Nakumatt struggling as awaited investor delays
Nakumatt Mbarara on Buremba Road in Mbarara Town. PHOTO BY FELIX AINEBYOONA
What you need to know:
- In mid-2016, cracks started to emerge from Nakumatt’s operations as shelves went empty.
- In October 2016, it admitted it was facing financial challenges and was looking for an investor.
- That investor is yet to come on board as the supermarket chain continues to hemorrhage money.
Kampala. East Africa’s largest retailer, Nakumatt continues to struggle after failing to pay its workers in Kenya.
In Uganda, the retailer is battling landlords over unpaid dues, suppliers demanding for their payments and agitated staff looking at a bleak future.
As Nakumatt battles to get salaries of more than 1,000 workers in Kenya, in Uganda, one landlord is threatening to shut-down operations in Mbarara and attach properties.
In April 2017, State minister for veterans Bright Rwamirama, Mpororo Group Ltd, and Ms Florence Rwamirama dragged Nakumatt to court over rental arrears from 2013 totalling Shs2b.
Nakumatt Mbarara, opened in 2012, has its outlet in a building owned by Mr Rwamirama along Buremba Road.
In the suit, Mr Rwamirama alleged that he was forced to remodel the building to fit Nakumatt’s demands in 2012 and that he used borrowed money from dfcu Bank to cater for the changes.
Prior to the suit, Nakumatt honoured payments – after threats from the landlord – for three months to August 2016. The troubled retailer then allegedly started issuing bounced cheques. Subsequently, they got sued.
However, Nakumatt protested some of the claims in the suit and instead countersued the landlords alleging that they had advanced them money to do the remodelling on the building.
“…the Respondent used the applicant’s funds as an interest-free facility to carry out the proposed structural changes and not the funds borrowed from dfcu. The applicant advanced a sum of $150,000 (Shs540m) to the 1st respondent on her dfcu account, which sum of money was agreed that it would be refunded to the applicant or converted as rent,” reads Nakumatt’s counterclaim.
The retailer also alleges that the landlords breached the tenancy agreement and in the counterclaim wants them to refund the monies advanced to them less of rental arrears.
It also points out that all rental arrears between September 2016 and March 2017 had been cleared. It insists the arrears are just Shs400m and not Shs2b.
Nakumatt has been struggling for the last one year and in part, this lawsuit indicates some of those challenges. In the court documents, Nakumatt admits asking the landlord to reduce the space due to “poor sales at the branch” that has left it financially constrained.
Nakumatt has pegged the revival of its fortunes on a new – yet to be named – investor.
The investor was supposed to bring in $75m (Shs27bn) cash for a 25 percent to turnaround the chain whose expansion drive was driven by debt.
Mr Andrew Dixon, the Nakumatt Group marketing director, told Business Daily, a sister newspaper to Daily Monitor last week that a delay in securing an investor had placed the business under pressure and seen them unable to meet some obligations.
“We had a delay in some salary payments. The restructuring has taken longer than anticipated and affected some of our liabilities,” he said.
In the meantime, shelves remain empty as suppliers hold back until they are paid.
