Choppies Enterprises Chief Executive Officer (CEO), Ramachandran Ottapathu and his deputy, Farouk Ismail are demanding a compensation of P450 million from accounting firm, PricewaterhouseCoopers (Pwc) following a 75 percent decline in market value of Choppies shares traded on the Botswana Stock Exchange (BSE) and Johannesburg Stock Exchange (JSE).
Ottapathu and Ismail, who are the two largest shareholders at Choppies, demand P254 million and P197 million respectively. Ottapathu further demands R417 000 (about P290 000).
PwC which ranks as the second-largest professional services network in the world — and is considered one of the Big Four accounting firms, along with Deloitte, EY and KPMG — was at the helm as auditor of Choppies when the retail giant suffered turbulence.
According to court papers, Ottapathu and Ismail, who are represented by Ramalepa Attorneys, in January 2018 when Choppies began discussions with Pwc regarding engagement of Pwc as external auditors of Choppies and its subsidiaries.
From that time, Pwc was given the opportunity to obtain insight into the business of Choppies and on or about 25th January 2018, Pwc presented to Ottapathu in his capacity as CEO, its fee proposal.
In the fee proposal, according to court papers, Rudi Binedell a partner at Pwc confirmed that he had assessed Choppies engagement risk in order to ensure that Pwc had a complete understanding of the business of Choppies as it is only possible before presenting the fee proposal. Binedell had completed process that confirmed that Pwc were independent of Choppies within the meaning of appropriate regulatory and professional requirements, and that the objectivity of the proposed audit team was not impaired.
Agreement was reached on 9 March 2018. According to the court documents, Choppies engaged Pwc on the basis of Pwc and Binedell’s representations and assurances contained in the Audit Agreement 2018, and also on the basis that Pwc and Binedell were independent and that Pwc and Binedell would remain independent throughout the course of audit.
In terms of the Audit Agreement 2018 and the ISA, specifically ISA 260 (Communication with Those Charged with Governance), Pwc was required to plan their audit and communicate their plan to Choppies and specifically those charged with corporate governance, namely the audit committee.
Ismail and Ottapathu contend that from at least 19 March 2018, Pwc and Binedell were aware, or ought reasonably to have been aware that, they were required to; finalise the audit and report key findings to the Audit Committee by no later than the end of September 2018 and issue the final statements and their audit report by no later than the end of September 2018.
On the 6 July 2018, Binedell, on behalf Pwc, presented on behalf of Pwc, an audit plan for Choppies and its subsidiaries to the Audit Committee for their consideration and approval. The presentation set out how Pwc would discharge their responsibilities under the audit among them confirming their independence and compliance with ISA 20; understanding of stakeholders’ expectations and analysis of risks.
The audit timetable reveal that, about May or June 2018, Pwc would attend the stock counts and finalise the audits strategy and communicate the audit approach to the committee; by June 2018, Pwc would set out its planned audit approach and response to the risk they have identified for the audit to date.
By September 2018, Pwc would produce a report that summarises the key issues arising from the audit and present to the audit committee; produce a draft key audit matter and obtain clearance; approve the financial statements; and sign off on the statutory report. Pwc proposed a fee of approximately P8 480 00.
BINEDELL’S COMPROMISED INDEPENDENCE
In court documents, Ottapathu and Ismail allege that on March 2018, the date which Pwc made its preliminary presentation to the Audit Committee, Binedell attended a dinner with Robert Matthews and Allan Muller, members of Choppies Audit Committee.
During the dinner, the court documents say, Binedell discussed with Matthews and Muller various issues relating to Choppies and Pwc’s audit of Choppies for the 2018 financial year.
Muller requested that Binedell joins Choppies as the Group Finance Director and hereby solicited his employment by Choppies. Subsequent to the meeting, Ottapathu and Ismail, allege that Muller and/or Matthews repeated this request to Binedell and indeed other of Choppies’ management on several occasions.
“Matthews had suggested that the Choppies Board should consider Binedell be given 60 million shares in Choppies under the employee share option scheme, as an incentive,” says the court documents.
“Ottapathu was requested by Muller and/or Matthews to formalise an offer to Binedell in writing.”
The lawyers representing Ottapathu and Ismail contended that Muller and/or Matthews made these requests and thereby solicited the employment of Binedell when they ought to have known that this was in contravention of the Audit Agreement 2018 and that it would compromise Binedell’s independence and the independence of Pwc throughout the audit.
“As a result of these facts, Pwc bore an obligation, contractually and in terms of their ethical obligation to immediately; take action in accordance with ISA 260 and IESBA Code of Ethics, and report such threats to those charged with governance and then either (1) to resign as auditors of Choppies; and alternatively and at the very least, to remove Binedell from the audit team,” Ramalepa Attorneys argues.
Pwc and Binedell, lawyers argue, failed to do so and Pwc proceeded to conduct that audits of Choppies and its subsidiaries, with the audit team as it was then constituted, led by Binedell.
AUDIT DELAYS AND SUSPENSION OF OTTAPATHU
On or about 17th September 2018, and at a Boarding meeting, Binedell advised the Board of Directors of Choppies that he would not be able to finalise audit in Botswana, South Africa and Zimbabwe due to a number of audit issues, some of which affect all regions and of which were specific to certain regions only.
Binedell identified a number of issues of concern in which he implicated Ottapathu’s management of Choppies, and specifically the following a) related party transactions, particularly Fours Cash and Carry; Purchase Price Allocations on assets acquired; allegedly suspicious cash flows between Choppies and Devland Cash and Carry; issues with ZIA and concerns on money laundering accusations in Zimbabwe; latest provisional set of consolidated financials provided on the morning of 17 September 2018- showing a material deviation from both last year’s results and the budgeted figures for the 2018 financial and reportable irregularities identified by the auditors during the audit process.
Binedell noted his concerns about lack of transparency as well pressure from Pwc Africa Chief Operation on his association with Choppies due to Zimbabwe press issues.
Other issues he raised advising Choppies to obtain legal advice in South Africa and Botswana arising from transactions and advice on how the Board should as well as on the Board potential “exposure.”
Owing to the concerns raised by Binedell, Pwc felt exposed and would not “sign off” on the financials until various matters were resolved, therefore Choppies would not meet the deadline to publish audited annual financial results by 30 September 2018.
Consequent to Binedell’s report Ottapathu was suspended as Choppies CEO, trading of Choppies shares be suspended and a forensic audit was commissioned.
Ottapathu responded to Binedell’s concerns by proving information and documentation but Pwc insisted on an independent forensic auditor.
Failure to meet the audited financial results on time led to the suspension on BSE and later on JSE.
Other mitigation efforts, including impairing 50 percent of the assets on Choppies balance sheet also did not bear fruits.
Ottapathu, Ismail conclude that Pwc disregarded the statutory deadlines and that as dully appointed auditors of Choppies, Pwc and Binedell occupied stator office and they were obliged to among others, comply with Companies Act and Financial Reporting Act .
The duo conclude that by virtue of the role performed by Binedell and Pwc as the statutory auditor of Choppies and its subsidiaries and in implementing the Audit Agreement 2018; and by the virtue of their knowledge, Binedell and Pwc owed a legal duty to Ottapathu and Ismail as shareholders of Choppies.
Ottapathu and Ismail, through their lawyers, insist that Binedell and Pwc breached their duty to shareholders, when Binedell accepted a dinner invitation on 19 March 2018, from Matthews and Muller and then Pwc and Binedell then failed to eliminate the threatens to their independence arising therefrom or to apply appropriate safeguards to reduce such threats to an acceptable level.
Lebang Mpotokwane, one of the conveners who presided over the opposition cooperation talks that resulted in the formation of the Umbrella for Democratic Change (UDC), has advised against changing the current umbrella model in favour of a merger as proposed by others.
The Botswana Congress Party (BCP) leader, Dumelang Saleshando recently went public to propose that UDC should consider merging of all opposition parties, including Alliance for Progressives (AP) and Botswana Patriotic Front (BNF).
Saleshando has been vehemently opposed by Botswana National Front (BNF), which is in favour of maintaining the current model. BNF’s position has been favoured by the founding father of UDC, who warned that it will be too early to ditch the current model.
“UDC should be well developed to promote the spirit of togetherness on members and the members should be taught so that the merger is developed gradually. They should approach it cautiously. If they feel they are ready, they can, but it would not be a good idea,” Mpotokwane told WeekendPost this week.
Mpotokwane and Emang Maphanyane are the two men who have since 2003 began a long journey of uniting opposition parties in a bid to dethrone the ruling Botswana Democratic Party (BCP) as they felt it needed a strong opposition to avoid complacency.
Tonota born Mpotokwane is however disappointed on how they have been ejected from participating in the last edition of talks ahead of the 2019 general elections in which BCP was brought on board. However, despite the ejection, Mpotokwane is not resentful to the opposition collective.
He said the vision of opposition unity was to ultimately merge the opposition parties but he believes time has not arrived yet to pursue that path. “The bigger picture was a total merger and we agreed that with three independent parties, members might be against merger eventuality so the current model should be used until a point where they are now together for as long as possible,” he said.
“UDC should gradually perform better in elections and gain confidence. They should not rush the merger. We have been meeting since 2003, but if they rush it might cause endless problems. If they are ready they can anyway,” he advised. For now the constituent parties of the umbrella have been exchanging salvos with others (BCP and BNF).
“There are good reasons for and against merging the parties. Personally, I am in favour of merging the parties (including AP and BPF) into a single formation but I know it’s a complex mission that will have its own challenges,” Saleshando said when he made his position known a week ago.
“Good luck to those advocating for a merger, it will be interesting to observe the tactics they will use to lure the BPF into a merger,” former BNF councillor for Borakalalo Ward and former BNF Youth League Secretary General, Arafat Khan, opined in relation to BCP’s proposed position.
Mpotokwane, who is currently out in the cold from the UDC since he was ejected from the party’s NEC in 2017, said the current bickering and the expected negotiations with other parties need the presence of conveners.
“We did not belong to any party as conveners so we were objective in our submissions. If party propose any progressive idea we will support, if it is not we will not, so I would agree that even now conveners might be key for neutrality to avoid biasness,” he observed. Despite being abandoned, Mpotokwane said he will always be around to assist if at all he is needed.
“If they want help I will be there, I have always been clear about it, but surely I will ask few questions before accepting that role,” he said. UDC is expected to begin cooperation talks with both AP and BPF either this week or next weekend for both upcoming bye-elections (halted by Covid-19) and 2024 general elections and it is revealed that there will be no conveners this time around.
The Botswana Democratic Party (BDP) moved through its lawyers to attach the property of Umbrella for Democratic (UDC) President Duma Boko and other former parliamentary contestants who failed in their court bid to overturn the 2019 general elections in 14 constituencies.
WeekendPost has established that this week, Deputy Sheriffs were commissioned by Bogopa Manewe Tobedza and Company who represented the BDP, to attach the properties of UDC elections contents in a bid to recover costs. High Court has issued a writ of execution against all petitioners, a process that has set in motion the cost recovery measures.
Botswana Sectors of Teachers Union (BOSETU) says COVID-19 as a pandemic has negatively affected the education sector by deeply disrupting the education system. The intermittent lockdowns have resulted in the halting of teaching and learning in schools.
The union indicated that the education system was caught napping and badly exposed when it came to the use of Information System (IT), technological platforms and issues of digitalisation.
“COVID-19 exposed glaring inefficiencies and deficiencies when it came to the use of ITC in schools. In view of the foregoing, we challenge government as BOSETU to invest in school ITC, technology and digitalization,” says BOSETU President Kinston Radikolo during a press conference on Tuesday.
As a consequence, the union is calling on government to prioritise education in her budgeting to provide technological infrastructure and equipment including provision of tablets to students and teachers.
“Government should invest vigorously in internet connectivity in schools and teacher’s residences if the concept of flexi-hours and virtual learning were to be achieved and have desired results,” Radikolo said.
Radikolo told journalists that COVID-19 is likely to negatively affect final year results saying that the students would sit for the final examinations having not covered enough ground in terms of curriculum coverage.
“This is so because there wasn’t any catch up plan that was put in place to recover the lost time by students. We warn that this year’s final examination results would dwindle,” he said.
The Union, which is an affiliate of Botswana Federation of Public, Private and Parastatal Union (BOFEPUSU), also indicated that COVID-19’s presence as a pandemic has complicated the role of a teacher in a school environment, saying a teacher’s role has not only transcended beyond just facilitating teaching and learning, but rather, a teacher in this COVID-19 era, is also called upon to enforce the COVID-19 preventative protocols in the school environment.
“This is an additional role in the duty of a teacher that needs to be recognized by the employers. Teachers by virtue of working in a congested school environment have become highly exposed and vulnerable to COVID-19, hence the reason why BOSETU would like teachers to be regarded as the frontline workers with respect to COVID-19,” says Radikolo.
BOSETU noted that the pandemic has in large scales found its way into most of the school environments, as in thus far more than 50 schools have been affected by COVID-19. The Union says this is quite a worrying phenomenon.
“As we indicated before when we queried that schools were not ready for re-opening, it has now come to pass that our fears were not far-fetched. This goes out to tell that there is deficiency in our schools when it comes to putting in place preventative protocols. In our schools, hygiene is compromised by mere absence of sanitizers, few hand-washing stations, absence of social distancing in classes,” the Union leader said.
Furthermore, Radikolo stressed that the shifting system drastically increased the workload for teachers especially in secondary schools. He says teachers in these schools experience very high loads to an extent that some of them end up teaching up to sixty four periods per week, adding that this has not only fatigued teachers, but has also negatively affected their performance and the quality of teaching.
In what the Union sees as failure to uphold and honour collective agreements by government, owing to the shift system introduced at primary schools, government is still in some instances refusing to honour an agreement with the Unions to hire more teachers to take up the extra classes.
“BOSETU notes with disgruntlement the use of pre-school teachers to teach in the mainstream schools with due regard for their specific areas of training and their job descriptions. This in our view is a variation of the terms of employment of the said teachers,” says Radikolo.
The Union has called on government to forthwith remedy this situation and hire more teachers to alleviate this otherwise unhealthy situation. BOSETU also expressed concerns of some school administrators who continuously run institutions with iron fists and in a totalitarian way.
“We have a few such hot spot schools which the Union has brought to attention the Ministry officials such as Maoka JSS, Artesia JSS, and Dukwi JSS. We are worried that the Ministry becomes sluggish in taking action against such errant school administration. In instances where action is taken, such school administrators are transferred and rotated around schools.”