Spar chair steps down as retailer denies 'dodgy' accounting allegations

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Graham O’Connor, former chair and CEO of Spar. Photo: Spar
Graham O’Connor, former chair and CEO of Spar. Photo: Spar
  • Former Spar CEO Graham O'Connor has stepped down as chairperson so that the retailer can better deal with all claims being made against the group. 
  • The group has denied that recent reports of fictitious loans are symptomatic of 'dodgy' accounting.
  • Spar has been hit by a wave of negative publicity of late, including allegations of false claims made in court, but also scrutiny of its governance.
  • For more stories, go to the News24 Business front page.

Retail group Spar announced on Friday that former CEO Graham O'Connor was stepping down as chairperson so that it can better deal with all claims being made against it. O'Connor will remain on the board.

The company announced that O'Connor stepped aside "to allow the board to focus on the current allegations facing the company". 

The JSE-listed retailer has been hit with a wave of negative news of late, including that it is facing off with one of its store owners in Johannesburg amid allegations it inflated the price of a store.

In another blow, fraud charges were filed against senior executives of Spar, including O'Connor, amid allegations that the grocer falsely claimed in 2019 it was owed money in order to gain control over certain supermarkets.

In addition, Business Day reported that two 'fictitious' loans have been uncovered in a report compiled on behalf of Spar's board, which was looking into allegations of unfair treatment and racism. 

The governance of the company is also under scrutiny after O’Connor became Spar chairperson in March 2021, a month after retiring as CEO, which is at odds with the King Code's recommendation of at least a three-year break.

O’Connor will continue as a non-executive director, while lead independent director Andrew Waller will serve as interim chair until a permanent replacement is found. 

On Friday, Spar said the recent allegations pointing to instances of fictitious and fraudulent loans on its books do not mean that this is representative of "dodgy" accounting, adding while recent negative publicity has been driven by a small minority of aggrieved retailers, it is taking all allegations seriously.

The group said it was taking allegations of fictitious and fraudulent loans extremely seriously, and was seeking legal opinion.

"Spar wishes to assure shareholders that this was an isolated matter and is neither Spar’s accounting policy nor practice.

"Spar also denies the allegations that this is symptomatic of 'dodgy' accounting," it said, adding it will update shareholders once a legal opinion has been received.

The firm also "strongly" denies allegations of discrimination based on race or store location. These allegations were first levelled against Spar in 2021 and "were independently and rigorously investigated" by law firm Harris Nupen Molebatsi, which prepared a report.

The report found that the allegations were not corroborated and there was no deliberate or intentional practice on the part of Spar as alleged, the group said. "The investigation did, however, highlight some internal business-related practices which needed to be reviewed and subsequent changes have been and continue to be implemented as a matter of priority."

Repairing relations

Valued at about R26 billion on the JSE, Spar is a warehousing and distribution business which owns several country licences for the Spar retail brand. The brand is used by a network of independent retailers that trade under its brand and are supplied on a voluntary basis through its distribution centres. As of its 2022 year, the group had a network of just over 2 500 stores in southern Africa, while also operating in Switzerland, Ireland and Poland.

The firm said on Friday that when protecting its rights as a creditor, it is inaccurate to claim that it "takes back" the store, as the process does not amount to legal ownership. "It is also always a last resort, as every effort is made to ensure success and to support any retailer who may be struggling," it said.

Spar said after the report, it had proactively moved to address issues with retailers, some through legal processes, some through confidential mediation, and the balance through the normal course of business. 

"Each complaint is being dealt with thoroughly in order to ensure the best possible outcome for all parties. Unfortunately, one of the aggrieved retailers chose to withdraw from the process and has regrettably made public disclosures of confidential information concerning the retailers’ positions," it said.

Board scrutiny

The firm said its board had debated the advantages and disadvantages of appointing O'Connor to board chair after his retirement as CEO, and believes that the benefits of his "extensive experience and firm integrity, far outweighed a more independence orientated solution as set out in King IV".

The board comprises two executive directors and seven non-executive directors and of the seven non-executive members, six are independent directors, the group said.

The chairperson is not independent, but "at the time of his appointment, Spar engaged shareholders and appointed a lead independent director in line with the King IV code on corporate governance," it said.

"Spar has a broad stakeholder base and prides itself on high standards of governance and ethics," the firm said. "Under the board’s direction, all matters are being dealt with rigorously, transparently and decisively to ensure the ongoing success and stability of the business."

"Spar regrets the anxiety and concern that the recent media coverage has caused members of the Spar family and all its stakeholders," it said.

This article was updated on 17 January 2023 to reflect the correct spelling of O'Connor's name.

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