Choppies boost as Kenyan tax dispute ends
Brian Benza | Friday February 19, 2016 15:10
Ukwala Supermarket’s bid to sell its outlets to Choppies Enterprises was last December stopped until a P104 million (Sh946 million) tax dispute between the retailer and the Kenya Revenue Authority (KRA) was settled.
The KRA has now withdrawn the suit, with the two parties now opting to settle the dispute out of court. Choppies CEO, Ramachandran Ottapathu confirmed the dispute has now been resolved and the Botswana Stock Exchange-listed retail giant has started operation in the east African country.
“There was a decision to solve the matter out of court. Choppies has already started operations in Kenya. The first of the ten stores we are acquiring was opened on Friday,” Ottapathu told BusinessWeek. According to BusinessDailyAfrica, Ukwala has admitted to owing the taxman Sh101 million, but is appealing the additional Sh845 million that KRA is demanding.
Under the out-of-court deal, Ukwala will pay Sh59.7 million to the taxman within 30 days, and apply for a waiver of Sh42 million it had racked up in interest and penalties. The disputed Sh845 million will be settled by the KRA’s tax appeals tribunal.
With the opening of its first store, Choppies is now the first foreign supermarket to successfully enter Kenya through an acquisition. Last year, Choppies said it would buy 10 stores in Kenya for $10 million as part of its expansion plans into east Africa.
The purchase consideration was to be funded through debt and 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.