Choppies Kenya deal embroiled in P100m tax row
Brian Benza | Friday January 8, 2016 12:39
Ukwala Supermarket’s bid to sell its outlets to Botswana’s Choppies Enterprises was last month stopped until the P104 million-tax dispute between the retailer and Kenya Revenue Authority (KRA) is settled.
Choppies CEO, Ramachandran Ottapathu confirmed the dispute but said he was hopeful the issue would soon be settled amicably.
“The issue has nothing to do with Choppies. They must settle with the Revenue Authority before we acquire. We are confident the matter will be resolved before the end of February,” he told BusinessWeek.
The Kenya high court has ordered Ukwala to pay a security equivalent to the amount in dispute if it is to go ahead with the sale to Choppies. According to reports from the Kenyan Standard digital, Ukwala Supermarket has asked the High Court to review its orders requiring it to deposit hefty security.
Ukwala Supermarket argued the orders by the court requiring it to issue a one billion shilling security to sell its outlets would cause damages to its operations.
“According to Ukwala’s director, Rohit Maaghanlal Shah, the taxman allegedly did not disclose that it had the same case before a tribunal when it obtained the orders.
“It’s unnecessary for this court to impose such a draconian order for the provision of a guarantee for the entire amount claimed by the respondents, which is in excess of Sh1 billion yet the assessed disputed taxes due to the respondent was only Sh500 million,” the director was quoted by the Standard digital.
Last year, Choppies said said it would buy 10 stores in Kenya for $10 million (P110million) as part of its expansion plans into east Africa.
The purchase consideration will be funded from debt and from existing cash resources.
The transaction is in line with the group’s strategy of expanding into new markets in sub-Saharan Africa.
Its stated target is to operate more than 200 stores in at least six countries by December 2016.
Ukwala is a recognised and well-regarded brand in the Kenyan market and the stores will trade as Choppies Ukwala supermarkets.
Choppies will operate with a 25 percent local partner in Kenya in terms of the joint-venture agreement with the promoters of ETG, the leading agricultural commodities trading and logistics business, which are long established in the region.