Cover Story
be able to use the accumulated points , ” says a contact at Nakumatt Holdings customer care through its Messenger platform ,
When asked what would happen should the firm go under , the customer care personnel , could not confirm with certainty what would happen then but only sought to affirm that the company is doing its utmost best to remain afloat .
The Uchumi debacle
The present situation is ‘ What if ’ Nakumatt would have listed at the Nairobi Securities Exchange . Could it ’ s financial woes have been detected and therefore mitigated in time by the shareholders and the regulators ?
Being a listed entity in itself may still not provide sufficient solace , if Uchumi Supermarkets case could be drawn as a reference point . A report by audit firm KPMG released last year revealed how former Uchumi CEO , Jonathan Ciano and his Chief Financial Officer Chadwick Okumu masterminded a plot to disguise perennial losses that were being made by the retailer .
In the audit expose , it emerged that Uchumi made fictitious payments to suppliers through suspicious purchase of goods and services which led to huge losses . The fall of Uchumi was purely a direct result of conscious actions by the executive who orchestrated the internal hemorrhage .
A week after the dismissal of Mr . Ciano it emerged that accounting malpractice was used to indicate the company was in good financial standing but nothing was further from the truth . The management incorporated the gains from revaluation of its property assets into the balance sheet , whereas Uchumi had was deep in loss making territories from 2013 .
London based research firm further revealed that Uchumi ’ s decision to include the revaluations as part of its income had the effect of obscuring the true status of its financial position .
Uchumi reported KSh 14.6 billion sales for 2014 and KSh14.27 billion in 2013 , a marginal 0.6 percent increase while loyalty points stood at KSh 92.8 million in 2014 down from KSh 98.04 million a year earlier indicating a decline in purchases from the regular customers . Total revenues were KSh 14.46 billion in 2014 from KSh14.37 billion a year earlier , a one per cent increase .
Detailing the massive fraud so far unearthed from the Uchumi saga , Julius Kipngetich who took up the reins at the helm of the struggling retailer discovered that his predecessor Mr . Ciano was the major supplier of fresh produce to the stores . He always paid himself first before other suppliers . Preliminary information revealed that supplier debt was severely understated at KSh 750 million while actual figures stood at KSh 2.2 billion .
“ My decision to join Uchumi Supermarkets was purely based on the financials reported which indicated a KSh 265 million annual loss and I felt well capacitated to turnaround its fortunes . Little did I know the extent to which the mismanagement rot was entrenched ,” says Dr . Kipngetich .
Emerging Mini supermarkets
Shades of doubt that the retail and consumer market in Kenya awaits exponential growth have been shredded by recent evidence of sprouting of mini retail supermarkets . The sprouting of this mini supermarkets are the true testament that the middle class in Kenya has experienced considerable burgeon even outside Kenya ’ s urban setting .
A report released by Stralink financial advisors , ranked Kenya ’ s retail sector as among the most attractive for long-term investors , across the Sub- Saharan the challenges facing Nakumatt and Uchumi notwithstanding .
The report states that the retail penetration is estimated at 30 per cent ahead of peer economies like Nigeria and that the Kenyan market is uniquely poised to offer investors strategic access to the growing middle class while tapping into the ever increasing disposable income . Kenya also provides strategic entry to the wider East Africa region .
Outside of Nairobi and other major town across the country , smaller retail outlets continue to emerge and that are raking in profits from serving a targeted demographic , that they understand .
Eastmatt
Eastmatt supermarkets was founded in 1990 , and boasts over 13 branches across the Nairobi Metropolitan and has at least 100 employees . Quick mart Established in 2006 , in Nakuru town , which is also home to Nakumatt . The retailer has a total of 5 branches and they are looking to set up a new outlet along Kiambu Road in Nairobi .
Clean shelf Supermarkets
Clean shelf supermarkets commenced operations in 2002 with the first store opening in Ongata Rongai on the outskirts of Nairobi . They have evolved from a single outlet to the current 7 situated in Langata , Kiambu , Kahawa West , Limuru , Kerugoya , Nyahururu and Rongai
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28 | THINK BUSINESS • NOVEMBER 2017