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.
Despite the government of Botswana’s ambition to have one of its own to lead Southern Africa Development Community (SADC) since its establishment in 1980, the Presidency says there is no budget specifically dedicated to the campaign.
The Government has released the name of Permanent Secretary to the President, Elias Mpedi Magosi, as the candidate for the SADC Executive Secretary position. Magosi is expected to face off with Democratic Republic of Congo (DRC) candidate, Faustin Mukela. The position will become vacant in August this year.
However, despite the optimism the Botswana Government has not yet set aside a budget to assist Magosi to win against the seemingly DRC giant. “We all know that the COVID-19 pandemic has negatively affected the country’s ability to effectively fund any new project. This campaign is not an exception. As such, we do not have any budget for the campaign. However, we have so far managed to take advantage of His Excellency the President’s working visits to the neighbouring countries to also carry out the campaigns,” Press Secretary to the President, Batlhalefi Leagajang, explained.
Botswana has housed SADC since the establishment of the then SADCC in 1980, but has never occupied top most leadership positions at the SADC Secretariat. “We therefore, strongly believe that we should also have an opportunity to contribute to the management of our regional body as it continues to drive the important issues of regional integration industrialization and socio-economic development.
This will also profile Botswana as a strong advocate of regional integration,” he responded to this publication’s questionnaire as to why the Government wants to occupy the plum post. SADC is a Member State driven organization. As such, Leagajang said, needs a well-grounded Executive Secretary with a blend of management and leadership acumen; a transformational leader with political awareness and integrity; private and public sector experience; a deep culture of corporate governance; as well as strategic agility and result-oriented consummate diplomat.
“These are the unique attributes of our candidate,” he said. So far President Mokgweetsi Masisi has visited nine out of 16 SADC member states on a working visit and also taking an opportunity to present to them his candidate.
“The countries have appreciated this effort and we remain hopeful. However, it is important to note that this is a democratic and competitive process which must be respected,” he responded when asked about the reception and assurances from various countries to cast a vote for Magosi.
In 2018, when Pelonomi Venson-Moitoi challenged for the Africa Union (AU) Chairperson, the government appointed former President Festus Mogae to be the campaign leader. Does the Government have anyone apart from Masisi to help with the campaign?
“The campaigns for the candidate are strictly led by the Government of Botswana. Since this is a candidate for Botswana, not just the Government, it will be appreciated if all Batswana, including the media, could also shoulder the responsibility to campaign for the candidate in their own spheres of influence,” Leagajang responded.
While there are sceptics on Magosi winning against the DRC man, the Government is confident and believes that with the unique traits that he possess, Magosi stands a chance. He is said to be a strong advocate of justice and fairness as he has played this role in his current role as PSP and in his previous roles as PS and in the private sector. He has helped individuals and companies to find justice and fairness in most of their dealings with Government.
Magosi is also said to be a proponent of corporate governance and which he has relentlessly pursued in most of his career including in Government and other sectors. A strong believer in following laid down procedures and laws. “He carries a variety of skills as an HR expert with experience in different sectors, a strategist and an Organization development specialist.
His experience and exposure spans government, parastatal, private sector and at regional level as well, thus making him a suitable candidate for the regional role. He has worked with governments, businesses, development partners and politicians and is comfortable navigating through all of them,” Leagajang concluded.
The Minister of Land Management, Water and Sanitation Services, Kefentse Mzwinila looked a politician set to shoot the moon as he laid bare his billions of pula development agenda recently in Parliament.
His Ministry’s combined Recurrent and Development Budget Proposals for the 2021/ 2022 Financial Year is pegged at Four Billion, Three Hundred and Sixty – Five Million, two Hundred and Nineteen Thousand, Five Hundred and Sixty Pula (P4, 365, 219, 560). This is a budget 38.3% more than the allocation for the 2020/2021 Financial Year.
Mzwinila preluded his request to parliament with a demonstration that his Ministry has no champagne taste on a beer budget – indicating that his ministry’s expenditure at the end of February 2021P2.111 Billion or 96% of development budget; and P910 million or 90% of the recurrent budget.
Notwithstanding the budget dust, the Minister justified this year’s increase in the Ministry’s total budget. He attributed the escalation to the commencement of major projects under the water sector. These include the implementation of the North South Carrier (NSC) 22.2 covering various sub projects. Mzwinila noted that these are all public value projects which are aimed at improving the lives of Batswana.
Mzwinila’s Ministry has projected that the sum of Nine Hundred and Sixty –Three Million, Nine Hundred and Forty – Seven Thousand, Five Hundred and Sixty Pula (P963, 947, 560) be permitted for the Recurrent Budget and stand part of the 2021 / 2022 Appropriation Bill ( No. 1 of 2021).
“55% of the Recurrent Budget is geared towards the Revenue Support Grant for 12 Land Boards and their subordinate authorities while the sum of P5 Million is allocated to the Real Estate Advisory Council (REAC). The remaining 44% is proposed for the Ministry Departments.”
The sum of Three Billion, Four Hundred and One Million, Two hundred and Seventy –Two Thousand Pula (P3, 401, 272, 000), for the Development Budget was approved and stand part of the same schedule of the appropriation (2021/2022).
When breaking down the Development Budget, Minister Mzwinila noted that Water Supply and Sanitation projects will account for P1.098 Billion to finance the Maun Water and Sanitation project, Molepolole Sanitation projects and the Shakawe Water Treatment Plant Rehabilitation.
With all the implementation bottlenecks troubling several projects in the country, Mzwinila had to satisfy the question of whether his Ministry demonstrated a dire need for the budget with reference to its execution of the budget for the financial year 2020/2021 and its delivery of strategic initiatives and projects?
Mzwinila’s pitch found favour with parliament and his ministry will get an aggregate budget of P3.198 Billion for the 2020/ 2021 Financial Year. Within this allocation, P2.188 Billion is for the Development Budget and P1.010 Billion will cover the Recurrent Budget.
The Minister revealed his strategic interventions for land management, water and sanitation services. Highlighting that efforts by Government to provide serviced residential land to citizens on the waiting list are being hampered by limited resources. He shared that his ministry needs P94 Billion to cover such costs which will directly link to water, sewage, roads, electricity, telecommunications and storm water drainage leading to the allocation of 4 587 plots on un-serviced land.
The minister projected that 22 952 un-serviced residential plots are planned to be allocated in the next financial year. However, there is a trend where allocated land remains fallow and undeveloped which raises misgivings that the requests could have been made on speculative plans.
Mzwinila noted that in the spirit of forging stronger International connections, the Ministry will in June 2021 sign a Memorandum of Understanding on Land matters between Namibia and Botswana with the aim of opening doors to the creation of Dry Ports in the country, facilitate international trade through Walvis Bay Sea Port.
Botswana is already challenged by scarcity of naturally occurring water resources due to the aridity of the country creating persistent water shortages. The type of infrastructure required to improve national water security is a true reflection of intensive investment needed in the water sector The Minister stressed.
“An emerging issue such as the COVID -19 pandemic poses serious challenges as the control of the virus requires reliable water supply. In an effort to mitigate the challenge, the Ministry has undertaken extensive bowsing throughout the country which included the provision of additional capacity for supplementary bowsing to areas with pervasive water shortages, plus an additional forty one (41) un-gazetted settlements.
Operational costs due to bowsing were at an average of P6 Million per month before the COVID-19 pandemic and increased to an unsustainable amount of the order of P13 Million per month, since the beginning of the State of Emergency in April 2020,” the minister shared.
Through the support of a World Bank Loan, the Ministry is implementing several initiatives under the Botswana Emergency Water Security and Efficiency (BEWSE) project. Through BEWSE the Raw Water Pricing and Abstraction Strategy will assess the pricing of water in a manner that enables the provision of water to support new economic development, the strategy is planned to be completed in June 2021.
The Ministry has commenced the development of a long term National Water Security Strategy to improve resilience to climate change impacts. The strategy development entails prioritization of the proposed future mega water transfers such as the Chobe – Zambezi water transfer, the Atlantic Ocean water transfer to Botswana through Namibia and Lesotho – Botswana water transfer.
Following the signing of the tripartite Memorandum of Agreement (MoA) between Botswana, Lesotho and South Africa in November 2017 for the Lesotho –Botswana Water Transfer project, a 24 months contract for a combined prefeasibility and feasibility study for the development of a bankable Lesotho – Botswana Water Transfer project feasibility study was signed and is to be completed in 2022.
One of the Ministry’s famous major water supply projects such as the North South Carrier (NSC) 2.2 has experienced hiccups; having tenders for contract 1 (Masama to Mmamashia Pipeline) and Contract 2 (Mahalapye to Masama Pipeline) cancelled due to budgetary constraints.
The Botswana Climate Change policy draft of 2021 was tabled in Parliament by the Minister of Environment, Natural Resources Conservation and Tourism, Philda Kereng for consideration and adoption.
The policy attempts to indicate the country’s environmentally conscious development agenda as Substantial resources are being dedicated to research and policy efforts to mitigate climate change and support adaptation to the current and future impacts of greenhouse gas emissions.
Kereng indicated that Botswana is not immune to the impacts of climate change and it continues to delay the country’s national development efforts and that the key economic development sectors dependent on the climate system have recorded declines over the years due to the variability of the rainfall and other climatic conditions. Experts elsewhere have pointed out that lack of consideration of population dynamics hampers the development of stronger, more effective solutions to the challenges climate change poses – hopefully this policy if effectively implemented could partly answer this question.
Kereng underscored that sectors such as agriculture, water, bio diversity, health and tourism have suffered the most and the consequences of these have contributed significantly to the decline of livelihoods in Botswana especially in rural areas.
To respond to the changing climate, Botswana has embarked on sectoral reform such as climate smart agriculture, poverty alleviation initiatives, building resilience on the economic productive sectors, diversification of tourism for the improvement of livelihoods and income generation, local economic development and sustainable environment.
The efforts require a coordinated mechanism that will provide an enabling environment for an integrated approach to the formulation and implantation of development plans and socio economic related policies in Botswana that are responsive to the changing climatic conditions.
Minister Kereng explained the draft policy is characterized by an inclusive and integrated approach to social, economic development and governance modalities that would enable the country to achieve a sustainable development pathway. It provides opportunities for improved livelihoods through creation of green jobs, development and transfer of relevant technologies as well as creation and ease of access to both local and international markets. It also commits the government, private sector and non-state actors to adopt adaptation and mitigation measures that would facilitate sustainability and building of resilience of all sectors.
While Members of Parliament were trying to comprehend the policy, this publication got in touch with Green Botswana to solicit their views on the policy draft. Ms. Sela Motshwane, the Founder of the Trust highlighted that “the Climate Change policy was meant to be read in August 2019. It is long overdue, and we all need to see it and understand it in full.
I understand the current budget does not allow for a full implementation- but I could be wrong. More funds could have been allocated since. I think generally, Batswana need to understand fully what this means to our daily lives. I believe the true understanding is by policy drafters and the Ministry of Environment only.”
In the same vein, Green Botswana Trust took to the streets to provide a community solution to climate change on World Health Day (Wednesday). Green Botswana held a “Free Trees for Babies” at Extension 2 Clinic where fruit trees were gifted to parents, expectant mothers, 25 health workers, police officers and the prison officers who had accompanied prisoners to the clinic.
Motshwane said: “The decision to do the “Free Trees for Babies” by gifting fruit trees was to raise awareness to our imminent food security issue as stated by the Deputy Permanent Secretary of the Ministry of Agricultural Development and Food Security, Mr. Thabang Botshoma and encourage the general public to plant a tree so that we can reach our SGD Goal 13 : Climate Action. The trees gifted are to be named after the baby recipient”.
Green Botswana is calling for the urgent action from government and members of the public to create a culture of community accountability and collegiality in moving Botswana towards climate action and sustainability. To achieve the 2030 Paris Agreement Pledge, it will take all citizens and not just the government to reach goals.
Parliament resolved to adopt the Botswana Climate Change Policy, 2021.