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Spar's auditors report dodgy loan to regulator

Retailer Spar says its auditors have reported a loan the company entered into to the Independent Regulatory Board of Auditors (IRBA), which oversees the country's auditing profession.

In an update to shareholders on Thursday (19/01/2023), Spar said its auditors, PricewaterhouseCoopers, found the loan to be a reportable irregularity, meaning IRBA needed to be notified immediately. 

Spar then conducted its own investigation, which also concluded that a reportable irregularity had occurred.

This is the first time that Spar has acknowledged wrongdoing related to loans it arranged for retailers. The grocer previously said it was waiting for a legal opinion before commenting.

Spar did not give much information about the loan, apart from saying that it was entered into five years ago between a "willing lender and borrower through a commercial bank" at a "normal interest rates with fixed terms of repayment."

The issue of "fictitious" loans at Spar was first raised in an internal probe conducted by law firm Harris Nupen Molebatsi (HNM) in 2021. 

The HMN report, leaked to News24 last year, found that two loans the grocer had entered into "lacked substance". But HMN was unable to say at the time where the loans constituted accounting irregularities. 

Spar's board had now decided that they did. 

"The board concluded that the loan did not seem to have served any real commercial or economic purpose and should not have taken place," it said on Thursday.  

Then there were three 

Reviews of other loans arranged by Spar for retailers identified two other similar transactions from five years ago.  

The combined value of all three loans is R11 million. It was not immediately clear whether these two loans had also been reported to IRBA. 

"SPAR’s auditors are satisfied that this was an isolated matter and is no longer taking place," it said. 

The announcement comes just two days after Spar announced that its CEO Brett Botten would retire at month-end amid a board shakeup. 

Spar's former CEO and chairperson, Graham O'Connor, is also planning to retire at the group's upcoming annual general meeting in February. 

Long-time independent non-executive director, Phumla Mnganga, is planning to step down at the same time. Printing group Novus Holdings had also announced on Wednesday that Mnanga would be stepping down as chair at the end of March, saying she had "been considering and reviewing her listed board portfolio for some time" and was looking to balance her commitments.

Meanwhile, two new non-executive directors, Dr Shirley Anne Zinn and Pedro Manuel Pereira da Silva, have been appointed to the board, which Spar says "addresses any existing shareholder concerns around independence".


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