BY ANNISA ESSACK

31:05:2021

The local black-owned, Checkout supermarket group that went out of business has accused a Walmart-controlled company of crippling its once profitable operations.

Shield Buying and Distribution Proprietary Limited, a Walmart-owned company, issued R110 million summons for outstanding debt on the chain. The supermarket chain filed a multibillion-rand counter damages claim.
Checkout claimed in court documents that Shield cut its credit facilities without notice in 2017, which had a devastating effect on its operations. In its contract with Shield, which was amended in 2014, it was agreed there would be no meddling with Checkout’s credit facility unless it was by mutual agreement.

This caused the stores to run short on stock and thus were unable to service customers’ needs. Its profitability plummeted, worsening the financial position, leading to about 1 700 staff members being released.
In launching its counter-claim, Checkout stressed that Shield’s move to reduce its credit by more than half was a death blow. Its growth as a business brand was greatly dependent on the credit facility with Shield, allowing it to compete with top players in the industry through promotions and discounts.

In December 2019, Checkout’s management applied for business rescue, and the appointed practitioners are about to conclude the sale of the 45-year-old supermarket chain.

In January 2020, Shield served the summons via the Durban High Court.
Mohammed Riaz Abdoola was the chief executive of Check One Supermarket (Pty) and is listed as the first respondent with the Wishing Stone Investments (Pty) are the other respondents. Abdoola is also a director in Wishing Stone.

Shield uses its bulk buying, purchasing power from manufacturers to supply goods on credit to affiliated independent supermarket groups, like Checkout. According to contractual stipulations, for affiliates who manage their credit well, Shield rewards their customers with rebates, discounts, and other incentives.

Checkout has had business relations with Shield for 40 years and was rated its best customer.

Shield claims that Checkout owes R110762 657 for goods sold and delivered as per its summons. However, Abdoola, who has dealt with Shield and was nominated to respond on behalf of Checkout, rejects Shield’s claim as “unjust, unethical” and smacked of “heavy-handedness”. He said that Checkout was invoiced for goods it had not received and was owed more than R100m in rebates.

He further claimed that Shield was aware of the discrepancies and inaccuracies in its accounting and provided reconciled August 2019 purchases statements for five Checkout stores, which showed that Shield had over-stated its account by more than R30m.

Abdoola says it was Shield’s responsibility to provide reconciled accounts before making demands, but it was clear it did not have the necessary invoices to support its claim.

Checkout claimed its credit facility was deliberately reduced from around R330m to R150m, without notice or explanation. Despite several meetings with Shield and the company that insured Checkout’s debt, it was suspended to have its credit reinstated.

In 2009, Massmart purchased a minor supermarket group called Cambridge Foods. According to Checkout’s management, Shield began to work against the group after Massmart took over in 1992 and was listed on the JSE in 2002.

Walmart, in 2011, bought the controlling interest in Massmart and went on a buying spree of independent supermarkets, which then traded in the name of Cambridge. It also restructured its South African operations in 2017, placing Shield in conflict with Checkout. The same executive managing Cambridge handled Shield had full knowledge of Checkout’s business details, and its rival, Cambridge, was fully aware of that.

Checkout estimated its turnover in 2020 would have been beyond R3bn and its gross profit over R550m. It has asked that Shield’s claim be dismissed and compensated for its reputational damage and loss of earnings for both the business and Abdoola.

Since January 2020, both parties have been locked in a legal wrangle over their respective claims. In April, Shield’s legal team applied for condonation in not submitting its response to Checkout’s counter-claim within the prescribed time.

Massmart’s senior vice-president group corporate affairs, Brian Leoni, said that the allegations made by Check One Supermarket (Pty), Mohammed Riaz Abdoola and Wishing Stone Investments (Pty) were baseless without merit.

He said that legal proceedings were initiated by the Shield Buying group in January 2020 as a last resort, after unsuccessful attempts, over an extended period, to recover R110mowed to Shield for merchandise supplied.