GABORONE (Reuters) – Botswana budget retailer Choppies Enterprises will sell its loss-making South African operations for only 1 rand to escape existing liabilities and inject 100 million rand ($6.8 million) into the business.
The assets being sold have been operating at a substantial loss for two years, with a lack of cashflow resulting in understocked stores that have hit market share and exacerbated losses, Choppies said on Wednesday.
Debts to suppliers and lessors have also raised the prospect of potential applications to wind up the South African subsidiaries, Choppies added.
The groceries and general merchandise retailer’s South African business operates 88 stores as well as warehousing and logistics units.
“The company was not able to continue to fund the losses of the South African subsidiaries from Botswana,” said Choppies, the shares of which are suspended from trading on its primary bourse in Botswana as well as the Johannesburg stock exchange.
Choppies added that the woes of the South African operations could have had negative consequences for the liquidity of the group and the Botswana business entity’s relationships with suppliers.
The planned sale will transfer ownership of the South African business to Kind Investments Proprietary Limited. The identity of the investment vehicle’s owner could not be ascertained immediately.
Kind Investments will be obliged to inject 100 million rand into the business by way of an interest free-loan, which will be used as working capital and to buy shop stock, Choppies said.
The transaction is expected to be completed by February 2020.
Shares in Choppies, which operates in eight African countries, were suspended in September after plunging more than 60% on a delay to publication of annual results.
The results for the year to the end of June 2018, which have yet to be published, were delayed after PricewaterhouseCoopers (PwC) raised concerns over its audit for that year.
($1 = 14.7075 rand)
Reporting by Brian Benza; Editing by David Goodman