Botswana-based supermarket chain Choppies Enterprises is exiting Kenya, four years after entering the market through an acquisition of Ukwala Stores for $10 million. The announcement came a week after the company said it was leaving South Africa.
Prior to this development, Choppies had planned to triple its number of stores in Kenya from 12 presently. But during an Extraordinary General Meeting (EGM) with shareholders last week, the retailer said that it had listed its assets in the country for sale and classified its stores as “distressed”.
Choppies, which has a presence in eight African countries, has struggled to gain a substantial share in Kenya’s retail market which is known to be very competitive. In recent times, the retailer has been characterized by empty shelves in its stores, the East African says.
More so, the retailer has seen its shares plunge by more than 60 percent since last September on the Johannesburg and Botswana stock exchanges. This was a result of a delay in publishing its financial statements for 2018. The shares were later suspended on both bourses as the company’s auditors – Pricewaterhouse Coopers (PwC) – were unable to finalize the statements over alleged irregularities.
Reasons for Choppies’ struggles
A major factor behind the problems of the retailer from Botswana is competition in Kenya’s retail sector with multinational supermarket chains such as Carrefour, Shoprite and Game Stores, opening multiple outlets in recent years to cut the dominance of indigenous firms – Tuskys and Naivas.
Choppies has also been hit by operational turbulence, including a failed rapid expansion plan and the inability to pay suppliers amid rising operating costs. The company has been forced to shut down two stores outside Nairobi due to stock shortage.
The Export Trading Group (ETG), the local shareholder in Ukwala Supermarkets with a 25 percent stake, recently offered Kenya’s Choppies a $6 million shareholders loan. The bailout is meant to settle suppliers’ debts that had restricted fresh stocks.
Additionally, Choppies is facing internal trouble largely blamed on weak governance and its suspended CEO, Ramachandran Ottapathu. The Chief Executive was suspended in May on the basis of malpractices which include the sale of ghost stock to inflate sales. This was revealed in a forensic audit but Ottapathu linked his suspension to a fallout among the directors after his push to boost transparency and governance in the board.
Ottapathu also allegedly courted politicians to bypass national legislations on business ownership in order to drive Choppies’ expansion. This reportedly led to the company’s growth from one outlet in Gaborone in 1986 to 260 stores in eight countries — South Africa, Zimbabwe, Zambia, Kenya, Tanzania, Mozambique and Namibia — where it employs about 17,000 people.
Following the EGM which was held to resolve the boardroom wars and review the forensic reports, Choppies Chairman and former Botswana President, Festus Mogae, said he will be stepping down from that role.
Apart from Kenya and South Africa, there are indications Choppies will be closing shop in Mozambique and Tanzania as well. Meanwhile, its stores in Zambia, Namibia and home country, Botswana, will be retained.