Friday, June 21, 2024

Choppies’ charges dropped 

The country’s biggest retailer by number of shops, Choppies Enterprises, has announced that the charge made against the company by Botswana Accountancy Oversight Authority (BAOA) arising from alleged non-compliance with standards of corporate governance during the financial years 2017, 2018, 2019 and 2020 has been withdrawn.

In 2021, following investigations in the prior year, BAOA charged Choppies P100, 000 over the delayed release of audited financial statements stretching from 2017 to 2020. 

In 2018 the retailer got in trouble with regulators for failure to publish audited financial results on time after the company external auditor, PricewaterhouseCoopers Botswana (PwC), refused to sign off on Choppies financial results for the year ended June 2018. The audit firm said it had flagged some processes and transactions that could distort the true picture of the company’s financial health. 

The failure to publish the results within the stipulated times as required by Botswana Stock Exchange and Johannesburg Stock Exchange led to the company’s share being temporarily suspended from trading.

As matters unfolded, the review of past records uncovered massive losses. The delayed June 2018 financials released in December 2019 stunned shareholders and market observers: a P445 million loss in 2018, and another shocking loss of P170 million for 2017 which was initially reported as a P74.6 million profit.  The losses extended to 2019, with the retailer booking in a P428 million loss, followed with a loss of P370.6 million for the year ended June 2020.

However, following the restructuring of the business by exiting the under- performing investments, Choppies recorded P60 million profit after tax for the year ended June 2021, and more than doubled the profit to P145 million for the year ended June 2022. 

Choppies founders and main shareholders, Ramachandran Ottapathu and Farouk Ismail, are suing PwC and its audit partner Rudi Binedell for P450 million, accusing the audit firm of breaching their ethical, statutory and common law obligations by prioritizing their own interests, and in the process leading to collapse in the value of Choppies stock after it was suspended from the two stock exchanges. Choppies share value dropped by more than 75 percent during the period. 

PwC and Binedell have denied the accusations of gross negligence, maintaining that they acted within their rights. Furthermore, Binedell is refuting allegations that he held off on signing Choppies audited financials out of spite after a job offer that had been made by the old Choppies board of directors was rescinded. 

The lawsuit is currently before the high courts of Botswana, with a status hearing slated for June. 

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