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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