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.
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.