CHOPPIES WINS A SECOND ROUND IN COURT CASE AGAINST AUDITING FIRM PWC
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Sub-Saharan Africa retail giant Choppies has received another major reputation booster after winning a second round in the dragged-out high court case against PricewaterhouseCoopers Botswana (PwC) and its audit partner Rudi Binedell.
The two largest shareholders in the Botswana-headquartered supermarket chain Choppies Enterprises Limited, CEO Ram Ottapathu and partner Farouk Ismail, have obtained an important high court ruling in their R610 million claim PwC and Binedell.
Ottapathu and Ismail want PwC to be made liable for losses the directors faced when Choppies was suspended from the JSE and Botswana stock exchanges for not publishing its 2018 financial statements within stipulated time frames. The two have submitted that PwC was to blame for the delay. The suspension caused shares in Choppies to tumble and thus eroded their own value in Choppies as shareholders.
In a judgment handed down in the Botswana High Court last week, Judge Makhwe ruled in favour of an application by Ottapathu and Ismail for a separation of certain issues from the main legal action and dismissed a counterclaim by PwC and Binedell.
Makhwe ruled that the following questions will be separated from the issues in the main legal action and decided on in advance:
- Whether PwC and Binedell owed Ottapathu and Ismail a duty in law to not cause the harm alleged – in other words whether PwC and Binedell’s conduct was wrongful – in circumstances where Ottapathu and Ismail establish that PwC and Binedell acted:
- In bad faith, or
- With gross negligence, or
- With negligence.
- Whether PwC and Binedell were the legal cause of the loss alleged by Ottapathu and Ismail in circumstances where they establish that PwC and Binedell acted:
- In bad faith, or
- With gross negligence, or
- With negligence.
In their counterclaim, PwC and Binedell argued that they wished all issues in the dispute to be heard at once and did not want a piece-meal approach which they averred would affect their right to a fair hearing as enshrined in the constitution. Judge Makhwe dismissed their counterclaim with costs.
At the centre of the dispute between the parties, said Makhwe, is a written agreement concluded on 9 March 2018 between Choppies and PwC in terms of which PwC was engaged as an auditor for the Choppies Group of Companies.
He said this agreement was executed by Ottapathu in his capacity as CEO of Choppies and Binedell in his capacity as a partner of PwC and provided some salient terms to be observed by the parties.
Makhwe said, for instance, it forbade the solicitation of employment or nomination of the key audit partner for the position of director or officer of the company, or to any position that may exercise significant influence over the preparations of the company’s accounting records or financial statement.
He said the fee proposal structure from PwC and Binedell dated 25 January 2018 is tied to this agreement.
Makhwe said the proposed fee structure makes it plain that PwC and Binedell were aware that Choppies was a listed entity on both the Botswanan and South African stock exchanges and that Choppies was obliged to comply with stock exchange rules in both countries.
He said PwC and Binedell’s senior counsel emphasised during argument that there was no agreement regarding when the results should be released.
Makhwe ruled that PwC’s agreement regarding when Choppies’ financial results would be released does not accord with commercial sense and prudence and “flies in the face” of PwC and Binedell’s own undertaking.
Independence
On the question of solicitation, Binedell argued that the job offer was made long before he accepted the mandate and he had expressed no interest in it, and his independence was therefore not affected.
Ruling on the issue of Binedell’s independence, Makhwe said PwC and Binedell had not disputed that Binedell met with some directors of Choppies on 19 March 2018 when some discussion or inquiries about a job took place.
Makhwe said the directors in question were members of the Choppies audit committee, which was admitted by the parties in their case management report.
He said counsel for PwC and Binedell argued strongly that the offer or discussions took place much earlier than claimed by Ottapathu and Ismail, and that Binedell was not interested.
However, Makhwe said: “I could not help noticing that counsel for the respondents [PwC and Binedell] did not want to commit to any specific date except to say the offer came much earlier.”
He ruled that on the pleadings before him, the job discussions took place after PwC and Binedell had signed a mandate on 9 March 2018 that spelt out the terms of engagement between the parties, with these discussions taking place on 19 March and 24 April 2018.
“Although the respondents [PwC and Binedell] seek to underplay the independence issue, such was the significance of the discussions between the second defendant [Binedell] and the Choppies audit members that the second defendant [Binedell] discussed the inquiry of joining Choppies with the independence leader of PwC Botswana,” he said.
A status hearing of the separation application is now scheduled to be heard in the Lobatse High Court in Botswana in June.
In a previous High Court of Botswana judgment handed down in November 2021, Binedell was found to have delayed the Choppies audit report because a job he had been offered at Choppies had not materialised.
Binedell was harshly criticised in a judgement handed down by Ms Justice Boipuso Tshweneyagae in the Botswana High Court who said at the time: “…(his) alleged conduct is also an issue. The allegation is that he was not arm’s length in his auditing of the Choppies books as he had been offered a job with significant shareholding as incentive.
“When this did not materialize, he used his position as the key lead auditor to compromise the publication of the audit report beyond the publication deadline of 30th September 2018.
“Prima facie…(his) independence as a dispassionate and professional auditor was impaired once he engaged in potential employment discussions with Choppies. He should have recused himself from leading the audit.”
Ottapathu said the company had undergone a major revitalisation and consolidation programme and was well on its way to again assume its position as a leading African multinational retain chain.
“We have made major strides in creating a solid foundation for the group to build on and believe this has set the course for a rebirth of the company which offers value for money to its customers and shareholders in a challenging economic environment.
“The latest court judgement in our favour reinforces our belief that the truth shall always prevail.
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Pep Stores donates sanitary towels to Popagano JSS
The Guidance and Counseling unit at Popagano Junior Secondary School received a donation of 790 sanitary towels from Pep stores on Thursday.
When presenting the donation, Mareledi Thebeng, the Dinokaneng Area Manager, highlighted their belief in giving back to the community, as their existence depends on the communities they serve. Thebeng pointed out that research indicates one in four girls miss school every day due to the lack of basic necessities like sanitary towels. Therefore, as a company, they strive to assist in alleviating this situation. She expressed hope that this donation would help ensure uninterrupted learning for girls.
Upon receiving the donation on behalf of the students, Charity Sambire, the President of the Student Representative Council, expressed her gratitude. Sambire specifically thanked Pep Store for their generous gift, speaking on behalf of the students, especially the girl child.
She conveyed their sincere appreciation for Pep Store’s compassion and quoted the adage, “Blessed is the hand that gives.” Sambire expressed the students’ hope for Pep Stores’ prosperity, enabling them to continue supporting the students. As a gesture of gratitude, the students pledged to excel academically.
During her speech, Motlalepula Madome, the Senior Teacher in Guidance and Counseling, highlighted that many students at the school come from disadvantaged backgrounds where parents struggle to provide basic necessities. Consequently, some students miss school when they experience menstruation due to this lack.
Madome emphasized the significance of the donation in preventing the girl child from missing lessons and its potential to improve the school’s overall results. She expressed the school’s gratitude and expressed a desire for continued support from Pep Stores.
Popagano Junior Secondary School, situated in the Okavango District, holds the second position academically in the North West region. Despite its location, the school has been dedicated to achieving excellence since 2017
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Botswana misses out critical PAP committee meeting
The Pan African Parliament (PAP) committee on gender, family, youth and people with disability in its sitting considered, adopted and recommended to the plenary session the preliminary report on the framework for the model law on gender equality.
According to the last week’s media release from PAP which is sitting with its various committees until June 2nd, the committee is following up the PAP initiative to draw up a model law on gender equality to enable national governments to harmonize, modernize and standardize their legislations to address local needs is set to be discussed in Plenary.
However, what is concerning is the fact that Botswana which is a member state missed the deliberations. Kgosi Mosadi Seboko who sat in the committee representing Botswana has since been ejected by parliament and this is a huge blow for a nation that is still battling equity and gender balance.
“Although PAP has no legislative powers it makes model laws for member states to adopt. PAP also develops protocols to be ratified by countries. The input of countries at Committee state is extremely critical. It now means the voice of Botswana is missing the discussions leading up to development of protocols or model laws,” said one of Botswana’s representative at PAP Dr. Kesitegile Gobotswang who is attending the current session.
While Botswana is missing, the committee meeting took place on the sidelines of the Sixth PAP second ordinary Session being held under the African Union Theme of the Year for 2023, “The Year of AfCFTA: Accelerating the Implementation of the African Continental Free Trade Area” in Midrand, South Africa and will run up to 2 June 2023. Chairperson of the Committee, Hon Mariam Dao-Gabala expressed satisfaction with preliminary processes undertaken so far towards the formulation of the Model Law,” a release from the PAP website reads.
“The law should be suitable to all countries whatever the predominant culture or religion is. The aim is to give an opportunity to women to participate in the economic, political and social development of the continent. Women are not well positioned and face a lot of obstacles. We are introducing the idea of equity in the Law because we cannot talk about equality without equity,” said Hon Mariam Dao-Gabala in the press statement.
The release has stated that among issues to be covered by the Model Law is the migratory movements of women. The Committee proffered that this has to be addressed at the continental level to ensure that migrant women enjoy all their rights and live with dignity in their destination country. The members of the Gender Committee undertook consultations to consolidate the contributions of the various stakeholders that will be the logical framework format for the Model Law.
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BDP MPs demand review of Ministers performance
Botswana Democratic Party (BDP) backbenchers were left frustrated when State Minister Kabo Morwaeng failed to furnish them with reports from various ministries at a party retreat held last month.
The two-day retreat of BDP MPs at Notwane Farms was held to discuss the implementation and progress of government projects in line with the party’s 2019 general elections manifesto, in order to assert themselves and press the President to take action against ineffective members of his cabinet. They believed that the laxity of these members could cost them the elections next year.
To accomplish this, the party had requested that each ministry submit their reports to the State Ministry, as it was the most senior ministry. These reports were expected to be assessed at the retreat to evaluate service delivery and the implementation of the party manifesto.
The ministries submitted their performance reports to the Ministry as agreed, but Masisi and the MPs did not have the opportunity to review them. This was the main agenda of the retreat, but when it commenced, and many were anticipating the reports, they were nowhere to be found.
“Minister Morwaeng told us (MPs) that he forgot to prepare them, and as a result, there was nothing to discuss. He said he would share those reports in our WhatsApp group. To us, that was an insult because it is a very serious matter, and we needed to discuss it and see which ministry is failing and how it can be assisted to ensure that service delivery is met,” revealed one MP to WeekendPost.
Reliable sources have informed this publication that one of the reasons why the reports were not shared is due to the poor performance of the State Ministry. It is said that the Minister decided not to share the reports because it would portray him as incompetent, especially since President Masisi was present and seeking suggestions from MPs.
It is understood that the Ministry of Lands and Water Affairs, as well as the Ministry of Local Government and Rural Development, performed well, while the Ministry of Health and the State Ministry performed poorly.
The MPs are primarily concerned about the lack of correlation between the ministries’ recurrent and development budgets.
“You would notice that in some cases, a ministry would spend their recurrent budget accordingly, but when you look at their development expenditure, it is at 15 percent. That’s the money that should ensure that people receive services and amenities, and we wanted to advise ministers to communicate with bureaucrats to address this,” added the MP.
Without the reports, and with the expected agenda now in tatters, it is said that President Masisi asked MPs to come up with suggestions on how to win public confidence to secure victory in the next elections. It was at this point that backbenchers asked President Mokgweetsi Masisi to crack the whip on ineffectual ministers who had failed to fulfill their mandates. MPs expressed their concerns to the President, particularly regarding the state of affairs at the hospitals.
“There is a serious shortage of medicines and personnel in our areas, especially in rural areas. We have been complaining about this situation for some time, but there seems to be no change,” one MP told WeekendPost.
“The state of our roads and infrastructure is in disrepair. What irks us the most is that we have been complaining about these things for some time, but there has been no change. We demand progress.”
The issue of poor delivery and the significant deficit in the ruling party’s election promises is so severe that President Masisi had his ministers sign performance agreements and annual performance plans. The President effectively read them the riot act, informing them that they would be fired if they continued to fall short in delivering on their mandates.
He told journalists at a press conference that he recently had a serious engagement with Minister of Health Minister Dr. Edwin Dikoloti and Assistant Minister of Health Sethomo Lelatisitswe regarding the deplorable state of affairs at public health facilities.
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