In Summary
  • An over ambitious expansion plan saw Uchumi record a Sh1.2 billion loss at a time it owed suppliers and lenders over Sh3 billion.
  • At Kenya Airways things are also getting thick after Parliament’s transport committee vowed to block the airline’s plan to lease the JKIA.

The government’s misadventures in companies that have for years depended on bailouts from taxpayers’ coffers is akin to riding a dead horse.

From State corporations to parastatals, the taxpayer has parted with billions in attempts to rescue institutions that have only dug themselves into more debt.

But the situation that Uchumi Supermarkets and Kenya Airways have found themselves in paints a unique picture of what could have been, while also placing taxpayers’ necks on the chopping board.

Uchumi opened its doors in 1975, just two years before the national carrier was born, and picked up quite fast.

The retailer’s entry and the government’s investment in it was aimed at ensuring essential goods were made available to the ordinary Kenyan, hence the name Uchumi — which translates to economy.

EXPANSION

By 1987, Uchumi was among the biggest supermarket chains in the country and was only rivalled by Ebrahim, which recently shut down after 75 years of operation, and Gilanis.

Uchumi went on to expand and had branches in just about every major town in Kenya.

Things appeared rosy until June 1, 2006 when the retailer’s managers announced that the company was insolvent.

An over ambitious expansion plan saw Uchumi record a Sh1.2 billion loss at a time it owed suppliers and lenders over Sh3 billion.

Its assets were worth Sh1.8 billion. The retailer’s 250 suppliers were owed Sh1.8 billion.

Uchumi also owed PTA Bank Sh475 million, East and Southern Africa Trade and Development Bank Sh474 million, KCB Sh416 million and ICDC Sh24 million.

RECEIVERSHIP

The banks placed the retailer under receivership. Then-Trade minister Mukhisa Kituyi announced a Sh657 million bailout by the government barely 22 days after the closure.

Other shareholders also raised Sh300 million and Uchumi reopened its doors, but remained under receivership until February 2010 when it cleared loans owed to KCB and PTA.

After receivership, Uchumi appeared to be back on track and there was hope that it had learnt tough lessons from the collapse.

Receiver manager Jonathan Ciano was appointed CEO, and not long afterward the retailer was growing.

By 2015, Uchumi had 40 branches in Kenya, Uganda and Tanzania. One year later, history repeated itself.

Poor management, graft and over ambition in expansion saw Uchumi back in the red.

DEBTS

The retailer was not paying distributors, and the few supplies firms that received their dues on time were owned by senior managers, according to an audit report by consultancy KPMG.

Suppliers filed an insolvency petition. The retailer now owed creditors Sh6.1 billion, which did not match its Sh5.8 billion assets. Suppliers were owed Sh5.4 billion of the total debt.

The suit was however withdrawn after suppliers agreed to convert Sh3.6 billion into equity and Uchumi promised to clear the Sh1.8 billion balance.

The government pumped in another Sh700 million to get the retailer back in business. Last year, suppliers went back to court after the retailer failed to pay them on time.

The retailer owes them over Sh3.6 billion. The government once again pumped in Sh800 million but Uchumi burnt it all on some suppliers’ debt, partial restocking and paying staff.

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