Kenya: Tuskys in the Footsteps of Collapsed Nakumatt and Uchumi

Kenya's retail sector is going through a rough patch that has seen the collapse of Nakumatt and Uchumi, with foreign operators such as Shoprite and Choppies opting to shut down operations.

With another big retailer, Tuskys, teetering on the brink of collapse, stakeholders such as the Kenya Union of Commercial Food and Allied Workers (KUCFAW) are now calling for government intervention in a sector that continues to grapple with mismanagement, corporate governance issues, and delayed payments to suppliers and workers.

The trouble at Tuskys Supermarket came to the surface in February when the company announced a restructuring programme that put an unspecified number of employees on the chopping board, citing a difficult operating environment and poor performance of the business over the past two years characterised by declining sales and customer numbers.

In April it closed three branches in Nairobi, Kitale and Mombasa, terming it a temporary move that was meant to help the firm serve its customers better in spacious branches by adhering to the government's directives of social distancing and personal hygiene to contain the spread of Covid-19.

In the same month (April), the government through the Ministry of Trade, Industrialisation and Enterprise Development confirmed having received a report about the struggling Tuskys Supermarket and put it on a weekly watchlist, with hopes that its "early" intervention could avert the collapse of the retailer that employs an estimated 6,000 workers, with over 63 branches in Kenya and Uganda.

The Kenya Association of Manufacturers (KAM), whose members form the bulk of Tuskys' suppliers, said the retailer is facing debt payment challenges and is flouting the joint Prompt Payment Code of Practice that provides for payment of fast-moving consumer goods (FMCG) within 30 days from the invoice date whilst other goods should be cleared in 45 days.

In 2018, the erstwhile giant retailer in the East African region, Nakumatt, collapsed and entered into a voluntary administration to protect itself from creditors who were demanding repayment of debts amounting to over $300 million.

And in January, the creditors voted to liquidate the retailer.

In April, Shoprite Holdings Ltd, Africa's largest fast-moving consumer goods retailer, brought its aggressive expansion into Kenya to a sudden halt and announced the closure of its Waterfront branch in Nairobi's Karen Estate, rendering more than 100 workers redundant.

The retailer had already opened four stores in Kenya with plans to open a total of seven branches in the country.

The South African-based retail giant said the move is part of a wider plan to exit markets that have proved to be unprofitable on the continent.

On September 8, Shoprite announced that it would close or dispose of its remaining two stores in Kenya in the year ahead and exit the market.

Botswana-based Choppies Enterprises Ltd has also discontinued operations in Tanzania and Kenya to curb further financial bleeding and restructured its outstanding loan estimated at $56 million as part of tactical measures to boost its survival due to mounting losses and stiff competition in the retail space.

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