KENYA – Botswana based Choppies Supermarket has revealed plans to exit the Kenyan market four years after acquiring Ukwala stores for US$10m (Sh1bn) following challenges of growth and financial constraints.
The Botswana retailer started as a single store in 1986 and has grown to Zimbabwe, Zambia, Mozambique, Namibia, Tanzania and Kenya where it grew to over 12 stores after acquiring homegrown retailer, Ukwala Supermarkets.
In an extraordinary general meeting (EGM) with its shareholders, the troubled retailer revealed that it had listed its Kenyan assets for sale and has classified its 12 stores as distressed.
“Zambia has a steady performance in a volatile economy, Kenya’s distressed business has been identified for disposal.
“Tanzania and Mozambique are distressed while Namibia is performing as expected,” Wilfred Mpai, Choppies director told shareholders.
“In Botswana there is steady income flow under difficult trading circumstances. South Africa North West business is distressed and identified for disposal,” he added.
The retailer’s plans of opening new outlets in Kenya were stifled after plunging into a US$1.26 million (Sh126.8m) loss from six insolvent outlets in Kisumu and Nakuru.
This also led to the closure of Bungoma and Kiambu county branches characterized by empty dusty shelves early this year.
The retailer has accrued debt owed to suppliers, landlords and workers for their salaries as revealed by Kenya Union of Commercial, Food and Allied Workers (KUCFAW).
Export Trading Group (ETG) the local partners of Choppies supermarket who bought 25% stake in Ukwala Supermarkets, offered the Kenyan unit a US$6m (Sh600m) shareholders loan in a recapitalisation plan to settle suppliers’ debts that had restricted fresh stocks.
But this seems not to have made matters any better as the retailer has also been facing internal squabbles.
Recently, EGM was held to resolve the boardroom wars and review the forensic reports which led to suspension of Chief Executive Officer, Ramachandran Ottapathu.
The company’s board suspended Ramachandran in May who was accused of malpractices including sale of ghost stock to inflate sales, as revealed in a forensic audit.
However, Mr Ottapathu linked his suspension to a fallout among the directors following his push to boost transparency and governance in the Choppies board.
Defending his position, he said, “Choppies requires urgent governance and operational remedial interventions, including a review of board performance and composition.”
Recently the retailer moved to solve its shareholding dispute in Zimbabwe that saw former Zimbabwe vice-president, Phelekezela Mphoko divest out of the local subsidiary Nanavac Investments which trades as Choppies Supermarkets in Zimbabwe. Mr Mphoko was paid US$3 million to exit the company.
Last year, they failed to publish its annual financial results and its holding company, Choppies Enterprises Ltd, was subsequently suspended from the Botswana and Johannesburg Stock Exchanges.
Competition in Kenya’s retail sector is heating up with multinational supermarket chains like Carrefour, Shoprite and Game Stores opening outlets in recent years in an attempt to cut the dominance of Tuskys and Naivas, both of which are indigenously owned.