ICAZ APC December 2022 Pre Release

Dec December 2022
Assessment of Professional Competence Sun

Mon
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December 2022 4 5 6 7 8 9 10
Pre-released information 11
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19 20 21 22 23 24
Fodjan (Pvt) Ltd 25 26 27 28 29 30 31
Inbox Financial Manager
INBOX
Mail
Doc From Subject Attachment Received
1 Elijah Molabe Welcome PowerPoint 09/12/2022
slides
Calendar
2 Elijah Molabe Big Ranch (Pvt) Ltd 09/12/2022
3 Elijah Molabe Customer loyalty programme 09/12/2022

Contacts 4 Hajra Moodley Big Ranch (Pvt) Ltd Extracts from 09/12/2022
management
5 Elijah Molabe Matters arising from meeting with external auditors

Tasks 09/12/2022
6 Hajra Moodley New franchise offering 09/12/2022
7 Elijah Molabe Supplier proposal 09/12/2022
Fodjan (Pvt) Ltd is a fictitious company, and all events as well as the names of all persons associated with this company, as mentioned in this Assessment of
Professional Competence, are purely fictitious in nature and any resemblance to real persons, living or dead, or to an actual business entity, is purely coincidental.
APC December 2022 © SAICA 2022
Pre-released information ICAZ
DOCUMENT 1
EMAIL FROM CHIEF FINANCIAL OFFICER TO FINANCIAL MANAGER
From: Elijah Molabe

Sent: Friday 9 December 2022, 7:59 AM
To: Financial Manager
CC: Hajra Moodley
Subject: Welcome
Attachment:
Hi there
I hope you have enjoyed your first week or so at Fodjan. You may have found that the restaurant franchise industry is a lot more
dynamic and challenging than most people think. As previously discussed, Fodjan (Pvt) Ltd (‘Fodjan’) was established in 1992 and
has evolved into one of the leading casual dining restaurant groups in Zimabwe.
The impact of the initial hard Covid-19 lockdowns from March 2020 to mid-August 2020 was devastating for the restaurant and
fast-food markets. Our franchisees suffered a great deal because patrons were unable to have sit-down meals for almost five
months. Our franchisees were also unable to serve alcohol, a lucrative source of business, during these months.
It was difficult trading through intermittent lockdowns, complicated further by it being hard to predict when these would be
imposed. Fortunately, lockdown levels were eased later in 2021 and we were able to get back to almost normal trading conditions.
However, the casual dining and fast-food markets have dramatically changed post Covid-19 lockdowns. First, people have learnt how
to cook, or to improve their cooking skills, as a matter of necessity. Second, online orders for delivery skyrocketed and this became
the ‘new normal’. Third, ghost kitchens popped up all over the place. These ghost kitchens have no physical facilities for sit-down
meals and instead prepare food to fulfil online orders that are for delivery only. There have been so many innovations and
developments in response to the changed landscape.
With the trading environment becoming increasingly complex, I often wonder if we should make more use of the data stored on our
computer systems to better understand our businesses. I suppose the same goes for our franchisees. If you have thoughts on this, I
would really appreciate your input!
I have attached some PowerPoint slides that provide information about Fodjan and its operations. We use these slides for orientation
purposes for new staff members and non-executive directors. This presentation is also useful for planning purposes and our annual
strategy sessions. Enjoy the read.
Kind regards Elijah
CFO: Fodjan (Pvt) Ltd

NOTICE: Please note that this email and the contents thereof are subject to the standard Fodjan (Pvt) Ltd email disclaimer. See http://www.fodjan.co.zw/disclaimer/email.htm for more
details.
APC December 2022 2  SAICA 2022

ATTACHMENT TO EMAIL
Annexure A: Fodjan (Pvt) Ltd – Background information

From: Elijah Molabe
Subject: Big Ranch (Pvt) Ltd
DOCUMENT 2
Hi again
Hope you are settling in well.
Just a heads up. You may have noticed on slide 19 of the PowerPoint presentation I emailed you, that Fodjan has not yet prepared
any pro forma journal entries regarding our acquisition of 100% of the equity of Big Ranch for the purpose of preparing the group’s
FY2022 consolidated AFS. I will need your help with this.
I will send you more information next week.
Kind regards Elijah

NOTICE: Please note that this email and the contents thereof are subject to the standard Fodjan (Pvt) Ltd email disclaimer. See http://www.fodjan.co.zw/disclaimer/email.htm for
more details.
From: Elijah Molabe
Subject: Customer loyalty programme
DOCUMENT 3
Hi there
As mentioned to you earlier, our industry was hit hard by Covid-19. We will need to think outside the box on how we can boost our
revenue. You would have noticed from the PowerPoint presentation that we are considering introducing a customer loyalty
programme.
Some of our competitors have implemented customer loyalty programmes quite successfully. In particular, one competitor issues
‘family cards’ to customers, which entitle these customers to benefits such as –
 discount vouchers once customers have spent a certain amount of money at any of their
restaurants; and
 access to exclusive promotions and automatic entry into competitions.
Although such a programme obviously comes at a cost, it holds many potential benefits for Fodjan and our franchisees. Such
programmes have proven to be effective in increasing customer loyalty in the restaurant industry – the benefits outweigh the cost.
The more often customers visit our franchisees’ restaurants, the more revenue our franchisees will earn. And the more revenue our
franchisees earn, the more franchise fees we will collect. It’s a win-win situation!
The board is comfortable to consider the business merit of such a programme, but will draw on your technical expertise to give advice
on the accounting and tax implications.
We will chat once I have more details.

PS: While we are talking about revenue, I must point out that there are no uncertainties on how to account for our existing revenue
streams. When the new IFRS 15 became effective in 2018, we consulted an IFRS expert who assisted us with our revenue
recognition. Our auditors, Greener & Co, expressed their complete satisfaction with how we account for revenues and there have
been no significant changes since.
Kind regards Elijah

more details.

DOCUMENT 4
EMAIL FROM CHIEF EXECUTIVE OFFICER TO FINANCIAL MANAGER
From: Hajra Moodley

CC: Elijah Molabe
Subject: Big Ranch (Pvt) Ltd
Attachment:
Hi there
I believe Elijah has provided you with some background regarding Fodjan’s acquisition of Big Ranch and the plans to turn
around these restaurants and then later to sell them to new franchisee(s). Our operational team is already working hard at
improving profitability at Big Ranch
– refer attached for extracts from the management accounts of Big Ranch with some explanatory notes.
I have started discussions with various potential franchisees to take over all the Big Ranch restaurants. It makes sense to sell all
the restaurants together rather than individually since that would mean less work. My discussions with potential franchisees have
revolved around the following negotiating points:
 Fodjan paid a total of ZWL14,5 million for Big Ranch, so we would want to recover at least this amount from selling the
business of Big Ranch to a new franchisee/buyer. A new Fodders restaurant costs approximately ZWL3,5 million in
capital expenditure (kitchen equipment, tables and chairs, IT equipment, crockery and cutlery, etc.) prior to opening. Hence,
ZWL14,5 million for five established restaurants would be a bargain for a buyer;
 Big Ranch would enter into a new franchise agreement with Fodjan or renew the existing
agreement for a further five years but no joining fees would be payable; and
 Big Ranch would from 2023 onwards pay the normal 5% franchise fee and a marketing fee
of 3% on its restaurants’ turnover – as do all other franchisees.
I am going to ask you to assist with our discussions with potential franchisees/buyers and to analyse the Big Ranch numbers
ahead of these discussions.
Many thanks in advance.
Kind regards Hajra
CEO: Fodjan (Pvt) Ltd

more details.

ATTACHMENT TO EMAIL
Big Ranch (Pvt) Ltd

Extracts from management accounts
together with some explanatory notes
FY2022
ZWL’000
Revenue 1 47 571 58 887

Food and beverages costs (22 596) (29 620)
Employee costs (8 753) (9 716)
Other operating expenses (6 951) (7 514)
Franchise fees 2 (1 903) (2 355)
Marketing fund contributions 2 (1 189) (1 472)
Procurement fees 3 (339) (444)
Joining fees 4 (100) (100)
Owner’s drawings 5 (1 250) (650)
Operating profit 4 490 7 015

Depreciation: Furniture and equipment (2 681) (2 434)
Depreciation: Right-of-use assets (2 410) (2 410)
(Loss)/profit before interest and taxation (601) 2 171
Interest expense: New Africa Finance Corp. 6 (1 142) (1 177)
Interest expense: Lease liabilities 7 (491) (263)
(Loss)/profit before taxation (2 234) 731
Notes to extracts from management accounts

1. Revenue represents the total sales of meals, products and beverages at the five Fodders
restaurants that Big Ranch operates.
2. Franchise fees were reduced by Fodjan to 4,0% of revenue during FY2021 and FY2022 to
provide relief because of the impact of Covid-19 restrictions and Big Ranch’s losses. Similarly, marketing fund
contributions were reduced from 3,0% to 2,5%. Because of Big Ranch’s financial distress, the franchise fees and marketing
fund contributions were left unchanged in FY2021 and FY2022.
3. Fees payable to Fodjan for using its procurement services to source products.
4. Joining fees represent the amortised initial joining fees over the period of the initial franchise
agreements.
5. The previous shareholder of Big Ranch paid himself a monthly amount, classified as
‘drawings’, over and above his monthly market-related salary.
6. Big Ranch obtained a loan from New Africa Finance Corporation in FY2018 to fund the
opening of new restaurants. The balance owing to New Africa Finance Corporation at 31 October 2022 was ZWL8,49
million.
7. Big Ranch paid ZWL3,032 million in lease payments to lessors in FY2022 of which ZWL0,263 million was allocated to
interest expense and the balance to reducing the lease liabilities.

DOCUMENT 5
From: Elijah Molabe
Sent: Friday 9 December 2022, 8:45 AM EMAIL FROM CHIEF
To: Financial Manager FINANCIAL OFFICER
Subject: Matters arising from meeting with external auditors TO FINANCIAL
MANAGER
Yesterday afternoon I had a meeting with Basil Bean, the audit engagement partner, and his team. Basil Bean is from Greener &
Co, our duly appointed firm of Public Registered Auditors. The purpose of the meeting was for the audit team to clarify its
understanding of our systems of internal control as part of its planning for the upcoming audit of Fodjan’s annual financial
statements for FY2022.
Numerous questions were asked about our system of internal control for revenue. I am not sure whether these questions are due to
the sizeable increases in revenue from the prior financial year. But this got me to thinking about whether we have adequate controls in
operation to ensure that these revenue streams are correctly invoiced to our franchisees. Accordingly, I would like you to set some
time aside in the next few days to review the system of internal control for our revenue transactions.
The audit team also expressed the desire to make greater use of ‘automated tools and techniques’ when conducting the audit to
improve the efficiency and effectiveness of its work. Not being particularly tech-savvy, I would appreciate your assistance in
helping them with this (if necessary) once the audit is under way.
After the planning meeting, during an informal conversation with Basil over a cup of coffee, he mentioned that several of his clients are
franchisees of Fodjan. They have been complaining that they have not seen much benefit from the campaigns run by our marketing
team despite their sizeable financial contributions to the marketing fund over many years.
I would therefore also like you to apply your audit skills to the marketing expenditures incurred during the past 12 months. If there is
anything that is questionable, I would like to know about it sooner rather than later. While you are busy with this, you might as well
consider whether there are any tax issues relating to the marketing fund. For a long time now, I have left the marketing team to ‘do
their own thing’ from a financial perspective but, having heard Basil’s comments, I definitely do not want to be accused by the board
of neglecting my fiduciary duties!
Please set some time aside in your diary to address these important matters.
Kind regards Elijah

more details.

DOCUMENT 6
EMAIL FROM CHIEF EXECUTIVE OFFICER TO FINANCIAL MANAGER
From: Hajra Moodley

CC: Elijah Molabe
Subject: New franchise offering
Hi there
Fodjan has stuck to its game plan since inception of being a franchisor and has exclusively focused on the Fodders brand
offering, a family-friendly casual dining restaurant group. However, having survived Covid-19 and related lockdowns, we have started
to think about expanding our offering to diversify and grow the group. There is limited scope to increase significantly the number of
Fodders restaurants, so we need to expand in different ways.
I believe Fodjan needs to keep to its strategy of being a franchisor operating in the sit-down and takeaway food and beverage
industry. We have in the past debated introducing a new franchise offering such as flame-grilled chicken, pizzas and pastas.
However, we believe these may be over-traded in Zimbabwe.
The board of directors is currently debating options regarding the expansion of our franchise offering and we have narrowed it
down to two potential options:
1. Purchasing an existing franchise operation (as franchisor) but not with a focus on flame-
grilled chicken, pizza or pasta restaurants; or
2. Entering into a master franchise agreement with a leading global brand to introduce their
offering into Zimbabwe (Fodjan assuming the role of franchisor of the Zimbabwean operations).
It would be wonderful if you could start thinking about the above two options. We will certainly involve you in investigating one of these
options and doing some financial modelling work for us. Many thanks in advance for your inputs.
Kind regards Hajra
CEO: Fodjan (Pvt) Ltd

more details.
DOCUMENT 7
From: Elijah Molabe

CC:
Subject: FW: Supplier proposal
Hi there
Please see email below from our chairman – I’m just looping you in as I may need some help in drafting/considering the terms of the
agreement.
Thanks
Elijah
more details.
From: Katleho Mokoena

Sent: Thursday 08 December 2022, 3:49 PM
To: Elijah Molabe
CC:
Subject: Supplier proposal
Hi Elijah
I’ve got a proposal that I think presents an excellent opportunity to get ahead in the market, especially as the economy is trying to
recover from the lockdowns.
I’m sure you are familiar with one of our sauce and seasoning suppliers by the name of Flavourful.
I have a monthly golf game with the CEO of Flavourful, Michelle Watson. Yesterday, I had a conversation with Michelle that
ended up with a proposal that I think has the potential to be really beneficial to Fodjan. The proposal is that Fodjan enters into a two-
year exclusivity agreement with Flavourful whereby Fodjan procures sauces and seasoning only from Flavourful, but at
significantly discounted prices. I really think this would be a great deal for Fodjan.
Of course, when I wear my RAC hat, it is important for me to point out that such a supplier contract would likely result in better profits
for Fodjan, and ultimately dividend payments for the RAC so that it can repay its own funders as soon as possible. After all, we
shouldn’t forget that, first and foremost, I am here by virtue of being a nominee director representing the RAC’s interests.
I’ll be in touch soon with more details.
Kind regards
Katleho Mokoena
Executive Head: Investments
RAC Empowerment Fund
NOTICE: Please note that this email and the contents thereof are subject to the standard Fodjan (Pvt) Ltd email disclaimer. See http://www.fodjan.co.zw/disclaimer/email.htm for more
details.


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Dec December 2022

Assessment of Professional Competence Sun

Inbox Financial Manager

3 Elijah Molabe Customer loyalty programme 09/12/2022

5 Elijah Molabe Matters arising from meeting with external auditors

6 Hajra Moodley New franchise offering 09/12/2022

7 Elijah Molabe Supplier proposal 09/12/2022

EMAIL FROM CHIEF FINANCIAL OFFICER TO FINANCIAL MANAGER

From: Elijah Molabe

Kind regards Elijah

CFO: Fodjan (Pvt) Ltd

APC December 2022 2  SAICA 2022

Annexure A: Fodjan (Pvt) Ltd – Background information

EMAIL FROM CHIEF FINANCIAL OFFICER TO FINANCIAL MANAGER

Hope you are settling in well.

I will send you more information next week.

Kind regards Elijah

CFO: Fodjan (Pvt) Ltd

EMAIL FROM CHIEF FINANCIAL OFFICER TO FINANCIAL MANAGER

We will chat once I have more details.

Kind regards Elijah

CFO: Fodjan (Pvt) Ltd

APC December 2022 1  SAICA 2022

EMAIL FROM CHIEF EXECUTIVE OFFICER TO FINANCIAL MANAGER

From: Hajra Moodley

Kind regards Hajra

CEO: Fodjan (Pvt) Ltd

APC December 2022 1  SAICA 2022

Big Ranch (Pvt) Ltd

Revenue 1 47 571 58 887

Operating profit 4 490 7 015

Notes to extracts from management accounts

APC December 2022 1  SAICA 2022

CFO: Fodjan (Pvt) Ltd

APC December 2022 1  SAICA 2022

EMAIL FROM CHIEF EXECUTIVE OFFICER TO FINANCIAL MANAGER

From: Hajra Moodley

Kind regards Hajra

CEO: Fodjan (Pvt) Ltd

EMAIL FROM CHIEF FINANCIAL OFFICER TO FINANCIAL MANAGER

From: Elijah Molabe

From: Katleho Mokoena

APC December 2022 2  SAICA 2022

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