SECTION A

$[100$ MARKS$]$

Read the case study below and answer the questions that follow.

Company Name: CapeTown Essentials $($Pty$)$ Ltd

Background

CapeTown Essentials $($Pty$)$ Ltd$.$ is a South African$-$based company headquartered in Cape Town. Founded in $2015$ by

Thabo Mokoena and Lerato Nkosi, the company specializes in sourcing, packaging, and distributing premium quality

local teas and spices. The company prides itself on promoting South African heritage by offering a range of products that

are both authentic and representative of the diverse cultures and flavors of the region.

Business Model

CapeTown Essentials operates on a direct$-$to$-$consumer model, primarily selling its products online through its e$-$

commerce platform. The company sources raw materials $($teas and spices$)$ from local farmers and suppliers, ensuring

that they adhere to sustainable and ethical farming practices. Once sourced, the raw materials are processed, packaged,

and stored in their warehouse in Cape Town. The company has also established partnerships with a few select boutique

stores across major cities in South Africa, allowing for a physical retail presence.

Operations

The company's operations can be broken down into four main stages:

Sourcing: Building relationships with local farmers and suppliers to ensure a steady supply of high$-$quality teas and

spices. Regular quality checks are conducted to maintain consistency.

Processing: The raw materials are cleaned, dried, and processed as required. Teas might be blended with other

ingredients to create unique flavors, while spices might be ground or mixed.

Packaging: Products are packaged in eco$-$friendly materials, with labels that highlight their South African origin. Each

package has a unique QR code that provides information about the source of the raw materials, ensuring traceability.

Distribution: Orders from the e$-$commerce platform are processed at the warehouse, packaged for shipment, and

dispatched through a reliable courier service. The company also supplies its products in bulk to its partnered boutique

stores.

Financials

CapeTown Essentials has seen steady growth since its inception. In the last fiscal year, the company reported a revenue

of ZAR $5$ million with a net profit margin of $20\%.$ The company reinvests a significant portion of its profits into research

and development, aiming to expand its product range and explore new markets.

Employees:

The company employs $50$ individuals, including those in sourcing, processing, packaging, sales, marketing, and

administration. Regular training sessions are conducted to ensure that employees are well$-$versed with the company's

quality standards and operational procedures.

Recent Developments

In the past year, CapeTown Essentials $($Pty$)$ Ltd$.$ engaged the services of Mr$.$ Siyabonga Khumalo, a Chartered

Accountant, to oversee their financial operations and ensure compliance with accounting standards. However, severa!

concerns have arisen:

Undisclosed Financial Interests: An internal audit revealed that Mr$.$ Khumalo has a significant undisclosed financial

interest in one of CapeTown Essentials' major suppliers. Despite this conflict of interest, he has been directly involved in

awarding contracts to this supplier, often sidelining other suppliers who offered better quality products at more

competitive prices.