11 September 2017

Tanzania: Another Regional Retail Giant Falls On Hard Times

Photo: The Citizen
Nakumatt employees celebrate during the official opening of the supermarket chain’s outlet at Mlimani City mall in Dar es Salaam in July 2014.

Dar es Salaam — Retail chain Nakumatt is going through tough times in Tanzania as its shelves are running dry while suppliers claim they have not been paid for the services rendered to the supermarket for almost one year now.

This comes at a time when tax authorities in the neighbouring Uganda have commenced the auction of Nakumatt goods as it moves to recover millions of shillings owed by the struggling regional retail chain.

Uganda Revenue Authority last Tuesday started to auction perishable goods owned by Nakumatt at two of its Kampala outlets, Bugolobi and Kamwokya, as the taxman seeks to possibly recover its $71,000 dues.

But speaking in Dar es Salaam last week, the Principal Secretary in Kenya's Department of Trade, Ministry of Industry, Trade and Cooperatives, Dr Chris Kiptoo, said his government wants to see Nakumatt and Uchumi supermarkets flourishing.

"Our government has asked the two companies to provide us with a detailed analysis of the debts by October so that we can be able to see what we can do to help," he said in Dar es Salaam on Friday.

Dr Kiptoo was speaking during an event where senior trade officials from Tanzania and Kenya discussed trade wars between the two countries that have seen them exchanging import bans on several commodities during the past few months.

In his remarks, the Permanent Secretary in the Ministry of Industry, Trade and Investment, Prof Adolf Mkenda, said it was important for Kenya to help in payment of the money to suppliers of Uchumi and Nakumatt.

"As for Nakumatt, we have calculated and arrived at Sh1.6 billion as the amount that the supermarket must pay its suppliers so that things can get back to normal. It is just a small amount of money but since the suppliers are largely small scale producers, the debts mean a lot to them," said Prof Mkenda.

Nakumatt is banking on cash injection from a new strategic investor to address frequent stock outs at its outlets.

The company in May announced plans to close its poorly performing branches in Kenya and Uganda as part of cost-cutting measures aimed at saving the retailer Ksh1.5 billion (about Sh30 billion) annually. Back in Tanzania, a survey conducted by The Citizen shows that the shelves of the Kenya-based supermarket chain are increasingly running dry.

At its Mlimani City outlet, the supermarket has virtually no products in its shelves to the extent that in places where one would expect to see cooking equipment, detergents, bathing soaps and body oils among others, one will now see only biscuits.

While normally one would find a section of the shelves containing multiple arrays of biscuits, they have now been spread in one row in a majority of the shelves replacing other products.

Most of the shelves lie empty except for those furnished with cloths, television sets, novels and home equipment among the few.

Mr John Mlay, who chaired a taskforce for those who used to supply goods to Uchumi Supermarket (another Kenya-based retail chain that closed shop in Tanzania and Uganda in 2015), said Nakumatt could also be heading towards a similar direction.

Uchumi Suppliers Task Force chairman Mr Joseph Mlay told The Citizen that

"Nakumatt is facing a similar challenge that engulfed Uchumi's operations in the country... Nakumatt's trend of payment to suppliers has not been good, with some being paid just a quarter or half of what they have supplied at any given time," he said.

The debts, he said, have been piling up to an extent that some suppliers have not been paid for up to one year.

This, he said, was why some suppliers find no reason of continuing with the business of supplying their products to the retail chain operator as they also have to grapple with payment of bank loans with which they produced the products being supplied to Nakumatt.

A Nakumatt employee, who preferred anonymity, told The Citizen at Mlimani City on Wednesday that the company was indeed going through troubled waters that have resulted into some changes including the halting of its smart card remedial.

However, the staff said, the management has assured employee that things would return to normal upon completion of the ongoing elections in Kenya.

The Citizen spoke to a manager at Nakumatt's Milimani City outlet, Mr Benson Ola who said he was the official spokesperson for the company, noting however that the retail chain does not have plans to any of its shops in the country.

He refused to comment on operations matter but only clarified that the Nakumatt Smart Cards remedial operations have been stopped for a while because they are being upgraded.

He said that in Kenya, the cards operate in two phases, including loyalty and cash programme.

"The cards have been upgraded to cash platform and we are now rolling out the new application," he said.

In another development, Nakumatt Kamata outlet operational coordinator Cheffnody Boniface said he could not comment as he was not the spokesperson and referred this reporter to Nakumatt Tanzania country director Daniel Kimweli, who is the official spokesperson but could not be reached by phone.

For his part, Milimani City general manager Pastory Mrosso said that Nakumatt was one of their anchor tenants but of late they have not been performing well.

He said they have notified them of their inadequate display of products which was against their lease agreement.

"The management replied back and informed as of remedial action being undertaken to remedy the situation," he said.

Mr Mrosso said that he hoped Nakumatt will improve the situation fast by keeping proper stocks and trading modality.

In November last year, Nakumatt Tanzania wrote to the Fair Competition Commission (FCC), requesting that it be granted a permission to sell 51 per cent of its stake to Ascent Investment Limited so as to collect funds to tweak its operations amid increasing debts regionally.

This came only two years after the Kenyan retailer acquired Shoprite shops in Tanzania in a deal that was valued at Sh76 billion.

The story is the same in Kenya, where Nakumatt supermarkets are now severely grappling with product shortages.

Additional reporting by Aurea Simtowe

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