Nakumatt shuts down three branches in Uganda

SHOPPERS INSIDE NAKUMATT THIKA ROAD MALL ON DECEMBER 23, 2016. FILE PHOTO | NMG

By MUGAMBI MUTEGI

More by this Author

Summary

• Uganda’s minster for veterans, Bright Rwamirama, two weeks ago took Nakumatt to court seeking to be paid Sh58.6 million in rent arrears that he, and other partners, are claiming from the retailer for use of their premises in Mbarara.
• Mr Toit declined to reveal whether Nakumatt has rent arrears from the three branches, stating that “specifics of the retailer’s contractual obligations are not up for discussion at the moment.”
• Nakumatt was expecting a six-week phased injection of Sh7.7 billion from an unnamed private equity fund beginning March, but failure to secure the funding has caused widespread product stockouts and seen it delay employees’ pay.

Nakumatt Supermarkets has shut three branches in Uganda as part of the ongoing restructuring process initiated to stem extreme financial pressure that has resulted from a huge mountain of debt.

Knight Frank Uganda, the property manager of the Acacia Mall, Village Mall and Victoria Mall, says Nakumatt ceased being a tenant of the three shopping centres on June 28.

The troubled retail chain in April closed another Ugandan branch over a rent dispute. The latest closures brings to five the number of Nakumatt outlets operating in the neighbouring country.

“The three stores were closed last Wednesday and Nakumatt has since removed all their stock,” Marc du Toit, head of retail at Knight Frank Uganda, told the Business Daily in a telephone interview.

“Nakumatt has had some performance issues and we felt that they were not adding much value to the three shopping malls. We shall redevelop the spaces over the next five months to add value to our shoppers.”

Nakumatt has since the year began closed some stores in Uganda – a move that has seen aggrieved suppliers and landlords sue for non-payment of about Sh515 million.

Uganda’s minster for veterans, Bright Rwamirama, two weeks ago took Nakumatt to court seeking to be paid Sh58.6 million in rent arrears that he, and other partners, are claiming from the retailer for use of their premises in Mbarara.

Mr Toit declined to reveal whether Nakumatt has rent arrears from the three branches, stating that “specifics of the retailer’s contractual obligations are not up for discussion at the moment.”

Nakumatt was expecting a six-week phased injection of Sh7.7 billion from an unnamed private equity fund beginning March, but failure to secure the funding has caused widespread product stockouts and seen it delay employees’ pay.
The retail chain’s gross debt more than tripled to Sh15 billion in February 2015 from Sh4.2 billion in 2011, piling pressure on operations and resulting in long payment delays to suppliers.

The retailer’s management recently announced plans to close several non-performing outlets to rein in its expenses and reduce the liquidity pressure it is facing.

Nakumatt in February closed its Ronald Ngala Street branch in Nairobi, citing years of low sales from the downtown shop in a high cost business environment, and has also closed one of two warehouses along Mombasa Road.

READ: Unilever in talks with Nakumatt on supplies cut

ALSO READ: Nakumatt sells shoppers ‘eco’ bags ahead of Sept ban

On June 6, the retailer sent hundreds of employees at its Mombasa Road warehouse on forced break following a dip in supplies that had left them “idle” for weeks.

Nakumatt, which also has presence in Tanzania and Rwanda, has since appointed audit firm KPMG to spearhead its restructuring.

The government, through Trade principal secretary Chris Kiptoo, has also stepped in to mediate negotiations between Nakumatt and its creditors, to resolve the debt crisis that has pushed it to near collapse.

“The situation is not good. The government is not a Nakumatt shareholder, but my involvement is to see how we can bring all parties to reach an amicable solution,” Dr Kiptoo told the Business Daily in an interview last week.

The PS said the retailer is too big to fail and that its collapse would have serious ramifications on the economy.

“It would be bigger than Chase Bank and Imperial Bank combined. This is why we are working hard to ensure the retailer stays open,” he said.