Uchumi files for bankruptcy

What you need to know:

Shut. The retailer closed outlets in Uganda over making losses


The increasing number of lawsuits against Uchumi Supermarkets (Uganda) Ltd has prompted the beleaguered company to petition the High Court to wind up its operations to safeguard its remaining assets from creditors.

If successful, the liquidation petition filed on December 7, 2015 at the High Court would see the company’s assets placed in the custody of the Attorney General as the official receiver.

Several creditors have execution orders while other cases are pending before different courts. The unsettled dues include money owed to suppliers, landlords and employees who will be rendered jobless.

The board of directors of Uchumi Supermarkets Ltd, the majority shareholder in Uchumi Supermarkets (Uganda), blames low sales, stocks and fraud for the challenges that have rendered the Uganda operation commercially unviable.

“Your petitioner has had working capital constraints that have resulted in delayed payments to suppliers. As of July 31, 2015, your petitioner had outstanding payables amounting to Shs8.8b ($2.62m),” said company secretary John K. Wambugu, in an affidavit to the court.

The High Court invited all interested creditors to reply to Uchumi’s petition within 15 days from December 10, 2015 the date they were notified through a court directive. The submissions will be heard from February 22.

Uchumi’s operations are projected to have a negative cash position of Shs23.8b ($7.1m) by end of December 2015, up from Shs12.7b ($3.78m) in September. Documents filed in court show that the company had incurred a net loss of Shs10.3b ($3.062m) as of June 30, 2014. Between January and June 2015, losses registered Shs295m ($87,713).

The company opened shop in Uganda with a nominal capital of Shs5.296b ($1.6m) in May 2001. The main branch was at Garden City.
Other branches were opened in the city suburbs of Kabalagala and Nateete, as well as the upcountry towns of Mbale and Gulu. A move to expand to Mbarara failed due to the losses the Uganda operation was making.

Uchumi’s net asset position declined from Shs107m ($32,000) as of June 2012 to negative Shs19.4b ($5.780m) as of June 2014. “The decline was due to losses in the financial years 2012, 2013, 2014,” said Mr Wambugu.

Concerns are emerging over how Uchumi will settle its obligations with more than a dozen creditors including Crown Bottlers, Century Bottling Co. Ltd, Nateete Shopping Centre, Samona Products, Dembe Trading and landlords seeking their dues.
The employees have also included the rest of the shareholders in their lawsuit, plus CEO Julius Kipng’etich.

On top of that, entities that secured court orders prior to filing the petition have attached several assets already. For instance, Golf Course Holdings, the landlord at Garden City, has locked up the premises and denied the company access to the assets held there-in.
Ugachick Poultry Breeders Uganda Ltd has attached other assets from Garden City while Imperial Hardware Ltd has attached a 250KVA generator and two 500KVA generators.