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.
For so many years, Botswana has been trying to be a self-sufficient country that is able to provide its citizens with locally produced food products. Through appropriate collaborations with parastatals such as CEDA, ISPAAD and LEA, government introduced initiatives such as the Horticulture Impact Accelerator Subsidy-IAS and other funding facilities to facilitate horticultural farmers to increase production levels.
Now that COVID-19 took over and disrupted the food value chain across all economies, Botswana government introduced these initiatives to reduce the import bill by enhancing local market and relieve horticultural farmers from loses or impacts associated with the pandemic.
In more concerted efforts to curb these food crises in the country, government extended the ploughing period for the Southern part of Botswana. The extension was due to the late start of rains in the Southern part of the country.
Last week the Ministry of Agriculture extended the ploughing period for the Northern part of the country, mainly because of rains recently experienced in the country. With these decisions taken urgently, government optimizes food security and reliance on local food production.
When pigs fly, Botswana will be able to produce food to feed its people. This is evident by the numbers released by Statistics Botswana on imports recorded in November 2020, on their International Merchandise Trade Statistics for the month under review.
The numbers say Botswana continues to import most of its food from neighbouring South Africa. Not only that, Batswana relies on South Africa to have something to smoke, to drink and even use as machinery.
According to data from Statistics Botswana, the country’s total imports amounted to P6.881 Million. Diamonds contributed to the total imports at 33%, which is equivalent to P2.3 Million. This was followed by food, beverages and tobacco, machinery and electrical equipment which stood at P912 Million and P790 Million respectively.
Most of these commodities were imported from The Southern African Customs Union (SACU). The Union supplied Botswana with imports valued at over P4.8 Million of Botswana’s imports for the month under review (November 2020). The top most imported commodity group from SACU region was food, beverages and tobacco, with a contribution of P864 Million, which is likely to be around 18.1% of the total imports from the region.
Diamonds and fuel, according to these statistics, contributed 16.0%, or P766 Million and 13.5% or P645 Million respectively. Botswana also showed a strong and desperate reliance on neighbouring South Africa for important commodities. Even though the borders between the two countries in order to curb the spread of the COVID-19 virus, government took a decision to open border gates for essential services which included the transportation of commodities such as food.
Imports from South Africa recorded in November 2020 stood at P4.615 Million, which accounted for 67.1% of total imports during the month under review. Still from that country, Botswana bought food, beverages and tobacco worth P844 Million (18.3%), diamonds, machinery and fuel worth P758 Million, P601 Million and P562 Million respectively.
Botswana also imported chemicals and rubber products that made a contribution of 11.7% (P542.2 Million) to total imports from South Africa during the month under review, (November 2020).
The European Union also came to Botswana’s rescue in the previous year. Botswana received imports worth P698.3 Million from the EU, accounting for 10.1% of the total imports during the same month. The major group commodity imported from the EU was diamonds, accounting for 86.9% (P606.6 Million), of imports from the Union. Belgium was the major source of imports from the EU, at 8.9% (P609.1 Million) of total imports during the period under review.
Meanwhile, Minister of Finance and Economic Development Thapelo Matsheka says an improvement in exports and commodity prices will drive growth in Sub-Saharan Africa. Growth in the region is anticipated to recover modestly to 3.2% in 2021. Matsheka said this when delivering the Annual Budget Speech virtually in Gaborone on the 1st of February 2021.
He said implementation of the African Continental Free Trade Area Agreement (AfCFTA), which became operational in January 2021, could reduce the region’s vulnerability to global disruptions, as well as deepen trade and economic integration.
“This could also help boost competition and productivity. Successful implementation of AfCFTA will, of necessity, require Member States to eliminate both tariffs and non-tariff barriers, and generally make it easier to do business and invest across borders.”
Matsheka, who is also a Member of Parliament for Lobatse, an ailing town which houses the struggling biggest meat processing company in the country- Botswana Meat Commission, (BMC), said the Southern African Customs Union (SACU) recognizes the need to prioritize the key processes required for the implementation of the AfCFTA.
“The revised SACU Tariff Offer, which comprises 5,988 product lines with agreed Rules of Origin, representing 77% of the SACU Tariff Book, was submitted to the African Union Commission (AUC) in November 2020. The government is in the process of evaluating the tariff offers of other AfCFTA members prior to ratification, following which Botswana’s participation in AfCFTA will come to effect.”
Women continue to shadow men in politics – stereotypes such as ‘behind every successful man there is a woman’ cast the notion that women cannot lead. The 2019 general election recorded one of Botswana’s worst performances when it comes to women participation in parliamentary democracy with only three women elected to parliament.
Botswana’s former Minister of Health, Professor Sheila Tlou who is currently the Co-Chair, Global HIV Prevention Coalition & Nursing Now and an HIV, Gender & Human Rights Activist is not amused by the status quo. Tlou attributes this dilemma facing women to a number of factors, which she is convinced influence the voting patterns of Batswana when it comes to women politicians.
Professor Tlou plugs the party level voting systems as the first hindrance that blocks women from ascending to power. According to the former Minister of Health, there is inadequate amount of professionalism due to corrupt internal party structures affecting the voters roll and ultimately leading to voter apathy for those who end up struck off the voters rolls under dubious circumstances.
Tlou also stated that women’s campaigns are often clean; whilst men put to play the ‘politics is dirty metaphor using financial muscle to buy voters into voting for them without taking into consideration their abilities and credibility. The biggest hurdle according to Tlou is the fallacy that ‘Women cannot lead’, which is also perpetuated by other women who discourage people from voting for women.
There are numerous factors put on the table when scrutinizing a woman, she can be either too old, or too young, or her marital status can be used against her. An unmarried woman is labelled as a failure and questioned on how she intends on being a leader when she failed to have a home. The list is endless including slut shaming women who have either been through a divorce or on to their second marriages, Tlou observed.
The only way that voters can be emancipated from this mentality according to Tlou is through a robust voter education campaign tailor made to run continuously and not be left to the eve of elections as it is usually done. She further stated that the current crop of women in parliament must show case their abilities and magnify them – this will help make it clear that they too are worthy of votes.
And to women intending to run for office, Tlou encouraged them not to wait for the eleventh hour to show their interest and rather start in community mobilisation projects as early as possible so that the constituents can get to know them and their abilities prior to the election date.
Youthful Botswana National Front (BNF) leader and feminist, Resego Kgosidintsi blames women’s mentality towards one another which emanates from the fact that women have been socialised from a tender age that they cannot be leaders hence they find it difficult to vote for each other.
Kgosidintsi further states that, “Women do not have enough economic resources to stage effective campaigns. They are deemed as the natural care givers and would rather divert their funds towards raising children and building homes over buying campaign materials.”
Meanwhile, Vice President of the Alliance for Progressives (AP), Wynter Mmolotsi agrees that women’s participation in politics in Botswana remains a challenge. To address this Mmolotsi suggested that there should be constituencies reserved for women candidates only so that the outcome regardless of the party should deliver a woman Member of Parliament.
Mmolotsi further suggested that Botswana should ditch the First Past the Post system of election and opt for the proportional representation where contesting parties will dutifully list able women as their representatives in parliament.
On why women do not get elected, Mmolotsi explained that he had heard first hand from voters that they are reluctant to vote for women since they have limited access to them once they have won; unlike their male counterparts who have proven to be available night or day.
The pre-historic awarding of gender roles relegating women to be pregnant and barefoot at home and the man to be out there fending for the family has disadvantaged women in political and other professional careers.