KENYA – Cash-strapped Kenyan retailer, Uchumi Supermarket, is set to receive a huge cash injection if a planned land sale to the Kenya Defence Forces materializes.
According to reports by Business Daily, the National Land Commission (NLC), operating on behalf of KDF, is working on the papers that will convert the 3.7 acres of land and buildings, on which Uchmi Supermarket’s branch sits on, estimated to be worth more than Ksh500 million (US$4.4m), for military use.
The reports haven’t indicated why the KDF is angling for the land that is adjacent to Wilson Airport, one of the busiest airports in terms of aircraft movement in East and Central Africa.
Uchumi is betting on the proceeds of the KDF sale to aid its turnaround strategy and offset its towering debts.
“For now, we cannot comment further on the value of compensation until we receive the award letters for compensation from the NLC.
“We are confident that the expeditious completion of the process will go a long way in implementing the turnaround strategy,” said Uchumi Supermarkets CEO Mohamed Ahmed Mohamed.
However, the move will see the military entangled in a court battle that has seen UBA Bank push to auction the property over a Ksh172 million (US$1.5m) defaulted loan.
The supermarket says the High Court had stopped the planned sale and all pending debt recovery cases, outstanding loans, and rent claims against Uchumi, in favour of a Company Voluntary Agreement (CVA).
Under the CVA, the retailer and over 120 suppliers were to form a committee and agree on how to settle debt owed to them and ensure the payments are made on time.
Uchumi CEO reckons the retailer is committed to the voluntary agreement and the sale to KDF will give it the funds to execute the plan.
“We are still committed towards implementation of the CVA and we believe that this could be a golden opportunity for Uchumi to resolve its historical issues,” Mr Mohamed said.
Tuskys drops bid to lease brand
Meanwhile, struggling supermarket chain Tuskys, is reported to have dropped the bid to lease its brand through a franchise after losing most of its stores due to non-payment of debt to landlords and suppliers.
The retailer had received approval from the Competition Authority of Kenya (CAK) to allow various independent retailers to trade using its brand at a fee following delays in closing a Ksh2.1 billion (US$18m) financial deal with a mystery offshore investor.
People familiar with the franchise deal say it has collapsed as the retailer struggles to remain afloat amid mounting bank and supplier debts.
Franchising was to allow the retailer to keep its brand alive besides generating fees from the partnerships.
It also offered the cash-strapped Tuskys – whose branches have been whittled down from more than 60 to less than seven — an opportunity to bounce back in the future should it get deep-pocketed investors.
The move followed a limited franchise strategy by rival Uchumi Supermarkets, which also fell on hard times.
The franchising model faces several challenges in Kenya’s retail market, including enforcing standards such as customer experience, types and variety of goods.
The biggest and most successful supermarkets are owned, operated and centrally coordinated by the same entities.
Such an ownership structure also brings advantages like sharing of costs, including marketing and logistics.