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Atul Shah, the patriarch of East Africa’ s largest retail chain in history has withstood insurmountable hurdles, but never of this magnitude. His first notable business hurdle, struck when he and his brother Vimal Shah, then youngsters had to toil and labor in an attempt to offset their father’ s KSh1.2 million debt.
The duo would later acquire Nakuru Mattresses, and merge it with Furmatts, a business they began together and from which sprouted Nakumatt Supermarkets. Surely and steadily, Nakumatt grew in size and brand stature from a single store in Nakuru to a mega retailer with outlets sprouting across the Great Lakes Region and as at December 2015, Nakumatt boasted of 65 stores which altogether generated revenues amounting to USD $ 450 million annually!
The plan was on course and in 1987 the family opened their first store in the capital city of Nairobi. From then it has been an upward trajectory for the retailer as the retail empire burgeoned a store at a time. In 2004, Nakumatt embarked on a mega expansion strategy in which the firm sought Ksh600 million from medium term loans with 4-5 year maturities.
This would finance the expansionist agenda which Mr. Shah admitted then required a‘ delicate balance’ to avoid a situation where business would be heavily leveraged to the extent it affected normal operations. For a business that was doing Ksh 10 billion in annual gross sales, it definitely was within the firms capacity, but this could have been when the first rivets began to fall off.
The woes that have befallen the mega retailer are a result of a myriad of unfortunate events including gross mismanagement, poor strategic decisions, and insurmountable internal shenanigans perpetrated by employees in conjunction with external parties. An inside source speaking to one of the dailies, indicated that Nakumatt kept a façade of a profitable business, while all this time the business was in trouble. For quite some time, the retailer has been crouching under the enormous weight of a colossal debt currently estimated to be KSh 18 billion. How the situation deteriorated to this extent remains to be unraveled, considering that in 2012-2013 financial year the retailer grossed annual sales upwards of KSh 60 billion. Being a non-listed entity, the specifics of its financial woes just as its profits can only be speculated.
Conspiracy to forcefully take over business.
In a letter to Nakumatt’ s Managing Director Mr. Atul Shah, the Principal Secretary of Industry, Trade, and Cooperatives Chris Kiptoo, expressed the government’ s concern with reference to mass closure of some of the retailer’ s branches. However in a rejoinder to the letter Mr. Shah outlined his case.
Mr. Shah recounts a series of events, directly government orchestrated and that have contributed to KSh 35 billion in losses over a period of time. He hints at a conspiracy that has been in the offing by some high level personnel in government to seek to forcefully takeover the family business.
In the letter he says, as far back as 1998, the government forcefully shut down several of its stores after discovery of infected canned beef from the United Kingdom hit its shelves. It was later discovered that the beef had been bought by the British Army and the Kenya Armed Forces Canteen Organization, as well prompting the reopening of the stores.
Moreover, Mr. Shah further alleges that the same group of unnamed persons in government cajoled the Kenya Revenue Authority( KRA) to issue a KSh 1 billion tax demand, alongside an agency notice to all banks to freeze all its accounts. These were the first jabs aimed at crippling the retailer, he says. He laments that while they went to court to challenge the KRA order, their case dragged in court and Nakumatt operated on a cash basis with its retailers and this affected its liquidity and ability to operate at large scale. The case was later thrown out.
He further questioned the government’ s decision to demolish Nakumatt Thika Road branch in 2008 apparently to pave way for construction of Thika Superhighway. The demolition was in violation of a court order barring such activity and as he states justifies why the demolition was conducted in the wee hours of the night. From the demolition, Nakumatt encountered losses running into hundreds of millions from stock destroyed and cash from previous sales that was still at the store during the demolition. He attributes the firm’ s current woes to the aforementioned tribulations. Even though the family blames others for its present tribulations, sources close to the business claim there is more than
26 | THINK BUSINESS • NOVEMBER 2017