The paradox of retail business in Kenya

There is a programme on CNN called Club100. Hosted by Ciryl Vanier, the programme tells the story of brands that have been in business for 100 years or more.

Vanier interrogates how these entities have survived the vagaries of time to not only remain firmly in operation, but also to define consumption habits across the world and even become part of popular culture.

These brands have a common denominator: they are all defined by resilience.

COLLAPSE

The story of supermarket business in Kenya is a tragic paradox. While some retailers collapse under the weight of enormous debts, lack of stock and unpaid salaries, others, ironically, seem to be living their best days, opening up branches all over the country in quick succession.

Nakumatt, Uchumi, decades-long Ebrahims and Ukwala brands have defined Kenya’s shopping culture for many years. Today, all of them have left the stage in a painful story of mismanagement, debt and others looting.

Joining them recently was Botswana-owned Choppies who are set to exit the local market after five years of operations.  

The closure of these businesses almost always follows the same pattern: empty shelves, unpaid suppliers, bulging rent arrears and massive layoffs.

Employees who remain are demoralised for having to turn customers away, and for going for months without pay. Before the business snaps.

With Naivas, Carrefour and Shoprite now running the roost in the local retail business, the supermarket landscape in Kenya is not what it used to be.

Even to Kenyans, the dramatic transformation of the scene has been difficult to fathom, with the subject forming part of a vibrant discourse on social media.

CHANGING SCENES

A Twitter user recently tweeted:

‘‘How we moved from Nakumatt and Uchumi to Naivas, Carrefour and Shoprite is beyond me.’’

The tweet captures the sentiments of millions of other Kenyans who have watched the brands fall through the trapdoor in the most embarrassing fashion.

Ebrahim’s Supermarket had for many years endeared itself to Kenyans who know Nairobi’s shopping scene well. The shoppers had a secret: if you couldn’t get a certain item in all the other shopping stores, chances are Ebrahim’s would have it in stock. And it hardly disappointed them. After all, the store had been in business for 75 years, the longest for a supermarket in Kenya’s history.

This is another heartrending story of Kenya’s oldest supermarket, which closed its doors earlier this year after serving city residents and visitors from 1944, 19 years before Kenya gained independence. 

In its glorious days, the iconic Ebrahim’s, etched at the intersection of Moi and Kenyatta avenues, served not only as a shopping store but also as an important landmark in the city.

While the owner Mr Ebrahim Nurali, 90, was tongue-tied as to what stole the roar from the once vibrant supermarket, a source revealed to the Nation that managers and some employees had for years colluded to fleece the family business, driving it into insolvency.

Ten months later, Ebrahim’s former home is not recognisable anymore. The space has undergone a complete makeover of glass partitioning, with small boutiques, electronic and perfume shops now operating. 

Like many other Kenyans, Martin Mwongela grew up imagining that Nakumatt was the synonym for supermarket shopping. The collapse of the business has had a sentimental effect on him.

Peter Wachira though was blunt in his analysis of Nakumatt’s woes. He tweeted:

‘‘One day you are the cock of the crow and the next the feather duster.’’

Talking of the cock of the crow, in its heyday, Nakumatt was head and shoulders the region’s retail kingpin. Nakumatt controlled 62 stores across the East African region, employed more than 6,500 and made profits by the tens of billions. 

CREDITORS

From 2016, Kenyans have watched helplessly as Nakumatt went to its knees. Creditors were on its neck, suppliers refused to deliver more goods owing to a large debt.

From this moment on, the retailer would close branch after branch, laying off staff before being embarrassingly kicked out by landlords for rent arrears.

In a space of three years, the retailer has shut outlet after outlet in the region, keeping doors of only six of its branch open, albeit painfully.

Not even the appointment of an administrator in Peter Kahi to resuscitate the business could keep it from sinking. 

With the six branches vanished, Nakumatt is now likely to be completely out of operations by the end of this year. This time for good.

This devastating tumble has stricken stroke a nerve of sympathy among Kenyans and East Africans. Few would have thought a 32-year era would end in this heartrending manner.  

When Choppies ventured into the Kenyan market five years ago, it had hoped to capitalise on the exit of Ukwala and Nakumatt.

The game plan of the Botswana-owned store with outlets across East and South Africa though failed to materialise after Kenyan shoppers stuck to traditional local brands namely Naivas and Tuskys.

The stay of Choppies in the Kenyan market has been a mixed bag.

Back at home, the brand was delisted from the Johannesburg and Botswana bourses after failing to make public its financial results in June 2018.

After failing to pay suppliers and salaries of its employees amid piling rent arrears, Choppies was forced out of Kenya few weeks ago.

Its Kenyan human resources manager Joshua Were said in September they were in talks to negotiate compensation modalities for their employees.

When the commercial court reconvenes on March 14 2020, the directors of Ukwala Supermarket will be crossing their fingers that Justice Mary Kasango grants their application to liquidate the once vibrant shopping store in Kenya.

TAX ARREARS

Bogged down by unsustainable debts, the store applied to be allowed to fold in November, bringing to a close its 24-year operations.

Like other stores that have gown down this dreadful route, the supermarket owed Kenya Revenue Authority, banks, suppliers and was unable to pay salaries to its employees.

With a debt of Sh840 million in tax arrears, KRA will be the single biggest loser when Ukwala, which owes a further Sh930 million to creditors, goes down.

With a measly asset value of Sh19.3 million, it became practically impossible for Ukwala to stay in business. But even as its branches countrywide shut down, the Eldoret outlet remained resilient, standing its ground to fight to the bitter end of what was clearly a losing battle.

In a tragic turn of events, employees of the branch only learnt of the owners’ intent to shut down the loss-making store a day before its closure. The branch had taken a crushing blow, and threw in the towel.

The survival of the soul of government-owned Uchumi Supermarket is currently hinged on the success of a Collective Bargaining Agreement (CBA).

In this plan, creditors will take a 70 cut of the money owed by Uchumi to allow it to recover from its financial whirlpool. Should the CBA backfire, Uchumi, currently in the ICU, will have breathed its last.

Once the poster boy of retail success, Uchumi attracted leaders from Africa for a benchmarking mission, and was also the first retailer in the region to be listed in the Nairobi bourse.

Long before Nakumatt had established its dominance, Uchumi was the symbol of budget shopping among Kenyans from all walks of life.

But from the time the rain of corruption, orgy of looting and mismanagement started beating the store, things were never the same again. First Uchumi was delisted from Nairobi Securities Exchange, before it shut down benches as it hurtled down to its waterloo. 

Like most state corporations in financial headwinds, the government has bailed the ailing supermarket to the tune of Sh1.8 billion, effectively making it a cash cow, even as its CEO Mohamed Mohamed denies it.

Even with the bailout, the retailer’s recovery has been hampered by its Sh3.6 billion debt owed to suppliers and lenders.

CEO after CEO, appointed to rescue the business, has come and left the retailer in its wobbly state, if not worse. Now its fate lies in the hands of others.

Kenyan businesses, especially consumer businesses, might have a leaf to borrow from members of Club100.