Mphoko points to legal disputes as why Choppies is exiting Zimbabwe

Choppies Enterprises Limited has revealed plans to cease its operations in Zimbabwe, citing increased competition from the informal sector among other challenges. However, former Vice President Phelekezela Mphoko's son, Siqokoqela has publicly disputed the company's reasoning, suggesting there is a deeper legal issue behind the decision.

In a post on X (formerly Twitter), Mphoko challenged the company's narrative and alluded to ongoing legal matters, including two court cases - HB 209/22 and HC1829/20 - that he believes are central to the company's withdrawal. Mphoko stated, "Let's set the record straight. Contrary to what Choppies Enterprises has said about competition from the informal sector and the state of the Zimbabwean economy, the real truth lies in the letters attached and the ongoing court cases."

Let's set the record straight. Contrary to what Choppies Enterprises have said is the reason for them pulling out of Zim by blaming the informal sector & Zim economy. The real truth & facts lie in the letters attached & court case
HB 209/22
HC1829/20 @crimewatchzw @ZimEye pic.twitter.com/OcB11Qpmiv

— Siqokoqela Mphoko (@SiqokoqelaMpho2) November 30, 2024

One of the key documents Mphoko referred to is a letter from the Reserve Bank of Zimbabwe (RBZ), which highlights serious concerns regarding the company's dealings. The letter, dated 17 August 2020, was in response to an inquiry about the transfer of shares between local shareholders and Choppies Enterprises, a Botswana-based company. According to the RBZ, there was no prior approval for the transaction, which violated Exchange Control regulations.

The RBZ's letter states, "Exchange Control does not have a record of the transaction where Mr. Phelekezela Mphoko and Mr. Siqokoqela Mphoko disposed of their 51% shareholding in Nanavac Investments to Choppies Investments of Botswana. The absence of such authority amounts to a violation of Exchange Control regulations."

The RBZ further explained that any foreign acquisition of shares in a local entity must be funded with foreign currency remitted through official banking channels, and approval from the Reserve Bank must be obtained before any transactions are executed. It was pointed out that if Choppies Investments had used local currency for the share purchase, prior Exchange Control approval should have been sought.

Mphoko's comments suggest that the exit of Choppies may be linked to these unresolved regulatory issues rather than just competition from informal traders, as the company claims. He pointed out that, "The purchase of foreign currency on the parallel market is illegal in terms of the Exchange Control Act," a reference that may suggest Choppies violated foreign currency regulations in its dealings.

The company, which has been operating in Zimbabwe for several years, has faced increasing competition from local informal businesses, particularly in the retail sector, where tuck-shops and small vendors have proliferated. These businesses often operate without the formalities of taxes or licenses, making it difficult for larger, formal enterprises to compete on equal footing.

However, with Choppies now attributing its decision to the pressure from the informal sector, Mphoko's revelations suggest that legal and regulatory issues may be playing a larger role in the exit. The court cases mentioned by Mphoko, combined with the RBZ's concerns over the legality of share transfers, point to a complex situation beyond just economic challenges.

The dispute also raises questions about Zimbabwe's regulatory environment, especially as the country struggles with attracting and retaining foreign investment. Despite the challenges, Mphoko has been vocal about his involvement in Zimbabwe's business and political affairs, particularly in the context of local companies and foreign investments.

As Choppies plans its exit, the company will need to navigate not only market competition but also the unresolved legal issues that have been brought to light. The Zimbabwean government, meanwhile, will have to address concerns over the informal sector's growing dominance and the challenges it poses to formal business operations in the country.