14 July 2018

Kenya: Uchumi Pins Its Hopes on Franchises

Struggling Kenyan retail chain Uchumi Supermarkets is banking on the sale of a $30 million plot of land in Kasarani, Nairobi and franchising of some of its branches as its only hope of staying open after the government ruled out injecting more money into the company.

Uchumi chief executive officer Mohamed Ahmed Mohamed said the board concluding discussions on franchising of its Lang'ata Hyper branch while talks on the sale of the land are at an advanced stage.

This is in order to unlock emergency funding for the retailer, even as it looks to raise long-term financing in the form of debt or equity by the end of the year.

"Our franchisee will put up stores, which we will manage at a fee while also earning royalties," Mr Mohammed told The EastAfrican.

Uchumi urgently needs cash to shore up its financial position, which has been badly damaged by sustained losses and failure to attract new capital from investors. However, the situation worsened last week when the government refused to advance more money to the ailing retailer.

According to the Ministry of Industry, Trade and Co-operatives, the government has already advanced a lot of money to Uchumi as part of a recovery plan, but the retailer has failed to live up to the terms of the bailout, forcing the government to halt further disbursements.

Uchumi is heavily indebted to the amount of $43.5 million, owed to suppliers in Kenya, Uganda and Tanzania, including accumulated salary arrears of four months amounting to $1.5 million.

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