Former Botswanan president Festus Mogae is reportedly claiming that former Zimbabwean Vice President Phelekezela Mphoko owns just 7% of the Zimbabwean operation, and not 51%, raising the prospect of an ugly legal battle.

The bottom line

Choppies in Zimbabwe is operated by Nanavac Investment (Pvt) Ltd, a Bulawayo-based business. The company is owned 51% by former Zimbabwe Vice President Phelekezela Mphoko and his son Siqokoqela Mphoko. 49% of the company is owned by Choppies Enterprises. Zimbabwe’s Indigenisation Act requires Zimbabwean nationals to own at least 51% of businesses. Phelekezela Mphoko has been chairman of Choppies Zimbabwe since December 2014.

Former Botswanan president Festus Mogae, the Chairman of Choppies Enterprises and a leading shareholder in the company, has now written to The Zimbabwe Independent, in a letter which says:

My brother, I would like to bring the following facts to your attention: We entered into this partnership with a clear understanding of the shareholding of 93% shares to Choppies Enterprises and 7% to the Mphoko family, free of charge. We signed agreements based on this and even the office of the former president (Robert Mugabe) has got these agreements.

You are well aware that I had access to former president, RG Mugabe and I did clear this with him in the presence of former foreign minister (honourable) Simbarashe S Mumbengegwi. I have the same access to the current president as I had with the previous one.

In other words, he seems to be claiming that there is an additional legal agreement (i.e. a shareholder’s agreement) between Mphoko and Choppies which means that Mphoko only owns 7% of Nanavac Investment (Pvt) Ltd. Mphoko disputes this, raising the prospect of a protracted and ugly legal battle. Mphoko will not have missed the implied threat in the statement “I have the same access to the current president as I had with the previous one.”

Why is this happening now?

Mogae has told The Zimbabwe Independent that he wants to regularise Choppies’ shareholding in Zimbabwe, and implied that failure to do so will potentially mean Choppies withdraws from Zimbabwe. This is a political message, aimed at the new President Emmerson Mnangagwa, who is keen to draw the line under the Mugabe era and unlikely to be thrilled at the idea of a major supermarket chain with 32 stores pulling out.

For his part, Mphoko has told the Zimbabwean media that he owns 51% of Choppies Zimbabwe and Mogae’s claims are part of a plot to take advantage of the fact that he is no longer under the protection of the Mugabe government.

What happens next?

There are two parts to this question: the legal and the political. Let’s look at the legal side first.

Mogae claims to have legal documentation showing that Choppies Enterprises owns 93% of Choppies Zimbabwe (aka Nanavac Investment (Pvt) Ltd). Mphoko claims to have legal documentation showing he owns 51%.

We’re spitballing, but if both men are telling the truth it looks like Mphoko legally owns 51% of Nanavac Investment (Pvt) Ltd in order to satisfy the letter of the law. But there is additional legal paperwork that supercedes it and brings this ownership down to 7%.

To our knowledge, neither side has suggested that Mphoko has ever invested his own money to take this 51% share. Bear in mind that Choppies entered Zimbabwe in 2013 by acquiring 10 Spar stores from SAI Enterprises (Pvt) Limited for $22.5m. So if Mphoko hasn’t invested AND owns 51% of Choppies Zimbabwe then Choppies Enterprises has been extraordinarily generous to its front man.

Let’s now look at the political side.

President Emmerson Mnangagwa and Mphoko aren’t the best of pals. As joint vice presidents under Mugabe the two battled with one another. Mphoko still represents a political threat to Mnangagwa, all the more so if he has substantial wealth behind him. It’s a reasonable assumption that Mnangagwa won’t support Mphoko.

Choppies Enterprises is listed on the Botswanan Stock Exchange and, since May 2015, jointly listed on the Johannesburg Stock Exchange. Investors are unlikely to warm to the prospect of legal shenanigans and may reasonably ask questions about the legal structures underpinning the company’s operations in other countries.

Choppies, which in the midst of a large, multinational store network expansion project, will be under considerable pressure to make this issue disappear fast and reassure investors that it is run above board.

Update – 9th July 2018

The Zimbabwe Independent has added more detail on the ongoing battle for control of Choppies Zimbabwe. This includes:

• The Mphoko family kicking Indian workers seconded to Choppies Zimbabwe out of all 32 stores – presaging an ugly anti-Indian turn in the shareholder battle (Choppies Enterprises CEO and major shareholder Ram Ottapathu is Indian).
• Ottapathu giving more detail on the shareholders agreement: specifically that the Mphoko family have only ever received dividends on the 7% share and that the agreement permits Choppies enterprises to buy back the 44% shareholding (i.e. the 51% minus the “real” 7% Mphoko holding) at nominal value.