14, 2018 read in part: “My brother, I would like to bring the following facts to your

"We entered into this partnership with a clear understanding of the shareholding of 93 percent shares to Choppies Enterprises and seven percent to the Mphoko family, free of charge," Mr Mogae said in a letter to Mr Mphoko on January 14, 2018.

He went on to say that the office of the former president (Robert Mugabe) has these agreements.

“You are well aware that I had access to the former president, RG Mugabe and I did clear this with him in the presence of former Foreign Affairs minister Simbarashe S Mumbengegwi," Mr Mogae wrote

He warned Mphoko he had "the same access to the current president (Emmerson Mnangagwa)."

Soon afterwards, however, Mr Mphoko was paid $3 million to exit the company.

Mr Ottapathu has threatened to take his quest for board changes to court.

"I was suspended without notice and without a hearing. I have not been involved in material wrongdoing or benefited financially from any of the transactions," Mr Ottapathu said in a statement on June 3.