Workers restock the Uchumi Capital Centre store on Mombasa Road last December. photo | file
Uchumi Supermarkets failure to pay its
workers for three months is just the latest indication of how far the
once-iconic retailer has sunk. Its financial troubles seem to run deep
despite receiving one government rescue package after the other over the
past decade.
So desperate has Uchumi been that it had
hinged its hopes on the sale of a Sh3 billion plot in Kasarani, Nairobi,
to come through and at least temporarily meet its financial needs,
including paying salaries and suppliers.
But the deal
has yet to be concluded and so the retailer remains in financial
doldrums. Ordinarily a business is not supposed to be run on the basis
of selling assets. It is normally the last resort for a struggling
company. Firms sell goods and services.
That means by resorting to selling assets, Uchumi Supermarkets is a business that may be dancing dangerously with death.
It is surprising that Uchumi can fail to pay workers just a
couple of months after it received some Sh700 million from the
government. That amount seems to have found a hole that was too deep to
fill.
Obviously
the interests of labour did not rank as highly as they should in the
use of the money as the company might have decided to pay suppliers
first.
Perhaps the retailer should seek to balance the
interests of various stakeholders and not spend its limited resources
in a manner that keeps workers out of the picture.
No business can run without people – people who are compensated for their effort and skill through regular payment of salaries.
For
Uchumi, failing to pay workers is a disastrous position to be in as it
only leads to a higher level of shrinkage, which is already a big
problem for supermarkets.
It may also be advisable to
craft a deal with suppliers that prolongs the payment period especially
after they were paid the Sh700 million late last year.
Ultimately
what Uchumi needs is a rebuilding of trust and confidence between the
retailer and its suppliers – as well as its other creditors and staff –
to avoid a situation where a key stakeholder stops dealing with the
company as soon as some payments are concluded.
In the meantime, the government must decide whether it wants Uchumi to die or keep it alive with proper support.
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