21 August 2017

Uganda: URA Shuts Nakumatt's Three Stores Over Taxes

Photo: The Observer
Nakumatt Oasis parking area (file photo).

The Uganda Revenue Authority (URA) has added to the woes of struggling regional supermarket giant Nakumatt by shutting the chain's main store at Oasis Mall in the heart of Kampala and two others, claiming unpaid taxes.

The closure effectively halted the retailer's operations in the country, as those were the remaining shops after the others closed earlier for various reasons, but mainly unpaid rent over the past two years.

Now, the URA is demanding at least Ush300 million ($86,000), excluding accumulated interest for the past five years, officials say.

"We are trying to see if they can make a part payment and then agree on how they pay the balance through instalments. Once that happens then we can reopen the shops," said Patience Tumusiime Rubagumya, commissioner of legal services and board affairs at URA.

She said the law gives the tax body the power to take such action.

The Nakumatt management has reportedly approached URA asking for a settlement over the tax matter, but details of the negotiations were not available.

The supermarket chain is facing pressure over its operations across the region. The EastAfrican established that in just one month, more than 11 suits have been filed at the High Court demanding a combined Ush4.7 billion ($1.343 million) owed to suppliers.

A separate set of creditors is demanding another over Ush500 million ($143,000).

Quickfire expansion

Last week Justice Anna Mugyenyi, sitting in Kampala, commenced the trial of one of the many cases in which One to One Finance Uganda Ltd has sued Nakumatt demanding over Ush534,878,201 ($153,000).

Other creditors who have gone to court are Alure Group, Euroflex, The Celler Ltd, Khaddar Investments Ltd, Paramount Dairies (2010) Ltd, Brookside Ltd, Zoo Packaging Ltd, Applecus World Ltd, Crane Paperbag Ltd, Britannia Allied Industries Ltd and Charms (Ug) Ltd.

The legal redress being sought puts at risk all property held by Nakumatt (U) Ltd.

According to the court documents filed on April 12th, 2017, the three plaintiffs argue that the amount results from failure to pay rent for sub-leasing part of its multi-complex building to run a supermarket business in Mbarara, in an agreement entered into in September 2011.

At its peak, Nakumatt boasted over 60 stores across Kenya, Rwanda, Uganda and Tanzania. It is to the extensive and quickfire expansion that some experts attribute Nakumatt's current financial troubles.

Another pending suit against Nakumatt is by Groceries Plus Ltd, filed on May 16, 2017, demanding $76,509 for supplies. Last year Nakumatt had to tussle with Future Electronics over a $120,283 case.

The Nairobi-headquartered supermarket chain entered Uganda in June 2009 with its first store at the Oasis Mall, followed by rapid expansion to nine stores by 2015.

Since last year, accumulated debts to suppliers saw many pull their products off the shelves.

Even as Nakumatt was negotiating with an investor to recapitalise its operations, landlords mounted new pressure. Mpororo Group, Bright Rwamirama and Florence Rwamirama, joint landlords for Nakumatt's Mbarara branch sued in May demanding $569,333 in rent arrears.

Also, the Buganda Kingdom announced closure of the Nakumatt store at its Muganzilwaza building in Katwe.

Then in July, property manager Knight Frank shut three other stores also over rent arrears.

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