Choppies sells South Africa based stores for R1
The stores have been trading at a 'substantial loss for the last two years'.
Botswana-headquartered food retailer Choppies has sold its stores and distribution centres in South Africa to King Investments for R1, the company announced on Tuesday.
The company, which has a primary listing on the Botswana Stock Exchange and a secondary listing on the Johannesburg Stock Exchange, said its South Africa-based businesses have been trading at a “substantial loss for the last two years”.
The losses were worsened by the “lack of cash flow (that) resulted in trade creditor suppliers not being paid on their applicable due date and hence refusing to supply stock, causing stores in South Africa to become understocked and lose market share.”
The group said it was not able to continue to fund the losses of the South Africa subsidiaries from Botswana. It said the continued failure to service debt exposed it to threats of application for the winding up of the South Africa subsidiaries.
“Such scenario would have had negative consequences for the liquidity of the company and the relationship of the Botswana business entities with critical suppliers.”
Choppies said King Investments, which will also take over all the subsidiaries’ debt, is obliged to make an immediate, interest-free loan of R100 million to Choppies Supermarkets South Africa that will be used to fund immediate working capital requirements and purchase stock.
“The South Africa companies are obliged to use their best endeavours to pay suppliers that are owed by any South Africa company with a view to re-establishing credit lines. In this way, the South Africa companies will be able to increase stock levels in its stores and take advantage of the seasonal increase in trading in December 2019 and January 2020.”