Tuskys MD replaced after failed Ukwala takeover

KENYA – Retail chain Tuskys Supermarkets has replaced its managing director barely a week after it lost a multi-million-shilling bid to acquire rival Ukwala supermarkets stores.

Stephen Mukuha, who has been Tuskys’ MD since 2001, was replaced last Thursday in what appears to have been engineered by the six siblings with whom he co-owns the business.

George Gachwe, a younger brother of Mr Mukuha, is the new managing director of the 24 years old retail chain.

Tuskys, which is Kenya’s second largest supermarkets chain by the number of stores, is a family business owned by five brothers and two sisters.

The change of management came just a week after the Competition Authority of Kenya (CAK) barred the retailer from taking over all but one of the six Ukwala Supermarkets stores it had targeted.

Tuskys had paid Sh200 million for two of the Ukwala stores it wanted to acquire and was to pay an additional amount to complete the transaction.

Tuskys has also been in the limelight over a court battle pitting  the fourth born in the family of owners Yusuf Mugweru against three siblings he accuses of siphoning about Sh1.6 billion from the retail chain’s bank account.

Mr Mugweru has also accused Mr Mukuha of physically assaulting him in a legal case that went into full hearing after the parties failed to settle the matter out of court. The court case has offered the public a rare glimpse into the workings of the highly successful family business that has since inception been run under an impenetrable cover of secrecy.

Tuskys’ employees last Christmas went on a one-day strike demanding a pay increase, causing the retailer a Sh100 million revenue loss.

Mr Gachwe’s appointment was communicated to staff on Friday through an internal memo seen by the Business Daily.

“Please note that transitions of this nature are not unique to Tuskys but are part and parcel of the processes and procedures of corporate organisations the world over,” the memo says.

“Moreover, this does not alter the composition of the board of directors as the outgoing MD will continue to exercise his mandate within the board and all other duties assigned to him by the MD.”

Tuskys is owned by five brothers and two sisters who took over the business following the death of their father Joram Kamau in 2002. John Kago, the first born in the family, owns 10 per cent of the retail chain while Samuel Kamau (second born), Mr Mukuha (third born), Mr Mugweru (fourth born) and Mr Gachwe (fifth born) have a 17.5 per cent stake each in Orakam, the holding company of Tusker Mattresses Ltd (Tuskys Supermarkets).

Each of the two sisters has a 10 per cent stake in the multi-billion-shilling business.

Mr Gachwe yesterday confirmed his appointment and said that the board had picked him to chart a new course for the business that has more than 52 outlets countrywide.

He said Mr Mukuha would be assigned other duties “in due course” and that he would continue serving as a procurement director “for the moment” while the company looks for a replacement.

“The position of managing director cannot be held indefinitely and that is why we decided to make the change,” said Mr Gachwe. “Tuskys is growing bigger by the day and the board thought it was time to start doing things differently.”

Mr Mukuha did not acknowledge the existence of any notice on management changes and declined to comment on the matter. Mr Gachwe insisted that the recent streak of bad news at Tuskys had no bearing on the board’s decision to effect management changes despite the timing of his appointment.

The CAK’s decision to block Tuskys’ acquisition of five Ukwala stores resulted in the closure of the two former Ukwala outlets on Nairobi’s Tom Mboya and Ronald Ngala streets. The 150 employees working at the two stores are still at home one week since the shops were closed.

Tuskys’ board met on Thursday morning, the same day the workers reported to the retailer’s head office on Nairobi’s Mombasa Road for a briefing on the closure. But the employees said the meeting did not produce any tangible results and that the management had only asked them to register and go home to wait for calls.

“Francis Kimani, the human resource manager, did not tell us much. He merely asked us to register and wait for phone calls,” said an employee of the affected stores who did not want to be named.

Sorting out the employment mess arising from the closure of Ukwala stores is one of the issues Mr Gachwe will find in the in-tray when he steps into Tuskys’ top office. It has not helped that most of the employees were redeployed from the Ukwala stores on contracts that expired on July 31.

The contracts had not been renewed by August 4 when the stores were closed, meaning that the employees had worked three days without tangible agreements. Mr Gachwe must also find a formula to quickly reopen the closed stores in order to arrest losses that the company has incurred during the week-long closure.

The stores are strategically located in areas with heavy human traffic, making them high-trading-volume outlets. Just over a week ago, the Kenya Union of Commercial Food and Allied Workers obtained interim orders from the Industrial Court stopping Tuskys from introducing performance indicators and new qualification benchmarks for the workers – an issue that also remains unresolved.

August 12, 2014; http://www.businessdailyafrica.com/Corporate-News/Tuskys-MD-replaced-after-failed-Ukwala-takeover/-/539550/2415972/-/n98dvg/-/index.html

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