Choppies Enterprises Chief Executive Officer (CEO) Ramachandran Ottapathu has said the retail giant is regaining its feet after tumultuous spell which saw the company being suspended on the stock exchange as well poor performance of its operations in some countries.
Choppies returned to trading on the Botswana Stock Exchange (BSE), where it is primarily listed, on the 27th of July 2020 subsequent to release of its 2018 and 2019 financial results which have been backlogging for the past two successive financial years.
BSE suspended Choppies in 2018 after the company failed to publish its financial results pending “changes in auditors as well as the legal and forensic investigations” hence a subsequent boardroom fracas played before the media.
For the same reason, Choppies shares were also suspended in its secondary market, the Johannesburg Stock Exchange (JSE). Choppies remains suspended on JSE.
Speaking to WeekendPost on Thursday, the Choppies supremo said they have learnt numerous lessons over the past few years relating to operations expansion, expressing confidence that the strong financial performance that the company posted recently is a testament to creation of a new path.
“The company had few loss making units that have been disposed of. The remaining places where we operate [Botswana, Zimbabwe, Zambia and Namibia] are solid performers from all the four regions in spite of high inflation in Zimbabwe, we still continue to make money. Zambia is growing well and Namibia is also in strong footing,” Ottapathu said.
Choppies recently decided to cease its operations in South Africa, Mozambique, Kenya and Tanzania owing to poor performance. Despite this divesture Ottapathu is confident other regions will be key in the growth of Choppies in the next few years.
“We will get some growth in Zambia, Namibia and Zimbabwe depending on what the country is going through. We are not going to be in a hurry to expand in Zimbabwe but other countries we will do expansion in a phased manner,’’ he said.
Asked on what went wrong in other regions Ottapathu said: “It was too new in those countries. Nobody had the patience to wait, we had to go with a new tide that people have to make money immediately.”
Ottapathu could not rule out the possibility of returning to the markets where they exited, indicating that only time will tell.
“It is too early for me to make a comment on that. We will be expanding in a cautious manner and we will do an expansion programme in a very thoughtful process,” he said.
In the latest financial results, Choppies indicated that it is in the process of restructuring its debt. The Debt Restructuring Plan will allow the Company to repay the lenders in smaller tranches than the previous structure which will release some cash to the Company and improve the cash flow going forward, the statement stated.
The Choppies board is of the view that the buffer that has been provided by lenders coupled with improved profitability levels will go a long way in keeping the Company as a going concern for the short, medium to long term.
“That is one of the lessons we learn in the whole thing, debt is a killer. We want to reduce the debt. We will repay the debt even if dividends are delayed by a year, we will rather pay the debt,” Ottapathu said.
Despite events of the past few years, Ottapathu is self-assured that shareholders are confident about the future of the company.
At the height of Choppies saga, Ottapathu was suspended as the CEO of the company pending investigations resulting from allegation of wrong doing that have been raised by one of the previous auditing team members.
“Majority of them are confident, that is why they put us back in the driving seat. We brought in new board members and they are working well with us,” said Ottapathu.
As he previously indicated, Ottapathu said his suspension followed his proposal to the then board led by former President Festus Mogae to have the company board “refreshed” to bring in people with relevant experience in the retail business.
After garnering support from majority shareholders, the board was refreshed, with Mogae and other board members comprising of Dorcas Kgosietsile, Heinrich Stander, Ronald Tamale and Wilfred Mpai resigning their seats in September 2019.
During the year under review there has been changes in the Board of Directors of Choppies and the current board, which is led by Uttum Corea and comprises of among others; Farouk Essop Ismail, Ramachandran Ottapathu, Carol Jean Harward, and Tom Pritchard.
CHOPPIES FINANCIAL PERFORMANCE
Choppies negative equity increased from P80.1 million at June 2019 to P467.1 million as at June 2020. The main contributor for the increased negative equity is the P469.6 million loss from discontinued operations.
Group revenue, for the year ended June 2020 comprising of sale of goods, from the continuing operations, increased by 1.1 percent to P5 421 million (2019: P5 359 million).
This increase was inflation driven in Botswana and Zimbabwe against a backdrop of negative sale volumes in Botswana and Zimbabwe due to the impact of the Covid-19 pandemic.
The impact of the COVID-19 pandemic on the Group’s continuing operations revenue is estimated at P190 million.
The Board has considered it prudent to not declare a dividend for the period under review.
The Botswana business continued to show strong resilience in an increasingly competitive and disruptive market due to Covid-19. This year was a period of consolidation, rationalising and balance sheet management with only 3 new stores opened totalling 91 stores.
Revenue grew by 2.7 percent to P4 260.1 million (2019: P4 147.2 million) despite sale volumes reducing by 4.7 percent. The gross profit margin improved to an impressive 24.4 percent (2019: 24.1 percent) with increased consumer demand in an economic environment of low interest rates and a weak Rand. In addition, improved buying and further addition of house brands contributed to profitability.
Financial services and value-added segments contributed well to the bottom line with significant effort and resources placed behind these to improve the service delivery and profitability.
EBITDA (i.e. before accounting for IFRS 16) grew by P58.2 million or 22.5 percent to P316.6 million (2019: P258.3 million).
Choppies is becoming a significant player in the Zambian market and is currently number 2 in its market segment with a total of 21 stores (2019: 21). Revenue grew by 3.5 percent to P604.1 million (2019: P583.5 million) and the gross profit margin to 17.6 percent (2019: 17.2 percent). In the rapid declining currency situation, input costs are not sufficiently recovered by sales proceeds in Kwacha. This situation is made worse by some overheads like rent which are normally fixed in US dollars, a situation currently been re-negotiated.
EBITDA losses (i.e. before accounting for IFRS 16) reduced significantly by P33.6 million to a P4.4 million loss (2019: P38.0 million loss).
Zimbabwe is one of the most challenging markets to operate in, with hyperinflation in three digits, concerns surrounding the economy, changes in the money market and public disturbances. Revenue declined by 18.6 percent to P414.1 million (2019: P508.5 million) resulting from an 87.5percent weakening of the local currency against the Pula during the previous 12 months.
Gross profit margins improved slightly to 19.0 percent (2019: 18.8percent) with EBITDA on a comparable basis (i.e. before accounting for IFRS 16) at P15.7 million (2019: P15.1 million). The abrupt changes and volatility in the currency makes operating in Zimbabwe extremely difficult. This resulted in all the gains obtained at country level getting eliminated when converted at group level due to the weak currency when compared to the Botswana Pula.
Despite all these issues, the business remains self-sustaining without any cash flow constraints. However, repatriation of profits to Botswana will continue to be difficult until the economy undergoes a structural change.
The Namibian operation is still relatively small, with five stores (2019:5), and is yet to reach a critical mass needed to generate sustainable profitability levels. Revenue increased by 18.7 percent to P142.1 million (2019: P119.7 million) with gross profit margins improving to 18.3 percent (2019: 16.6 percent).
The trends in sales growth and substantial improvement in gross profit levels are indicative of the future potential of the region. Based on the trends and similarities this market has to Botswana, the Namibian operation is expected to be a substantial contributor to the profitability of the Group in the longer term.
EBITDA losses (i.e. before accounting for IFRS 16) increased to P11.3 million (2019: loss P9.2 million) due to the rental payment of three non-operational stores.
The United States (US) will on the 3rd of November 2020 chose between incumbent Donald Trump of the Republicans and former Vice President Joe Biden of the Democrats amid the coronavirus pandemics, which has affected how voting is conducted in the world’s biggest economy.
Trump (74) seeks re-election after trouncing Hillary Clinton in 2016, while Biden (77) is going for his first shot as Democratic nominee after previous unsuccessful spells.
US Presidents mostly succeed in their re-election bid, but there have been nine individuals who failed to garner a second term mandate, the latest being George W H. Bush, a Republican who served as the 41st US President between 1989 and 1993.
Dr Mark Rozell, a Dean of the School of Policy and Government at George Mason University in Arlington, Virginia describes the complex US electoral system that will deliver the winner at the 3rd November elections.
“The founders of our Republic de-centralised authority significantly in creating our constitutional system, which means that they gave an enormous amount of independent power and authority to State and local governments,” Dr Rozell told international media on Elections 2020 Virtual Reporting Tour.
Unlike parliamentary democracies, like Botswana the United States does not have all of the national government elected in one year. They do not have what is commonly called mandate elections where the entire federal government is elected all in one election cycle giving a “mandate” to a particular political party to lead, and instead US have what are called staggered elections, elections over time.
The two house Congress, members of the House of Representatives have two-year long terms of office. Every two years the entire House of Representatives is up for re-election, but senators serve for six years and one third of the Senate is elected every two years.
For this election cycle, US citizens will be electing the President and Vice
President, the entire House of Representatives and one third of the open or contested seats in the Senate, whereas two thirds are still fulfilling the remainder of their terms beyond this year.
An important facet of US electoral system to understand given the federalism nature of the republic, the US elect presidents State by State, therefore they do not have a national popular vote for the presidency.
“We have a national popular vote total that says that Hillary Clinton got three million more votes than Donald Trump or in Year 2000 that Al Gore got a half million more votes than George W. Bush, but we have what is called a State by State winner takes all system where each State is assigned a number of electors to our Electoral College and the candidate who wins the popular vote within each State takes 100 percent of the electors to the Electoral College,” explained Dr Rozell.
“And that is why mathematically, it is possible for someone to win the popular vote but lose the presidency.”
Dr Rozell indicated that in 2016, Hillary Clinton won very large popular majorities in some big population States like California, but the system allows a candidate to only have to win a State by one vote to win a 100 percent of its electors, the margin does not matter.
“Donald Trump won many more States by smaller margins, hence he got an Electoral College majority.”
Another interesting features by the way of US constitutional system, according to Dr Rozell, but extremely rare, is what is called the faithless elector.
“That’s the elector to the Electoral College who says, ‘I’m not going to vote the popular vote in my State, I think my State made a bad decision and I’m going to break with the popular vote,’’ Dr Rozell said.
“That’s constitutionally a very complicated matter in our federalism system because although the federal constitution says electors may exercise discretion, most States have passed State laws making it illegal for any elector to the Electoral College to break faith with the popular vote of that State, it is a criminal act that can be penalized if one is to do that. And we just had an important Supreme Court case that upheld the right of the states to impose and to enforce this restriction”
There are 538 electors at the Electoral College, 270 is the magic number, the candidate who gets 270 or more becomes President of the United States.
If however there are more candidates, and this happens extremely rarely, and a third candidate got some electors to the Electoral College denying the two major party candidates, either one getting a majority, nobody gets 270 or more, then the election goes to the House of Representatives and the House of Representatives votes among the top three vote getters as to who should be the next President.
“You’d have to go back to the early 19th century to have such a scenario, and that’s not going to happen this year unless there is a statistical oddity, which would be a perfect statistical tie of 269 to 269 which could happen but you can just imagine how incredibly unlikely that is,” stated Dr Rozell.
BLUE STATES vs RED STATES
Since the 2000 United States presidential election, red states and blue states have referred to states of the United States whose voters predominantly choose either the Republican Party (red) or Democratic Party (blue) presidential candidates.
Many states have populations that are so heavily concentrated in the Democratic party or the Republican party that there is really no competition in those states.
California is a heavily Democratic State, so is New York and Maryland. It is given that Joe Biden will win those states. Meanwhile Texas, Florida and Alabama are republicans. So, the candidates will spent no time campaigning in those states because it is already a given.
However there are swing states, where there is a competition between about five and 10 states total in each election cycle that make a difference, and that is where the candidates end up spending almost all of their time.
“So it ends up making a national contest for the presidency actually look like several state-wide contests with candidates spending a lot of time talking about State and local issues in those parts of the country,” said Dr Rozell.
High Commissioner of the Federal Government of Nigeria to Botswana, His Excellency Umar Zainab Salisu, has challenged President Dr Mokgweetsi Masisi to move swiftly and lobby Africa’s richest man, Nigerian Billionaire, Aliko Dangote to invest in Botswana.
Speaking during a meeting with President Masisi at Office of President on Thursday Zainab Salisu said Dangote has expressed massive interest in setting up billion dollar industries in Botswana. “We have a lot of investors who wish to come and invest in Botswana , when we look at Botswana we don’t see Botswana itself , but we are lured by its geographic location , being in the centre of Southern Africa presents a good opportunity for strategic penetration into other markets of the region,” said Salisu.
As murder cases and violent incidents involving couples and or lovers continue to be recorded daily, Specially Elected Member of Parliament, Dr Unity Dow has called for more funding of non-governmental organizations and accelerated action from government to come up with laws that could inhibit would-be perpetrators of crimes related to Gender Based Violence (GBV).
Just after Dr Dow had deposited her views on this subject with this reporter, a young man in Molepolole opened fire on a married woman he was having an affair with; and ended her life instantly. While it is this heinous cases that get projected to the public space, the former minister argues that the secrecy culture is keeping other real GBV cases under wraps in many spaces in the country.
The former Minister of Foreign Affairs and International Cooperation said there is GBV all the time in all kinds of places. “We have become accustomed to stories of rapes, marital rapes, defilement of children, beatings and psychological violence and even killings,” she said.
Gender-based violence is a phenomenon deeply rooted in gender inequality, Dow is worried that there is absolutely no social punishment for perpetrators; they will continue to have the same friends, jobs, wives, homes, as before. Yet another factor, she said, is that there is little or no “justice” for victims of GBV.
The renowned activist said justice for GBV victims is not just the jailing of the perpetrator. “Justice for victims means an agile, victim-friendly, accessible (time, money and procedures) and restorative justice system.”
Asked what could be leading to a spike in Gender Based Violence cases or incidents, she observed that there is no one factor to which this spike can be attributed. “The most obvious factor is stress as a result of economic distress and or poverty. Poverty makes one vulnerable and open to compromises that they would otherwise not make. For perpetrators with anger management issues, economic stress leads to lashing out to those closest to them. Another factor is the disintegration of families and family values,” she opined.
According to Dow, no government anywhere in the world is doing enough, period. “We know the places and spaces where women and girls are unsafe. We know the challenges they face in their attempts to exit those spaces and places.” The former Judge of the High Court said GBV undermines the health, dignity, security and autonomy of its victims, yet it remains shrouded in the culture of silence.
Asked what could be done to arrest GBV cases, Dow said it is critical to involve and fund civil society organizations. She observed that much of the progress done in the area of women’s human rights was during the time when Botswana had strong and funded civil society organizations.
“The funding dried up when Botswana was declared a middle-income country but unfortunately external funding was not replaced by local funding,” she acknowledged.
Further Dow said relevant government institutions must be funded and strengthened.
“Thirdly, create a society in which it is not okay to humiliate, rape, beat or kill women. You create this by responding to GBV the same way we have responded to livestock theft. We need to create agile mechanisms that hear cases quickly and allow for the removal of suspected perpetrators from their homes, work places, boards, committees, etc.”
The former Minister said the much anticipated Inter-Ministerial Task Force on Gender Based Violence will have its work cut out for it. According to Dow, GBV is not just a justice issue, it’s not just a gender issue, but rather an issue that cuts across health, education, labour, economic, housing and politics. “As long as any one believes it is someone else’s problem, we will all have the problem,” she said.
In her view, Dow said every work, educational and other place must have a GBV Policy and/or Code of Conduct. “It is important that we acknowledge that the majority of men are law-abiding. The problem is their silence, in the face of injustice,” she observed.