Although the oil deposits identified in Côte d'Ivoire promise new resources for the state, negotiations with the many partners involved are ... still ongoing. To facilitate this, oil company Petroci is being transformed into a 100% state-owned company.
While the chain’s management has blamed the reduction of footfall traffic due to the COVID-19 pandemic, investigations by the country’s competition watchdog found its debts preceded the pandemic, and that the chain had also under-reported its debt obligations.
“The [Competition Authority of Kenya], through its own intelligence channels, in mid-April received information that there could be retail supermarkets who are failing to pay their local suppliers on time,” Mugambi Mutegi, CAK’s Communications and External Relations Manager told the press in mid-May.
After analysing the debt portfolios of 25 major retailers, the watchdog said four of them were in debt distress, but three were working on getting back on track.
“Three (3) of the four (4) retailers presented payment plans and have continuously reduced their debt portfolio, aiming to settle the outstanding amounts within the next 60 days,” CAK’s Director-General Wang’ombe Kariuki said in an emailed comment on 17 June.
The other, presumably Tuskys, did not present “a payment plan or evidence of negotiations with the affected suppliers.”
Tuskys had reported debts of KShs884.3m ,which it then revised downwards in early June, before the competition watchdog independently found it had under-reported the debt burden by KShs1.2bn. It is now under a regulator-mandated payment plan, as well as a weekly government review process.
Tuskys will now need to seek approval form CAK before it can move onto paying bonuses to directors.
Tuskys’ empty shelves are reminiscent of a “2016 Nakumatt”, one shopper told The Africa Report, referring to the gradual collapse of one of the country’s most recognisable brands. Once Kenya’s most successful and recognizable retail chain, Nakumatt collapsed in phases, before its creditors -whom it owed a total of KShs. 38 billion- decided to liquidate it in January 2020.
On Thursday, 18 June , a court in the coastal city of Mombasa issued an arrest warrant for Atul Shah, Nakumatt’s former CEO over a debt owed to a landlord.
In addition to private investigations by creditors into Shah and his family network’s properties, the CEO is also under investigation by the country’s investigative agencies for theft and money laundering.
Although many of its creditors have since moved on, those who showed up to vote for its closure in January were owed less than half the total amount. The competition regulator is taking a proactive approach to prevent a similar trajectory.
Tuskys’s top managers now risk arrest under recent laws, which include the creation of an investigative body within the competition watchdog, passed after the Nakumatt experience. Tuskys now has until the end of July to settle the debts. It has also tried a few cost-cutting measures, such as closing branches and reducing its staff, as well as doubling down on ecommerce efforts.
- Although the relatively new Buyer Power Department’s job description is extensive on paper, its work has focused on the retail sector.
- In a November 2018 statement, the watchdog’s head said it would “concentrate its investigations in the retail sector” and check enterprises “abusing their influence over suppliers” by breaching contracts, transferring costs, and demanding preferential terms.
The collapse of Nakumatt and the eternal struggles of Uchumi, the country’s only publicly traded retail chain, have made regulators in Nairobi pay more attention to the sector, especially as it attracts signficant foreign investment. The market now counts among its players several continental brands, such as South Africa’s Game, and a franchise of French multinational Carrefour S.A.
- Most new retailers have gone for slower expansion, and growth through mergers and acquisitions. Massmart’s The Game, for example, only has three stores in the country despite a five-year presence while Adenia Capital-owned brands Quickmart and Tumaini Self Service merged under the Quickmart brand in late 2019.
- Botswana’s Choppies, which entered Kenya by acquiring a struggling retailer, exited the market in late 2019. It also left Tanzania and Mozambique, leaving with a footprint in four countries, after it ran into financial and regulatory headwinds at home.
Tuskys specific problems though, are manifold, as it has been beset with internal fights for control among its second-generation owners, as well as multiple claims of internal fraud over the last decade.
“Tuskys appears to be in the weakest financial position of any of the major supermarket chains in Kenya, and if COVID-19 were to claim a victim in chained grocery retail, it would be the most likely candidate,” Africa-focused research firm Sagaci Research said in a recent analysis. The brand’s “debt-fuelled growth”, the researchers noted, left it vulnerable to external shocks.
Such gloomy predictions and the potential cascading failures are why Kenya’s competition watchdog has adopted a hardline stance on the retail chain, reaching out to creditors itself as it lays out a repayment schedule for the retailer and demands to be furnished with its financial statements.
Bottom line: As one of Kenya’s biggest retail brands with over 60 branches and 6,000 employees, Tuskys current predicament and its solution will shape Kenya’s retail sector significantly. Like most retail chains in the country, the chain owns almost nothing but its brand, making its potential failure a big risk both for the retail supply chain and for the economy.
While the competition watchdog is confident the new laws and early intervention are enough to stop such a cascading failure, its Director-General is also wary of the potential for “other emerging issues in our ever-evolving markets” to shape the outcome.
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