In an announcement that will surprise nobody, Choppies has confirmed it will exit Kenya, one of its key expansion markets. It has reportedly laid off 200 workers in anticipation of selling its 12 remaining stores. Choppies will also exit Tanzania, where it has two stores. But: comments from suspended CEO Ram Ottapathu suggest the issue may be less clear cut.
In an extraordinary general meeting (EGM) on Wednesday last week with its shareholders, Choppies has disclosed that it has listed its Kenyan assets for sale and classified its 12 remaining stores as distressed. Two stores in Kenya have already been closed. Export Trading Group, which controls a 25% stake in Choppies Kenya, entered into a deal with the Association of Kenya Suppliers that will see the retailer settle a $5.7m debt owed to suppliers to enable it to restock its stores.
The troubled Botswana retailer will also exit Tanzania and Zambia. It has previously announced plans to sell its assets in South Africa. The Mozambican stores have also been identified as distressed.
Note: in comments made before the EGM to Botswana media, Ottapathu has been extremely bullish and seemed to suggest that the path forward is growth, not disposal.
“Choppies needs to address the issues in North West province in SA and put in some working capital there and in Kenya.”
Suspended Choppies CEO Ram Ottapathu and close ally, Choppies founder and acting CEO Farouk Ismail, hold around a 35% stake in Choppies. At the EGM shareholders narrowly voted to oust almost all of the former board members, who opposed Ottapathu by a margin 52.05% to 47.95% of shareholders. In theory this paves the way for a contentious return of Ottapathu. A forensic investigation ordered by the old board laid the blame for Choppies’ financial problems nearly totally on Ottapathu.
CFO Heinrich Stander, appointed in December 2018, has now been voted off the board but is still CFO. Former Botswanan president and board Chair Festus Mogae has also left the board. New auditors PWC have resigned.
Ottapathu still faces a disciplinary hearing around his authorisation of certain deals but with a board leaning in his favour this looks more like a formality over and above the objections of many disgruntled investors. Ottapathu faces questions around how Choppies accounted for bulk sales and inventory at its stores in SA and Zimbabwe, and why Ottapathu bought a personal 50% stake in Choppies competitor, Fours Group.
Choppies has still not released its annual results for the year ended June 2018 and has been suspended from stock exchanges in Botswana and South Africa. The 2018 results will not ready until at least early November 2019.