The government’s move to halt bailouts to Uchumi Supermarket Plc has seen members of the top management quietly exit, leaving it dysfunctional at a time when a turnaround strategy is expected to start.

This, plus banks shying away from the retailer in terms of fresh loans, has paralysed Uchumi’s remuneration to its lean staff, making high-paying positions less attractive. Lawyers representing the firm have equally withdrawn their services.

Mohamed Ahmed Mohamed, the former Uchumi CEO, quietly left the  retail chain under unclear circumstances after convening his last meeting with creditors in March 2022. He is yet to be replaced.

Since taking over office last September, President William Ruto’s administration has also not appointed a representative to the board of Uchumi as the State’s commitment generally wanes. Out of the required 11 board members, there are only five directors steering the retailer’s strategic policy directions.

The current board comprises John Karani, chairman, and four other board members – Erastus Njoroge, George Karanja, Baiju Shah, and John Mwara – all of whom Uchumi cannot fund.

“The dysfunctionality of the Uchumi Board has affected the operations. Government representative to the board left at the change of Government, and for this reason, Uchumi has not had a properly functioning board for some time,” Owen Koimburi, the insolvency practitioner, told creditors last week.

Uchumi had only Sh394 cash at hand as of June 2023 despite trimming its losses by more than five times to Sh28,362. It remains in the red as equity levels widened further to a negative position of Sh6.62 million in that full year.

Voluntary agreement

Government loans stood at Sh1.2 billion, while lending from State-affiliated KCB Bank has touched Sh1.61 billion. Other banks owed include Co-operative Bank, Kenya Development Corporation (KDC), and United Bank for Africa (UBA) Kenya, which in 2019 rejected the formation of a Company Voluntary Agreement (CVA).

In 2020, the High Court okayed the CVA for the first time, paving the way for the restructuring of the creditors’ balances and recapitalisation of the business under the watch of an insolvency practitioner. “The inability to unlock cash flow that has already been referred to has led to less regular meetings, and hence fuller implementation of this CVA,” added Koimburi.

Last week, Uchumi unanimously agreed with creditors to revise the CVA, allowing conversion of 50 per cent of debt into preferential shares. A portion of the remaining debt will be written off to help jumpstart the retailers’ recapitalisation path from the anticipated sale of core assets. 

The supermarket’s financial woes date back to 2013 when an ambitious expansion plan, mismanagement, conflict of interest, and corrupt dealings pushed it into a yearly downward spiral.

Since then, the management has tried various measures to resuscitate the retailer amid stiff competition, growth in online shopping, and fast-moving consumer preferences, especially among the young generation that barely knows the Uchumi brand. Uchumi juggled between raising funds through rights issues, sale and leaseback plans with financiers, and the sale of non-core assets.