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The slow and painful death of Nakumatt

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A detailed report by a Kenyan leading daily has revealed why Nakumatt is on a slow and painful death.

Apparently, gross mismanagement, poor strategic decisions, tax issues and massive internal losses perpetrated by some wayward employees and suppliers are the main reasons behind Nakumatt’s slow death.

Ironically, the retailer –  which by far remains the most strategic supermarket chain in Kenya has received over 10 bids for capital injection from international funds.

However, reports indicate that all negotiations on the capital boost have been in vain. This is because investors looking to inject the much needed cash in the retailer want the owners – The Atul Sha family – to cede control.

Atul Shah, the managing director of Nakumatt, is however unwilling to let go.

Instead, in a letter to the government, he appeals for a bailout from the government. “If such goodwill can be extended to Nakumatt, we would be very grateful considering the current situation is not of Nakumatt’s making whatsoever,” Mr. Shah is quoted in the letter.

Shockingly, according to the daily, Nakumatt has been portraying the face of a highly successful and profitable company while in reality, it raked up losses.

Indeed, this might explain why the retailer, despite its famed success has always been cagey about listing on the Nairobi Securities Exchange –  a move that would effectively open it up to public accounting scrutiny.

Currently, as troubles shoot from its caves, it is being estimated that Nakumatt has debts amounting to over Sh. 15 billion.

This has seen it delay or totally fail to tender payments and statutory deductions for its employees.

Already, the government has expressed concern on the consequences that the departure of Nakumatt from the local scene could have on the economy.

According to the daily, a letter from the government to Nakumatt that was addressed by the Principal Secretary for Industry, Trade and Cooperatives Chris Kiptoo, the government fears that additional closures of the retailer’s branches could trigger panic.

“[It] has the potential of triggering panic in the wholesale, retail and manufacturing sectors and further complicating government efforts in stabilising the domestic economy that is already reeling from the effects of high inflation and rising prices of essential products,” the letter said.

However, in a rejoinder, Nakumatt blamed its apparent collapse on the government. The retailer, through its MD Atul Shah, claimed that the government’s actions against Nakumatt over the years have cost it an estimated Sh. 35 billion.

These actions include closing of all Nakumatt branches in 1998 due to contaminated canned beef, demolition of Nakumatt Thika Road branch, the issuance of Sh. 1 billion tax bill by KRA, and the fire that razed down Nakumatt Downtown, claiming the lives of 29 people.

According to Mr. Shah, engineers repairing a transformer on Kimathi Street were responsible for a power surge that sparked the fierce fire.

“It is important to note that during all these and sufferings (sic), Nakumatt devotedly paid its banks, suppliers, employees, landlords, and government revenue without fail and the above events are what have strained the company into the current cash flow challenges,” he wrote.

However, gross mismanagement has also been cited as one of the reasons why employees have found ways to steal from the company. The daily reports: ”

Wayward employees and suppliers have taken advantage of this weak management structure to steal from the company — also known as “shrinkage” in retail parlance. Unscrupulous employees often collude with suppliers to pay for goods not delivered.

In some instances, the retailer has accumulated a lot of “dead stock”— goods which it has already paid for but which are not moving off the shelves.

Employees keep on finding new clever ways of fleecing the company.

Our sources told us the supermarket lost millions of shillings in a credit card scam whereby certain employees pocketed money from credit card purchases which were cleverly stopped from reflecting on the company’s system.

Every month until the scam was discovered, the retailer paid millions of shillings to banks for the credit card purchases which fell far short of its actual collections.”

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