Uchumi Supermarkets goes silent on franchising plan

Uchumi supermarket along Agha Khan walk Nairobi. FILE PHOTO | NMG    

By PATRICK ALUSHULA More by this Author

Cash-strapped Uchumi Supermarkets has gone silent on the franchising model that

had been touted as the route to rescue it from collapse, complicating its recovery efforts.

Mazars Consulting Ltd, the firm supervising the retailer’s company voluntary agreement (CVA) plan, says the firm has been quiet on the franchising strategy that was agreed on years back. Under CVA, a company makes a proposal to its creditors to offset debts and picks a supervisor of the plan.

Mazars says in the latest supervisory report on Uchumi that while progress has been made, including settling about 82 percent of the old debts, not much activity has been seen on either the franchising model or convincing the government to rope the retailer in its plans.

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“There is however a concern that the new business model of franchising and engaging the government for inclusion on its economic transformation agenda appears to have been relegated if not dropped by the management altogether,” reads Mazars report released following a virtual meeting with creditors on the last day of February where it discussed the progress and the unfinished business in the attempts to revive the retailer’s fortunes.

The franchise-based business model was planned to be introduced to the Counties in line with the government model of county-based industrial parks. Uchumi was eying over 200 mini shops across the country where investors were to ride on the brand for sales.

The lack of progress on the franchising idea saw Uchumi post revenues of Sh31 million— or a monthly average of Sh5.2 million— in six months ended December last year compared with the Sh56 million that had been projected.

Mazars, however, says there have been some green shoots with shock stock levels gradually building up and the bakery operation continuing to grow. The firm also says revenue collection from the Langata property is on the right trajectory after the retailer got a new tenant for the space.

Uchumi also managed to sell three acres of the 20 acres it had intended to sell in Kasarani. The transaction was at Sh401 million, leaving it with net proceeds of Sh351 million.

Declining sales and rising amounts of debt had taken a toll on Uchumi’s financial health thereby limiting its ability to continue operating effectively as a going concern..

Uchumi and its creditors in 2020, passed a CVA plan that was aimed at restructuring the company’s debts and recapitalising the business.

Read: CMA to continue with probe of ex-Uchumi directors

The CVA plan was to be financed with the sale of 20 acres of land in Kasarani at a cost of Sh2.8 billion but the row with Kenya Defence Forces over the ownership of the property forced it to draw a revised plan.

The Nairobi Securities Exchange-listed firm is not compliant with listing regulations as relates to the filing of the audited accounts, board composition and holding of annual general meetings. It also still has unremitted deductions from previous and current employees.

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