Some employees of the troubled Tuskys Supermarket chain in Nakuru have called for the establishment of an independent regulator to monitor growth and control expansion of retail outlets in Kenya.
Tuskys Nakuru Branch manager Mr. Samuel Ikonya said thousands of lives have been ruined after the collapse of retail enterprises in Kenya due to the ‘ruthless and competitive nature of the business’.
“What is happening at Tuskys is now a familiar script in the country’s retail sector. We are only left with this outlet in Nakuru after closing our flagship Magic branch. We are now operating with skeleton staff after hundreds were laid off,” he said.
“No new supplies of goods are coming in against a background of creditors who include suppliers, landlords and banks demanding to be paid their dues running into millions of shillings,” stated Mr. Ikonya.
While wading into the debate on troubled retail sector recently, Governor Lee Kinyanjui had noted that due to lack of regulation, the sector’s landscape was in a sorry state and the situation has seen giants such as Nakumatt and Uchumi wiped out of the market while Tuskys was fighting for survival.
“The role of a structured retail outlet is critical for the distribution of local goods both locally and regionally as when Nakumatt closed shop in Tanzania, our exports to that country dipped significantly,” noted governor Kinyanjui.
“As we continue to witness the replacement of local retails with foreign chains, it must not be lost on us that the priority of any retail chain is to act as a marketing point for products from its mother country,” stated the governor in an interview.
For 47 year old Tuskys employee Jotham Nandwa, nothing could lift the gloom. Not even the reassuring words from his boss Mr. Ikonya that all shall be well.
“The few of us remaining on the staff list still show up at work every single day with hope that things will get better. We now work for a pittance. For the last six months, we have not received our salaries yet we have school fees obligations and mouths to feed,” Nandwa said.
“It is a double tragedy for some of my colleagues who thought they had found a new lease of life here after they were laid off by their previous employer-Nakumatt, which went under two years ago,” Nandwa reminisces ruefully.
For 28 year old Anne Gitonga who had leased space at the once giant retail outlet to conduct MPESA business, things have gone from bad to worse in the past six months with no word from the top management.
“Many former employees have slid into depression. They have lost hope of getting jobs elsewhere as more than four big supermarket brands have exited Nakuru market in less than four years including Nakumatt, Ukwala and Choppies among others,” she noted.
“The Uchumi story is also too familiar in the county as the once veritable giant now on its deathbed has spent a better part of recent years pleading to have part of its multi-billion debt forgiven to enhance its survival chances,” observes Ms. Gitonga.
She says that the number of customers visiting the only Tuskys branch hanging on a thread has drastically dropped from an average of 2,000 per day in its heyday to less than 100 currently.
Governor Kinyanjui said aggressive and unregulated expansion of retail outlets to increase presence was turning out to be their biggest ‘strategic miscalculation’.
“Less than a decade ago, Nakumatt, Uchumi and Tuskys were household names dominating the retail sector with expansive reach and presence within East Africa while Naivas and Ukwala on their part spread their tentacles to virtually all parts of Kenya. We must critically evaluate the need for a regulator to track and monitor artificial growth of branches that are not sustainable and done at the cost of suppliers,” noted the governor.
“The troubles experienced by several retail chains in the recent past is an indication of underlying structural challenges facing the sector. The trend is all too familiar and very worrying,” the county boss noted.
He said the regulator should also be empowered to create a bond where investors in the retail sector would make prescribed cash deposits that would cushion suppliers who are left high and dry when such companies close with billions of unpaid supplies and job losses.
Kinyanjui emphasised that the unregulated environment had proven to be injurious to the long-term interest of the sector as the retail chains were making poor strategic business decisions, possessed poor management structures while the market continued being saturated making it very competitive for long-term survival.
Another giant Ukwala was acquired by Botswana’s Choppies, which has already announced its exit from Kenya. South Africa’s Shoprite, a late entrant in the local market, is also closing shop after a short stint.
He said the regulator should be empowered to monitor retail outlets’ strategies of aggressive expansion which he said overstretched their financial muscle when the profit margins were slim, sparking off a financial crisis.
“It should be anchored in law that investors in this sector must embrace proper governance and professional management if they are to be allowed to operate. The economic impact of collapse of retail outlets in the SME sector is far reaching and must be well documented. Unfortunately, many never reopen,” said Kinyanjui.
The County boss further suggested that as retail outlets expand, the law needs to bar tightly family-owned management which offers little room for professionalism through a corporate governance structure within its top management rank.
“A regulator would be backed by laws that check blatant conflict of interest where top management in retail chains become suppliers to supermarkets and pay themselves before others. The laws should also check against misrepresentation of the company’s books by accounts personnel,” he concluded.
He called on the National government to institute a fact finding survey to unravel the challenges facing the sector.
He said the study and the recommendations therein would help to protect retail outlets and avoid the unfortunate trend witnessed in the past.
By Jane Ngugi