Embattled Botswanan supermarket group Choppies has sold its stores and distribution centres in South Africa to Kind Investments Proprietary Limited for R1 ($0.07). Kind Investments Proprietary Limited will also take over all the Choppies’ debt in South Africa and is obliged to make an interest-free loan of R100m ($6.86m) to Choppies Supermarkets SA to fund working capital.
Choppies, which put its South African business up for sale in August, has more than 90 stores in South Africa. Before its current financial reporting problems, the company had claimed in early 2018 that the South African store operations were profitable. Choppies was due to release its annual financial results to the year end June 2018 in September that year. Almost 18 months after that reporting period closed, the company has still not issued its results.
We can be sure of one thing: whatever the problems with Choppies’ financial reporting, they are not a simple misstatement. In fact, Choppies has now revealed that the South African stores have been trading at a substantial loss for the past two years.
With regard to ongoing trading in South Africa, Choppies has said:
“The SA companies are obliged to use their best endeavours to pay suppliers that are owed by any SA company with a view to re-establishing credit lines. In this way, the SA companies will be able to increase stock levels in its stores and take advantage of the seasonal increase in trading in December 2019 and January 2020.”
To some extent, the acquisition by Kind Investments Proprietary Limited comes at a good time, with the South African Competition Commission looking to open up the market and curb what it considers uncompetitive practices by the market leading supermarket chains.
We don’t know much about Kind Investments: Trendtype could find no South African company with that exact name listed, nor in Mauritius (a popular site to register investment companies for African markets). There is a “Kind Investment” listed on South Africa’s company register. Kind Investment was incorporated in March this year by a company formation agent. Serial entrepreneur Rayhaan Hassim was appointed as director in August 2019, at the same time Redford Capital was asking for expressions of interest.
Hassim has strong connections in Limpopo and among Polokwane’s political class – exactly where the majority of Choppies’ South African stores are. He has previously been described as intensely private and having a “phenomenal risk appetite”. According to South African reports, he has been involved in more than 90 businesses and is best known in South Africa for his involvement with auction house Aucor and also owns several car dealerships.
The sale also marks another milestone in what has been a torrid period for Choppies, that has seen its shares suspended from trading, its CEO suspended, a subsequent boardroom battle that has returned CEO Ottapathu, a fight for ownership in Zimbabwe and the company exiting from Kenya and, we believe, Tanzania.
