In the end, it was only fitting that it should be Tuskys
Supermarkets bailing out the ailing giant retailer Nakumatt, for theirs
is an incredible story of family friendship and business partnership
that is more than five decades old.
This week,
representatives of the two supermarkets acknowledged that talks of a
merger between them were under way, which would save Nakumatt from
imminent collapse under the weight of an elephantine debt estimated to
be more than Sh20 billion.
If it goes through, the deal
will continue an unlikely business partnership that was borne out of
the many fears that foreigners — mostly Europeans and Indians — had
about the new African government of independent Kenya.
The Sunday Nation
was told the incredible story about the intertwining histories of
Nakumatt, Tuskys and Naivas supermarkets by Mr Daudi Kanja a close
friend of Dr John Kago, the current chairman of the Tuskys.
BUSINESSMAN
Soon
after taking power in 1963, President Jomo Kenyatta announced that his
government would embark on a process of gradually nationalising
foreign-owned businesses as a way of empowering black Kenyans.
One
of the many Asians who worried that his business would be appropriated
by the Kenyatta government was Mangalal Shah, a small-scale trader who
had emigrated with his family from India to Kenya in 1947 to seek better
fortunes.
After initially setting up
businesses in Embakasi, Nairobi, Kisumu and Elburgon, the Shah family
moved to and settled in Nakuru in 1965 where they started a retail
store, which mainly stocked clothes and cloth materials.
DEAL
Being
one of the few cloth retailers in the town, and the ideal location of
Nakuru as the gateway to the western part of the country, meant brisk
business for Mr Shah.
Within a few years, he had bought a commercial building in the town.
However,
anticipating the government to appropriate his property for less than
its worth, Shah approached Joram Kamau, a friend and a fellow
enterprising young man to buy the building for Sh90,000.
“It was his (Shah) belief that if Joram owned it, he owned it as well,” Mr Kanja said.
At
the time, Joram was the proprietor of Rongai General Stores Ltd, a
company that was based in Rongai town, Nakuru County. His store was
doing very well too.
PROFIT
Rongai,
a small dusty town located five kilometres off the Nakuru-Eldoret
highway at Salgaa trading centre, had been given an economic boost by an
Italian-owned transport company — Rongai Transporters — which was based
there and which was distributing goods across East Africa.
Over
time Rongai became a stopover point for trucks going to other parts of
the country as well as Uganda and Rwanda, a legacy that lives to date.
“There were many employees who had money and this boosted Joram’s business,” Mr Kanja said.
FRIENDSHIP
It was during these times that Joram and Shah met and developed a close friendship.
However,
despite the fact that his business was doing well, Joram did not have
the money that his friend was asking him for the building.
“The
largest amount Joram had ever handled until then never exceeded Sh6,000
and now he was being asked for Sh90,000! He did not even have a bank
account,” Mr Kanja disclosed.
The
National Bank of Kenya (Nakuru branch) accepted to finance him to
acquire the building but on the condition that he deposits Sh20,000
first.
It was a standard requirement
for anyone who wanted to open a bank account in those days to deposit
some money first as security.
BANK LOAN
Joram
shared his predicament with Mr Shah who agreed to loan him the Sh20,000
deposit in order to unlock the Sh90,000 loan, thus making the former
one of the first Africans to own a building in Nakuru town.
“Joram
struggled to repay the loan, at times with many threats to auction the
property due to either delayed payments or non-payment at all.
"He
inwardly blamed and praised Shah in equal measure — on one hand for
putting him in a financial fix, but on the other hand, for making him
own a business building in town, an awesome achievement for an African
immediately after independence,” Mr Kanja said.
BANKRUPT
Both
Shah and Joram initially thrived in their respective businesses, but by
1970s Shah’s clothes business underwent a sharp reversal of fortunes
after some of his large customers defaulted on paying.
He went bankrupt and closed shop in 1976.
However, he found a job as a salesman in a shop called Nakuru Mattresses, which was owned by his brother Hasmukh.
Meanwhile his sons Vimal and Atul founded a store called Furmatt where they used to stitch and sell bedsheets.
The
“coffee boom” that hit the East Africa as from 1978 as a result of the
crop failure in Brazil lifted the buying power of their clients, which
meant good news to their clothes business.
“Business
was so good that by the end of 1979, we had paid off all the debts that
my father had accumulated,” Mr Atul Shah, Mangalal’s eldest son and the
current chairman of Nakumatt told a local newspaper a couple of years
ago.
JORAM HELPS
When
Hasmukh told his brother that he intended to sell off his shop and move
to the United Kingdom permanently, Shah and his sons thought it was a
good idea to buy the store even though they did not have enough money.
So
the elder Shah turned to his old friend Joram who gave him the title
deed of the building in Nakuru town, which he used as security to get a
bank loan to pay off his brother.
“The
business did so well that several years down the line he had given back
the title to his friend Joram whose friendship with both families
became deeper and deeper,” Mr Kanja said.
NAME CHANGE
Over
the years Nakuru Mattresses, which later changed its name to Nakumatt,
rapidly grew and expanded into a behemoth that we know today with 65
stores in Kenya, Rwanda, Uganda and Tanzania employing more than 5,500
employees.
Sometimes in the late
1980’s, Mr Kanja notes, Shah invited Joram to his home and told him that
his business was doing so well that he and his sons had bought two
business premises around Mfangano Street in Nairobi and that they were
willing to offer them one of the premises.
Joram
took the business premises and under Shah’s mentorship started Tusker
Mattresses (now Tuskys) in 1990, which grew rapidly to be Kenya’s second
largest retailer.
INVESTORS
Tusker
Mattresses did so well that at one point Joram decided to gift his
younger brother Mukuha with Rongai General Stores, which was also
equally doing pretty well.
Rongai
General Stores through expansion gave birth to Naivasha Mattresses,
later renamed (Naivas), Kenya’s fourth largest retailer today.
Despite
its slow and painful decline that began mid last year, Nakumatt remains
a very viable business given its strategically located stores
throughout East Africa.
A number of
deep-pocketed foreign investors have made bids to pump in capital to
revive it on condition that Shah family relinquish control of the
business.
This has proved too a
bitter pill for the Shah family to swallow, giving away a company to a
foreigner who will not understand the history and the sacrifices that
made the supermarket what it is today.
Given their shared history, the Tuskys pill might be more palatable.
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