Choppies Enterprises Chief Executive Officer (CEO), Ramachandran Ottapathu has suffered a major setback after his gambit to have former President Festus Mogae removed as the retail giant’s board chairman was met with a suspension on his part.
Choppies Board, under the tutelage of Mogae resolved Wednesday to suspend Ottapathu as the CEO of the Botswana Stock Exchange (BSE) listed company. According to Ottapathu, the suspension came in the disguise of a recommendation from a certain law firm in South Africa, owing to the recent troubles facing the retail giant. The Choppies supremo however believes what triggered suspension was a proposal he had submitted to the company board to have Mogae removed as Board chairman, and also have new faces with relevant retail experience in the board.
“At his age, he need to know the impact on his productivity level. He was sick also. He has been missing a lot of board meeting until last year September,” Ottapathu said of Mogae this week. The suggestion reportedly irked Mogae and the rest of the board, save for Farouk Ismail, who then moved swiftly to have Ottapathu suspended. Choppies board, which is constituted of seven member, including Ottapathu himself had majority to effect the decision, as only Ismail opposed the resolution.
“I came up with suggestions to the board at the request of the shareholders to have restructuring of the board; issues around chairman’s independence. This was not started by me, but when I suggested changes, some people in the board got annoyed,” narrated Ottapathu. “They gave me an option, you resign now or we are going to suspend you. I was not prepared to do that. This is the company I started, and they did not even have a replacement. Before I received my suspension letter it was on the social media.”
Ottapathu spoke highly of Ismail, who has since been appointed Acting CEO, noting that the latter is the only one who understands the Choppies business because they are always in touch. “Farouk [Ismail] is the only person who knows intimately and knowledgeably about the business in the board. None of them have ran one day of their own business and made money for themselves,” he said. He was however not kind to other Choppies board members, saying none of them have ran a profitable business before.
“He [Ismail] spends time with me. He makes appointments with me, so that he gets every information about the company. That is why is he does not have any doubt about any transaction or any activity we do,” said Ottapathu. “Other board members, including the chairman, when they get free time, if at all he gets it, he walks in [my office] and meet me for about 30 minutes or one hour. That’s not what you expect from a chairman. It does not happen anywhere in the world.”
The Choppies chief said if it all the decision to suspend him has anything to do with personal vendetta, the decision to suspend him was not in the interest of the company. “They have been reckless. They do not have the interest of the company at heart that one is for sure, because someone reasonably thinking cannot do this.” Ottapathu said one of the key reasons he wanted the board restructured was the verity that the company was growing, therefore creating necessity for change.
“This is one of the fastest growing company in the region. We needed retail or relevant experience in governance, and in the audit committee and in other areas,” said Ottapathu. “I did discuss with the chairman two years ago about relinquishing the power. He said give time, I will think about it, and I will make the right decision. But he did not do that.” Choppies was founded by Ismail in the 1980s and was joined by Ottapathu in 1992. Ever since then, the duo built the company into a dominant player in the country and the South African Development Committee (SADC) region.
Ottapathu said he has since engaged his lawyers to write to company lawyers requesting them to demonstrate valid reasons relating to his suspension. He also indicated that in the coming days he will meet with the company’s important shareholders to brief them on the new developments. Ottapathu, Ismail and Choppies employees collectively owns 46 percent of the company stock. Institutional investors owns about 26 percent, while the rest is owned by the public.
Ottapathu is of the opinion that the Choppies board, which had he said played no role in building the business, are behaving they were they do because they have nothing to lose. “For them they have nothing to lose. They lose this position of board, the can sit in another board. I do not have any other thing to do in my life. I do not want another entrepreneur to have the same experience that is why I am going to fight it until the last end. I want to set it as a example to make sure it does not happen in another board room.”
At its heart is a battle for control of Choppies Enterprises Ltd – an investment holding company listed, but currently suspended, on both Botswana Stock Exchange (BSE) and the Johannesburg Stock Exchange (JSE). â€¨The group which operates 260 stores in Botswana, South Africa, Zimbabwe, Zambia, Kenya, Tanzania, Mozambique and Namibia, and employs more than 17 000 people.
Mr Ottapathu joined Choppies in 1992 when it was a single insolvent store in Gaborone. Now, over 50% of Batswana shop regularly in its stores and Choppies is a much-loved household name – or it was until the Choppies Board put Mr Ottapathu on “precautionary suspension” this week and replaced him with the Deputy Chair, Mr. Farouk Ismail.
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.