Food retailer Choppies has sold its stores and distribution centres in SA to King Investments for R1, it said on Tuesday (03/12/2019).

The embattled company, which has a primary listing on the Botswana Stock Exchange and a secondary listing on the JSE, said SA 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 SA to become understocked and lose market share.”

The group said it was not able to continue to fund the losses of the SA subsidiaries from Botswana. It said the continued failure to service debt exposed it to threats of application for the winding up of the SA 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 R100m to Choppies Supermarkets SA that will be used to fund immediate working capital requirements and purchase stock.

“The SA companies are obliged to use their best endeavours to pay suppliers that are owed by any SA company with a view to re-establishing credit lines. In this way, the SA 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,” it said.

Choppies, which opened its first store in SA in Zeerust, in the North West province in 2008, has more than 70 stores. It also has three distribution centres and one production plant. The group has failed to take on established retailers such as Shoprite, Spar and Checkers.

Over the past year, the company has been mired in controversy.

It was accused of accounting irregularities related to how the group accounted for bulk sales and inventory at its stores in SA and Zimbabwe, and store acquisition. There was also boardroom wrangling that has led to some board resignations. Its shares were also suspended on the Johannesburg and the Botswana stock exchanges.