On a Wednesday morning in October 1990, Bogadi Leura walked into a little known supermarket along Mokgosi Road in Peleng, Lobatse. The 26-year old lactating mother was looking for a job. Any kind of a job.
The small supermarket only stocked a few hundred basic items, especially electronics – fewer than you can find at your local corner shop today – all at reasonable prices. Unbeknownst to Leura then, it is the place where she would spend her adult life working as a shelf packer. Now 58 and a grandmother, Leura still packs the shelves with stock at Choppies Wayside, a grocery store considered the foundation of the Choppies Group that is now an empire listed on the Botswana Stock Exchange (BSE) with a market capitalisation that once approached P5 billion (Currently around P1 billion) and a secondary listing on the Johannesburg Stock Exchange.
She has witnessed both Choppies’ turbulent and buoyant times and recalls back in the day when she used to travel with Farouk Ismail, Choppies founder, to ferry Zimbabwean merchants from the Lobatse train station, enticing them to buy at Wayside. “We didn’t want competitors to distract them. We had to go pick them up,” Leura would later recall during an interview at a nondescript office that used to be the accounts office at Wayside.
It was Farouk’s plan to acquire a minibus to collect traders from Zimbabwe to buy at Wayside. Leura does not regret leaving her job at Camphill school to join Farouk. As the longest serving member of staff, she recalls the errands that she took, including frequent trips to South Africa to purchase stock. “We didn’t have a warehouse and relied on buying from wholesalers to resell,” she says. At 58, Leura looks to her retirement with satisfaction and a sense of purpose.
Choppies’ evolution is a unique story of organic growth from Wayside in Lobatse to Warren Park in Harare. The retail behemoth promises to keep growing. The success of Choppies is underpinned by an old convention that its shoppers want an environment where they are surrounded by people like themselves with whom they feel comfortable. That convention rings true today. Despite its size, the retail giant appeals to lower income earners.
Former bookkeeper and now customs clearing agent, Kabelo Ramaijane, agrees. “We crammed into a small office,” he says, bursting out with laughter. He joined Wayside Supermarket in July 1992 from accounting firm Acumen and quickly learnt the ropes of working as a bookkeeper.
A rather short man from India had come to help Farouk keep Wayside books in order. “The man came to work as a full accountant,” Ramaijane says about Ramachandran Ottapathu, now Choppies CEO. The two shared the office for 11years. Ottapathu, he says, started opening smaller corner shops around Lobatse. “Sunshine Value, Daisy Garden, a strategy that has been extended to other towns and cities,” Ramaijane recalls.
As a clearing agent, he works with the taxman, ensuring smooth passage of Choppies trucks at the border gate. After 28 years at Choppies, Ramaijane heaps credit on Ottapathu as one person who empowered him. “He bought us shares,” he says, full of gratitude.
But the history of Choppies more truly dates back to the 1960s when Farouk Ismail’s father acquired a piece of land for P3 000 where Wayside Supermarket would later open for trading. “It was a lot of money in the ‘60s,” Farouk, who has retired from Choppies management, explained at his offices at the Gaborone CBD.
The small shop was more like a tuckshop, over-the-counter operation with a single till. As a fresh faced boy, Farouk and his brothers would help their father “put food on the table” but later took interest in the business. “He was not a rich man. He struggled to put food on the table,” Farouk says about his father.
Through a family friend, in 1986 Farouk secured a loan and set up Wayside Supermarket as just a general dealer. Wayside dealt mostly in electrical appliances, mainly transistor radios and television sets. Farouk took advantage of the proximity of Lobatse to South Africa from where he imported stock. Wayside soon became one of the trusted suppliers of electrical appliances to the Zimbabwean market. “We received many Zimbabweans who came to buy these in bulk. We had exclusive appliances because our proximity to SA,” Farouk recalls. He built a relationship with the Zimbabwean traders who then started pre-ordering their goods.
ENTER RAMACHANDRAN OTTAPATHU
Wayside growth compelled Farouk to seek a fulltime accountant. He had outsourced accounting services to Acumen (Mazars) and the firm assisted him to find an accountant. His name was Ramachandran Ottapathu. Ramaijane remembers a quiet and shy fellow at his first encounter with Ottapathu.
Emerging from a small town in Kerala called Ollur, Ottapathu had hunger for success and unmatched discipline. Farouk recalls meeting him and observing how he displayed an impressive grasp of even minutiae around the business and his zeal about opening new small operations alongside Wayside.
But soon the grocery store ran into financial difficulties and Farouk could no longer afford to pay Ottapathu his salary. However, he declined to quit, telling Farouk: “We are in this together.”
That strengthened the partnership. “At that time, I knew I had found myself a loyal partner,” comments Farouk. Ottapathu became so active in operations and revised ways of restoring the then ‘sinking ship.’ “I eventually offered him a 50/50 partnership in the business and allowed him to run it entirely. The business grew exponentially,” notes Farouk.
Ottapathu, or “Ram,” as he is affectionately known today, could have gone anywhere in search of a job in the 1990s as the Indian economy under Prime Minister P V Narasimha Rao was not in good shape – at least for him and his immediate family. “Opportunities were scarce,” he relates about the challenges of the time.
Like most average Indians at the time, Ram knew very little about Botswana and Africa. His father was, however, deeply involved in trade unionism and emancipation of the poor. “I only knew Nelson Mandela and the liberation struggle in South Africa,” Ram recalls. “I often tell friends that if there was a job offer on the moon, I would have taken it.”
South African liberation politics would present a silver lining for traders in Lobatse. Ram argues that Zimbabweans preferred to trade in Botswana in order to avoid volatile South Africa. As a result, Wayside became a magnet for merchants. At the same time, the unrest meant that the outpouring of asylum seekers into Lobatse unsettled residents. This affected business, as Ottapathu recalls.
However, the African National Congress (ANC) was also on the verge of attaining full power. “We knew it would lead to stability and elimination of trading barriers,” Ram says. “In 1992, we started selling groceries and vegetables, instead of specialising in electrical appliances. We also increased trading hours from 1700 to 2000 hours. More customers came. The potential was bigger.
The retail market at that time was controlled by SA retail chains in Botswana, Ram explains. Choppies’ strategy was to then acquire smaller struggling general dealers and turn them around. It opened its second store in 1993. Ram estimates that retail industry profit margins were around 5 percent. However, SA retail chains targeted 15 to 20 percent, using a one-size-fit-all product offering and pricing model.
“It was an opportunity for us. We tailored our prices to meet specific community needs. We sold what customers wanted at affordable prices,” he states. By 1998, Choppies was profitable and started rolling out its first supermarket at Gaborone West Shopping Complex. Farouk recalls that some business owners were soon offering their shops to Choppies.
“I remember Rafiq Sadar offering us his business,” he says, adding that despite optimism from the market, Choppies did not have capital to buy the grocery shops. Sadar, he says, agreed to a generous payment proposal. There was no going back for Choppies. “Developers would call and say we have space for you in Mochudi, Kanye, everywhere. It was growing,” says Farouk. Ram agrees, but for him the turning point was when Choppies opened its Western Bypass store in 2003. “By then, I knew we were going to rule this retail market,” he says. “After that, we never looked back.”
Choppies executed aggressive growth, consolidating the group into one structure in 2003 (after franchising under different names) to become the dominant leader in the FMCG industry in Botswana.
WHY CHOPPIES LISTED ON THE BSE
Everyone has always wanted a piece of Choppies. Local politicians and businessmen have always remained gawk-eyed about Choppies growth. When Choppies grew, its other operations like transport and distribution also grew.
“Most said this business is too big to be in foreign hands. Those types of questions always came up,” Ram remarks. They were pressurized to unbundle Choppies so that its other operations could be ‘owned by Batswana.’ But politicians wanted a bigger stake – 5 percent, 10 percent, but said they would pay it off out of dividends, according to Ram.
“Nothing materialised,” he says. “We decided to list on the BSE and operate as a public owned company in order to dispel the perceptions that it was foreign owned,” says Ram. Further, his partner Farouk adds, they also wanted to raise funds for expansion.
Choppies was listed on January 26, 2012. KPMG administered Choppies’ Initial Public Offering (IPO), with shares issued at P 1.15 per share. Then, 25 percent was bought by the public. The IPO was one of the largest ever. It raised P350 million in both the IPO and the private placement. Choppies was oversubscribed by 400 percent!
Choppies caught the attention of international investors, so much that Stanchart Private Equity (PE) Firm bought a 12.8 percent stake in Choppies in 2013, in a deal then estimated to be worth $60 million. It was Stanchart PE firm, which influenced the Choppies JSE secondary listing. Ram confirms that he was not yet ready at the time but was convinced by the investors to list on the JSE in November 2018. The firm later sold the shares.
THE UNSTOPPABLE GROWTH
Choppies expanded rapidly, locally and across borders. In Botswana, it controlled more than 50 percent market share. At one point Choppies had 250 stores in Botswana, South Africa, Zimbabwe, Zambia, Tanzania and Kenya, employing more than 17 000 people.
When listing in 2012, revenue was at P1.9 billion. It had grown to P13 billion by 2017. It listed at P1.15 per share. At one point, Choppies traded at over P3 per share. Profits also grew. Market capitalisation reached a peak of P5 billion. Choppies was, by market capitalisation, the third largest on the BSE.
THE TURBULENT TIMES
But Choppies is rising from its greatest challenges ever. The company had some audit queries a few years ago that led to a nasty boardroom war. Financials were delayed, and the JSE and BSE suspended Choppies. Share price on the BSE fell to 40 thebe but has since recovered to 69 thebe. At the JSE, it collapsed to around 42 cents but has since recovered to 87 cents.
A divided Board resorted to suspending Ottapathu. “They wanted to put the blame on someone to save their own faces,” he says about the difficult time in 2019, adding that contrary to what was said, he took instructions from the board. According to Ram, there is evidence in email correspondence between lawyers and board members saying that “‘we know he didn’t do anything wrong. But if we don’t do something, people will blame us.’”
Ram admits there were governance shortfalls by management and the board of directors but says all that has been dealt with. Ramaijane reduces the intricacies of those boardroom wars to a personal attack on his boss of 28 years. “I was worried that the main man was going,” he says about Ram’s suspension. “One day I called him and said, ‘Don’t go to India without me. If you go, I am also going.’” In the end, Choppies undertook an aggressive restructuring and was recapitalised.
Choppies and the PEPs
In 2009, Choppies drew widespread media criticism after it emerged that former head of DISS, Isaac Kgosi, had acquired shares in the group. Ram says that he was introduced to Kgosi through the late John Barry Little, who was also Choppies Company Secretary. “He came with John Little,” Ram explains. “I knew John Little. Initially they said he was getting some money by selling his farm. I understand he couldn’t sell his farm.”
He says Little eventually assisted Kgosi to acquire half a percentage of Choppies. Kgosi later sold off his shares after Choppies listed on the stock market. According to Ram, Kgosi acquired shares in Choppies two years before the retailer listed on the BSE. “Little told us that Kgosi was a straight person and we allowed him to invest. Two years after listing on the BSE, Kgosi sold his shares,” reveals Ram.
He says he himself invited former president Festus Mogae to invest in Choppies after he had a conversation with Sadique Kebonang, a Gaborone lawyer who later ventured into politics. “Mogae paid us P7.5 million each. We did not give him anything for free. He also used some money from the award he received from the Mo Ibrahim Foundation,” Ram says. Mogae had just won the (P50 million) Mo Ibrahim prize for good governance in Africa. Ram s interest in asking Mogae to join Choppies was influenced by his experience. “One day Sadique told me that he took Mogae to Serowe to open a small bottle store. I told him if he wants to invest, he can come join us,” says Ram.
Infact, according to the ex-Choppies Chairman, he was approached by Farouk Ismail and the former Minister of Mineral Resources, Green Technology and Energy Security, Sadique Kebonang, in 2010 after he retired as president, recruiting him for the position of Chairman of Choppies. Mogae says he was sold a dream of a Botswana-born retail supermarket that would be grown into an empire. “It was an interesting dream,” says Mogae in interview. “I decided to give it a shot. I wanted to be a part of something great.”
He says he invested P15 million in Choppies shares. “I paid P7.5 million each to both Farouk and Ram,” the former president reveals. “I had confidence in the dream that I was sold by the Choppies founders.”
Farouk confirms this: “I am the one who convinced Mogae to invest in Choppies and become its Chairman.” Further, Dorcas Kgosietsile, who was former Botswana envoy to India, says she was recruited to Choppies board by the board , as a person with experience in boardroom matters. She says she bought her shares at the IPO totalling 565 000.
In Zimbabwe, the retail chain is wholly-owned by Nanavac Investment (Pvt) Ltd, which itself had Class A and Class B shares. ,Former Managing Director, Siqokoqela Mphoko who is the eldest son of Zimbabwe’s former vice president, Phelekezela Mphoko, and who was previously Zimbabwe’s High Commissioner to Botswana, had 51 percent voting rights while economic shares were only 7 percent. Choppies had 49 percent voting rights and 93 percent economic shares.
Ram dismisses claims that Choppies partnered with the Mphokos for political influence. When they went to Zimbabwe, he notes that “We met Mphoko here in Botswana because he was a clerk at Botswana Insurance Fund Management (BIFM). That is how we became partners with him. His father was an ambassador in South Africa.” So when shareholder fights erupted in Zimbabwe, Choppies bought out Mphoko and now owns Choppies Zimbabwe 100 percent.
