The founding shareholders of Choppies stores, Messrs. Ramachandran Ottapathu and Farouk Ismail are threatening legal action against auditors, PwC Botswana. This follows the renowned auditors’ refusal to complete an audit of some of the Choppies subsidiaries for the financial year 2017/2018, which the two directors ascribe to eventual suspension of the retailer from the Botswana Stock Exchange (BSE) bourse.
The virulent threat of potential court action simmers in Choppies’ latest circular whose purpose is to update Shareholders on issues pertaining to the Group. Reports emanating from the Choppies Distribution Centre (CDC) suggest that the two supermarket gurus want possible compensation of P850 million from PwC. At the time of abandoning site, PwC was citing threatened litigation in an action for damages by the significant shareholders of the Company, Messrs. Ramachandran Ottapathu and Farouk Ismail, who are also directors of the Botswana subsidiaries.
Ottapathu and Ismail’s gripe with PwC is on account of alleged failure by PwC Botswana to act on an actual or perceived threat to its independence; breach by PwC Botswana and/or Mr. Rudi Binedell, audit partner, of rules of the relevant code of ethics in respect of independence; and a unjustifiable delay in the completion of auditor’s report of the Company in respect of the financial year ended June 2018.
These, the two founding shareholders of Choppies posit that – it allegedly resulted in the suspension of and a prolonged period of suspension of the shares of the Company trading on the BSEL and Johannesburg Stock Exchange (JSE). “It should be noted that by virtue of the fact that PwC signed the auditor’s report in respect of the financial statements of the Company and consolidated group financial statements for the financial year ended 2018 on 13 December 2019 PwC must have considered the financial statements of the subsidiaries of the Company,” reads Choppies circular to shareholders.
The circular points out that “PwC Botswana resigned as auditors of the Company in respect of all financial periods after 30 June 2018, thereby creating a casual vacancy, in the office of the auditor to the Company, as envisaged in Section 191 of the Companies Act.”The further states that PwC Botswana, certified public accountants in Botswana, (PWC Botswana), signed off the audit report for the Group and holding company annual financial statements for the year ended 30 June 2018 without signing off the audit reports of the Botswana and South African subsidiary companies for the same period.
“The Company has advised the Botswana Accounting Oversight Authority, the Companies and Intellectual Property Authority and Botswana Unified Revenue Services and the South African regulatory and tax authorities of the situation,” reads the circular. Meanwhile on 16 March 2020 PwC Botswana gave notice of termination of their role as auditors of the Botswana Subsidiaries of the Company, in respect of the Botswana subsidiaries of the Company, on the basis of regulations published by the Independent Ethics Standards Board for Accountants (IESBA) as adopted by the Botswana Institute of Chartered Accountants (BICA) in respect of actual or threatened litigation by an audit client or shareholders or management of an audit client which may constitute a threat to independence.
After PwC declined to complete the audits on Botswana subsidiaries, Choppies promoters had to race against time to find a replacement for PwC: “Immediately, upon receipt of such resignation, the Audit Committee of the Board set about achieving the appointment of a replacement, of PwC Botswana as auditor to the Company, in an effort to comply with the provisions of Section 191 of the Companies Act, and communicated with the firms of certified public accountants in Botswana, BDO, Deloitte, Ernst & Young and KPMG. Each of those firms, for various reasons, declined the appointment.”
After the rejections, Choppies found refuge with international audit firm, Mazars, who indicated willingness to be appointed auditors of the Group for the period commencing 1 July 2018 albeit with conditions. Acceptance by Mazaars of the appointment of auditors was subject to:
the on boarding and risk assessments required by Mazars at country, regional and group level, in respect of the Group being satisfactorily completed; examination by Mazars of the financial statements of the Group as of 30 June 2018, and the auditor’s report in respect thereof;
and consultation by Mazars with PwC in respect of various issues identified on the auditor’s report, and the boarding of financial and accounting information for the year ended 30 June 2018. According to the circular as of 17 February 2020, all the formalities were concluded, and the Board appointed Mazars as auditors to the Group, for the period commencing 1 July 2018 and ending 30 June 2019.
Another standoff with KPMG
In respect of the years ended 30 June 2016, 2017 and 2018, the Choppies Group has a logjam with KPMG, certified public accountants in Botswana, (KPMG). “KPMG signed off on the Auditor’s Report in respect of the Company and consolidated Group financial statements for the 2017 financial year and the Annual Report and such financial statements were approved by shareholders at the annual meeting of shareholders in November 2017 and KPMG was replaced as Group Auditors by shareholders at an extraordinary meeting in February 2018, audit reports for the annual financial statements of the Group’s Botswana and South African subsidiary companies were not signed off by KPMG for the 2017 and, in some cases, the 2016 financial year.”
The circular states that this situation came to light around November 2019 where after the Company engaged with KPMG to rectify the situation but without any success leading up to KPMG refusing to complete such audits and “terminating” all agreements with the Group and its subsidiaries in a letter dated 21 January 2020. “The Company responded to the letter, with particular reference to the so called “termination” of agreements, and reserved its position as against KPMG. However, the situation is that KPMG has refused to complete such audits,” reads the circular.
Sale of SA operations
The circular notes that on the 25 February 2020 the Competition Commission of South Africa issued a Merger Clearance Certificate in terms of which the Commission approved the merger brought about by the acquisition by Kind Investment (Pty) Limited of the shares and claims of the Company in its four South African subsidiaries, without conditions. “The conditions precedent to the agreement for the sale of shares and claims in the South African subsidiaries of the Company have thus been fulfilled. The effective date of the sale is, in terms of the agreement, the 1st of April 2020.
It is now for the parties to meet and undertake the stocktake and valuation of assets and liabilities as at the effective date, in order to calculate any residual liability of the Company to contribute funds to its South African subsidiaries in respect of the net equity value thereof, in order to close the transactions and the sale.” According to Choppies promoters, it is anticipated that this process will take place (as set forth in the agreement) at the end of March 2020 to complete by 1st of April 2020.
Discontinuation of Operations in loss-making markets
In order to stabilise the business and enhance Shareholders’ value, Choppies has exited all the lossmaking markets. In Mozambique, operations closed in September 2019 and majority of the equipment has been moved to Choppies Zambia.As for Tanzania, operations closed in November 2019 and all efforts are being made to sell the equipment and clear the outstanding liabilities. Meanwhile in Kenya operations have since been scaled down to only two stores and negotiations are on-going to sell equipment to local operators and/or existing landlords to clear some of the outstanding liabilities.
As the preparations for the Botswana Democratic Party (BDP) congress are about to kick off, reports on the ground suggest that the party’s Deputy Treasurer Jackdish Shah will not defend the position in August as he contemplates relocation.
According to sources, the businessman who joined the BDP Central Committee in 2015 at the 36th Congress held in Mmadinare is ready to leave the party’s politburo. It is said he long made up his mind not to defend the position last year. A prominent businessman, Shah, when he won the position to assist Satar Dada in 2015 was expected to improve the party’s financial vibrancy. By then the party was under the leadership of Ian Khama.
According to close sources, Shah long decided not to contest because he has fallen out of favour with the party leadership. It is said he took the decision after some prominent businessmen who are BDP members and part of football syndicate decided to push him out and they used their proximity to President Mokgweetsi Masisi to badmouth him hence the decision.
“The fight at the Botswana Football Association (BFA) and Botswana Football League (BFL) has left him alone in the desert and some faces there used their close access to the President to isolate him,” said a source. Media reports say, Shah does not see eye to eye with BFA President MacLean Letshwiti who is also Masisi’s buddy hence the decision.
BFL Chairman Nicholas Zackhem is said to be not in good terms with Shah, who at one point Chaired the then Botswana Premier League (BPL). “He is seriously considering quitting because of what is unfolding at the team (Township Rollers) which is slowly not making financial gains and might be relegated and he wants to sell while it is still worth the investment,” said a highly placed source.
Shah is a renowned businessman who runs internet providing company Zebra net, H &G, game farm in Kasane, cattle farm in Ghanzi region and lot of properties in Gaborone. He also has two hotels in USA, his advisors have given him thumbs up on the possible decision of relocating provided he does not sell some of the investments that are doing well.
Asked about whether he will be contesting Shah could not confirm nor deny the reports. It is said for now it is too early as a public decision will have to be taken after the national council meeting and prior to the national congress. “As a BDP Central Committee member he cannot make that announcement now,” a BDP source said.
BDP is expected to assemble for the National Council during the July holidays while the National Congress is billed for August. It is then that the party will elect a new CC members. The last time BDP held elective congress was at Kang in 2019. The party is yet to issue writ.
The government has failed to implement some commitments and agreements that it had entered into with unions to improve conditions of public servants.
Three years after the government and public made commitments aimed at improving conditions of work and services it has emerged that the government has ignored and failed to implement all commitments on conditions of service emanating from the 2019 round of negotiations.
In its position paper that saw public service salaries being increased by 5%, the government the government has also signalled its intention to renege on some of the commitments it had made. “Government aspires to look into all outstanding issues contained in the Labour Agreement signed between the Employer and recognised Trade Union on the 27th August 2019 and that it be reviewed, revised and delinked by both Parties with a view to agree on those whose implementation that can be realistically executed during the financial years 2022/23, 2023/24 and 2024/25 respectively,” the government said.
Furthermore, in addition to reviewing, revising and de-linking of the outstanding issues contained in the Collective Labour Agreement alluded to above and taking on a progressive proposal, government desires to review revise, develop and implement human resource policies as listed below during the financial year 2022/23,2023/24,2024/25
They include selection and appointment policy, learning and development policy, transfer guidelines, conditions of service, permanent and pensionable, temporary and part time, Foreign Service, expatriate and disciplinary procedures.
In their proposal paper, the unions which had proposed an 11 percent salary increase but eventually settled for 5% percent indicated that the government has not, and without explanation, acted on some of the key commitments from the 2019/2020 and 2021/22 round of negotiations. The essential elements of these commitments include among others the remuneration Policy for the Public Service.
The paper states that a Remuneration Policy will be developed to inform decision making on remuneration in the Public Service. It is envisaged that consultations between the government and relevant key stakeholders on the policy was to start on 1st September 2019, and the development of the policy should be concluded by 30th June 2020.
The public sector unions said the Remuneration Policy is yet to be developed. The Cooperating Unions suggested that the process should commence without delay and that it should be as participatory as it was originally conceived. Another agreement relate to Medical Aid Contribution for employees on salary Grades A and B.
The employer contribution towards medical aid for employees on salary Grades A and B will be increased from 50% to 80% for the Standard Option of the Botswana Public “Officers’ Medical Aid Scheme effective 1st October 2019; the cooperating unions insist that, in fulfilling this commitment, there should be no discrimination between those on the high benefit and those on the medium benefit plan,” the unions proposal paper says.
Another agreement involves the standardisation of gratuities across the Public Service. “Gratuities for all employees on fixed term contracts of 12 months but not exceeding 5 years, including former Industrial class employees be standardized at 30% across the Public Service in order to remove the existing inequalities and secure long-term financial security for Public Service Employees at lower grades with immediate effect,” the paper states.
The other agreement signed by the public sector unions and the government was the development of fan-shaped Salary Structure. The paper says the Public Service will adopt a best practice fan-shaped and overlapping structure, with modification to suit the Botswana context. The Parties (government and unions) to this agreement will jointly agree on the ranges of salary grades to allow for employees’ progression without a promotion to the available position on the next management level.
“The fan-shaped structure is envisaged to be in place by 1st June 2020, to enable factoring into the budgetary cycle for the financial year 2021/22,” the unions’ proposal paper states. It says the following steps are critical, capacity building of key stakeholders (September – December 2019), commission remuneration market survey (3 months from September to November 2019), design of the fan-shaped structure (2 to 3 months from January to March2020) and consultations with all key stakeholders (March to April 2020).
The unions and government had also signed an agreement on performance management and development: A rigorous performance management and reward system based on a 5-point rating system will be adopted as an integral part of the operationalization of the new Remuneration System.
Performance Management and Development (PMD) will be used to reward workers based on performance. The review of the Performance Management System was to be undertaken in order to close the gaps identified by PEMANDU and other previous reports on PMS between 1st September 2019 and 30th June 2020 as follows; internal process to update and revise the current Performance Management System by January 2020.
A job evaluation exercise in the Public Service will also be undertaken to among others establish internal equity, and will also cover the grading of all supervisory positions within the Public Service. Another agreement included overtime Management. The Directorate of Public Service Management (DPSM) was to facilitate the conclusion of consultations on management of overtime, including consideration of the Overtime Management Task Team’s report on the same by 30th November 2019.
A public health expert, Dr Edward Maganu who is also the former Permanent Secretary in the Ministry of Health has said that unlike many who are expressing shock at the population census growth decline results, he is not, because the 2022 results represents his expectations.
He rushed to dismiss the position by Statistics Botswana in which thy partly attributes the low growth rates to mortality rates for the past ten years. “I don’t think there is any undercounting. I also don’t think death rates have much to do with it since the excessive deaths from HIV/AIDS have been controlled by ARVs and our life expectancy isn’t lower than it was in the 1990s,” he said in an interview with this publication post the release of the results.
Preliminary results released by Statistics Botswana this week indicated that Botswana’s population is now estimated to be 2,346,179 – a figure that the state owned data agency expressed worry over saying it’s below their projected growth. The general decline in the population growth rate is attributed to ‘fertility’ and ‘mortality’ rates that the country registered on the past ten years since the last census in 2011.
Maganu explained that with an enlightened or educated society and the country’s total fertility rate, there was no way the country’s population census was going to match the previous growth rates. “The results of the census make sense and is exactly what I expected. Our Total Fertility Rate ( the average number of children born to a woman) is now around 2.
This is what happens as society develops and educates its women. The enlightened women don’t want to bear many children, they want to work and earn a living, have free time, and give their few children good care. So, there is no under- counting. Census procedures are standard so that results are comparable between countries.
That is why the UN is involved through UNFPA, the UN Agency responsible for population matters,” said Maganu who is also the former adviser to the World Health Organisation. Maganu ruled out undercounting concerns, “I see a lot of Batswana are worried about the census results. Above is what I have always stated.”
Given the disadvantages that accompany low population for countries, some have suggested that perhaps a time has come for the government to consider population growth policies or incentives, suggestions Maganu deems ineffective.
“It has never worked anywhere. The number of children born to a woman are a very private decision of the woman and the husband in an enlightened society. And as I indicated, the more the women of a society get educated, the higher the tendency to have fewer children. All developed countries have a problem of zero population growth or even negative growth.
The replacement level is regarded as 2 children per woman; once the fertility level falls below that, then the population stops growing. That’s why developed countries are depending so much on immigration,” he said.
According to him, a lot of developing countries that are educating their women are heading there, including ourselves-Botswana. “Countries that have had a policy of encouraging women to have more children have failed dismally. A good example is some countries of Eastern Europe (Romania is a good example) that wanted to grow their populations by rewarding women who had more children. It didn’t work. The number of children is a very private matter,” said Maganu
For those who may be worried about the impact of problems associated with low growth rate, Maganu said: “The challenge is to develop society so that it can take care of its dependency ratio, the children and the aged. In developed countries the ratio of people over 60 years is now more than 20%, ours is still less than 10%.”
The preliminary results show that Mogoditshane with (88,098) is now the biggest village in the country with Maun coming second (85,293) and Molepolole at third position with 74,719. Population growth is associated with many economic advantages because more people leads to greater human capital, higher economic growth, economies of scale, the efficiency of higher population density and the improved demographic structure of society, among many others.