The government is set to let go of its shareholding in Uchumi Supermarkets once the troubled retailer stabilises under the ongoing bailout and restructuring plan.
Trade Principal Secretary Chris Kiptoo yesterday said the shareholding exit will come after the government recoups taxpayers’ funds pumped into the company over the years.
Uchumi is in talks with a strategic partner to pump in fresh capital after years of struggle supported by Treasury bailouts and debt restructuring.
“We are not planning to stay for so long as shareholders of Uchumi, so once it stabilises then we will move on to something else and let it grow on its own.
Our focus is simply to see the retailer back in full operations and that all stakeholders are taken care of,” Mr Kiptoo said in an interview.
The government owns a 14.67 per cent stake in the loss-making Uchumi and is the second-biggest shareholder behind tier III lender Jamii Bora, which controls 14.90 per cent of the retail chain.
Uchumi last year survived a winding up suit and is currently banking on a Sh1.8 billion Treasury bailout package, of which only Sh500 million has been released so far. The targeted strategic investor is expected to pump in Sh3.5 billion to help Uchumi better restock its shelves and meet supplier debts and loans to lenders.
“We are not adding our shareholding and we are very keen on due diligence before we disburse funds to Uchumi so that it does not get drowned again. We have a team carrying out compliance checks to assure us when we can release the next Sh1.3 billion,” said Mr Kiptoo.
He said the retail sector, which contributes up to eight per cent of the gross domestic product, had been weakened over time by failed self-regulations, poor management and lack of transparency at the privately-owned supermarket chain.
Uchumi, which had resorted to asset sales to ease its cash position, putting up for sale the Ngong Road branch, Lang’ata Hyper store, and a 20-acre plot in Kasarani — was declared insolvent in May 30, 2006 and subsequently suspended from trading at the Nairobi Securities Exchange.
The retailer was readmitted on the Nairobi bourse on May 31, 2011, having received Sh675 million from taxpayers in a recovery plan fronted by government, and a further conversion of supplier debts to equity.
The latest bailout plan from the government is the second one, underlining the critical role the government has played to keep the retailer afloat.