Big changes at Spar after 3 loan ‘irregularities’ exposed and reported

Retail group Spar will see big changes at the management level following widespread media reports about an alleged loan scandal at the group.

The group notified shareholders on Thursday (19 January) that it is in the process of resolving issues around the reports, but maintains that the allegations levelled against it are unfounded.

News24 reported on a leaked report from law firm Harris Nupen Molebatsi (HNM), alleging that the group engaged in discriminatory practices and made dodgy loans to certain franchisees and set them up with businesses doomed to fail.

Spar said it “deeply regrets” the allegations of discrimination against certain retailers but insisted that they were unfounded.

“HNM prepared a report containing highly confidential information. Spar and eight retailers are involved in an ongoing mediation process relating to claims lodged by these retailers and every effort is being taken to resolve these issues as quickly and effectively as possible,” it said.

The group said that the HNM report did, however, highlight certain areas of improvement, and these areas are being addressed at the group’s distribution centres.

In respect of the “fictitious and fraudulent” loan highlighted in the reports, Spar’s auditors, PricewaterhouseCoopers, notified the company that they believed the loan to be a reportable irregularity, which required them to report the matter to the Independent Regulatory Board of Auditors (IRBA).

The Spar board has since been engaging with its legal team.

“Over the past month, Spar and the external auditors have conducted investigations into the matter. At the end of the process, the board agreed with Spar’s auditors that a reportable irregularity had occurred. Spar’s auditors are satisfied that this was an isolated matter and is no longer taking place, and adequate steps have been taken for the prevention of any loss as a result thereof,” it said.

The board said that a written loan agreement was entered into between a willing lender and borrower through a commercial bank, at normal interest rates with fixed terms of repayment.

“However… the loan did not seem to have served any real commercial or economic purpose and should not have taken place,” it said.

An extensive review of all loans arranged by Spar for retailers identified two other transactions of a similar nature, with a combined value of R11 million.

“These loans were isolated and occurred five years ago. This arrangement is not Spar practice, and there is no evidence to support any allegations of accounting irregularities with any other loan transactions,” it said.

Changes at the top

The Spar board said that it has met several times over the past few months to address concerns about the perceived shortcomings regarding the composition of the board, and has subsequently made significant changes, including new appointments and seeing some members go.

Mike Bosman was appointed as an independent non-executive director and the new chairman of the board with effect from Thursday, 15 December 2022. Shirley Anne Zinn and Pedro Manuel Pereira da Silva have been appointed as independent non-executive directors, effective immediately following the 2023 AGM.

Meanwhile, former chairman Graham O’Connor will retire on 14 February 2023 and Phumla Mnganga, who served on the board for 17 years, will be stepping down as an independent non-executive director at the same time.

Spar CEO, Brett Botten, will be retiring as CEO and member of the Board on Tuesday, 31 January 2023. Botten’s retirement is pursuant to his request to the board for an early retirement, the group said.

“Shareholders are advised that succession discussions are underway, and the appointment of a new group CEO will be announced in due course,” it said.

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