Last week, after the troubles bedeviling Nakumatt became an open secret, Weekend Business received two interesting emails.
One was from an aggrieved supplier who is allegedly owed close to Sh2 million.
“While I am a supplier of Nakumatt and wish the retailer all the success, I must say the family of Shah are the most unprofessional, arrogant and selfish lot,” wrote Bischof Elizabeth from Saudi Arabia.
“The brother-in-law of Atul Shah was importing…sabotaging local products. Mrs Mina, the sister, would order all outlets to put our products on the lower shelves and put imports as visible as possible.”
The other was from a well-wisher hoping to help the retailer ride the tempest to shore. “I have seen reports about Nakumatt’s state of affairs. Please, ask Mr Shah to get in touch with me as I think that I have a solution for his predicament. It’s sad indeed for a Government to take that view,” Evans Onchwati wrote from China.
The two readers perhaps demonstrate the split emotions among Kenyans towards the retailer that started off as a family store when Hasmukh Shah founded Nakuru Mattresses.
Nakumatt boss Atul Shah has now come out to apologise to the retailer’s employees, creditors, suppliers and shoppers and Kenyans for the sorry affairs at the supermarket.
Unlike the accusing language that Mr Shah used in a letter to Trade Principal Secretary Chris Kiptoo blaming the Government for its woes, he struck a reconciliatory tone, appealing to stakeholders to help Nakumatt see through the turbulence.
“We have learnt a painful, humbling lesson. We shall emerge stronger, firmly focused to place Nakumatt high on the continental and global retail map,” Mr Atul wrote to Weekend Business.
“Allow me this opportunity to once again express my sincere apologies to all the stakeholders we have let down. I can’t say it enough, but I am sorry and sincerely committed to facilitating the turnaround of Nakumatt, whatever it takes,” he added.
The retailer’s management has climbed down from the boorish attitude that saw it offer skewed terms to suppliers and even rival their products with its Blue Label brand – rapidly expanding while some small and medium enterprises were closing shop.
Mr Shah said he has not enjoyed sleep, meals or time with his immediate family in a long time and will only rest when the retailer is out of the woods.
“I am the ship captain and will do all that is within my capacity to deliver this vessel safely to the port. We have a wonderful team from KPMG among other advisors who are taking us through the paces and I have no doubt we shall get to the promised land,” he said.
Nakumatt is walking on the thin ice that Uchumi skidded through only a year ago. With unpaid suppliers, employees going without salary, rent and bank debts pilling up, it is not unimaginable that, like Uchumi, the supermarket chain is separated from litigation only by sheer goodwill.
Uchumi was nearly shut down after suppliers went to court to have it wound up and the creditors paid. It took assurance of the Government that it would inject cash and a deal with suppliers to convert debt to equity to save Kenya’s oldest retailer.
Mr Shah said he has been talking to creditors with a promise that the deal with a private fund to inject capital is still on track despite delays.
“Given that we have been actively engaging all our suppliers, we do not foresee such a setback. It remains in the interest of all our suppliers to support the ongoing negotiations and avoid litigation processes as that would only serve to slow down fairly advanced efforts currently underway,” he said.
But is Nakumatt too big to fall, with the potential to drown banks, suppliers – especially small and medium-sized businesses – employees and gleaming steel and glass malls?
The supermarket chain is said to have run into insurmountable debt — Sh4.7 billion in 2012 to a Sh18 billion — resulting to a downgrade by a credit rating agency to “watch list” as it struggled to pay suppliers.
Nakumatt now closes three more branches
While Mr Shah said he was not at liberty to share the exact financial woes of the retailer, he acknowledged that a substantial amount is still outstanding to creditors.
“We have, however, reached out to the respective creditors explaining our situation and seeking the necessary moratoriums and payment plans as necessary to enable us stretch the resources currently available,” he said.
However, with the revelation that one outlet in Uganda owed Sh515 million in rent and about half a year’s rent was outstanding for another branch in Nairobi, the total amount owed in rent alone could be huge.
The retailer has closed two outlets at Katwe in Uganda and Ronald Ngala Street in Nairobi.
Nakumatt operates 63 stores across the region, most of them the anchor tenants of the malls that house them.
James Hoddell, Director Emerge Developments Ltd, says he has heard from reliable sources that Nakumatt is close to getting a deal.
He, however, warns that in the event that the retailer closes shop, it will leave mall landlords in a sticky situation of having to write off rent arrears and get new anchor tenants.
“Some will have to downsize, break up the stores and give away parts to different businesses, and even try to attract other players like Naivas, Tuskys and Chandaria,” Mr Hoddell said.
“And, yes, there may be a price distortion downwards especially for double-storey units,” he added.
Does this mean Nakumatt merits a bailout? The jury is still out there on whether letting the retailer fall will have an adverse effect on the wider economy.
Although PS Kiptoo ruled out a Government programme, he said he was worried about the retail sector, which contributes about eight to 12 per cent of the Gross Domestic Product.
“Last year we had Uchumi, this year we have Nakumatt. We do not know who is next so we have to put in regulation,” he said.
Mr Shah, rising to the occasion, has even conceded that he is willing to play a smaller role at Nakumatt if only to salvage the business his father Mangalal Shah bought from Hasmukh.
“I have sat in many meetings in the last few months and (I have) been resolute,” he said.
“I have on numerous occasions reiterated that we have made very good progress on the corporate governance front and major outcomes will be announced soon. The family shall never be a hindrance to the growth of Nakumatt. That I promise.”
Given the circumstances, the bailout may be quite big and Mr Shah said only “credible potential investors” will be allowed a peek into the hole as such disclosures form a key component for due diligence studies.
“We are in a situation that requires a fresh and significant capitalisation of this business. Any funds received from either public or private sources will always be treasured and will be diligently invested,” he said.
The CEO said Nakumatt is also willing to consider taking a haircut, selling more stake to save it.