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PS lists reasons for Uchumi collapse before Nairobi court

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An Uchumi store. Mr Nalo blamed the rapid expansion for the collapse of the supermarket. Photo/FREDRICK ONYANGO

An Uchumi store. Mr Nalo blamed the rapid expansion for the collapse of the supermarket. Photo/FREDRICK ONYANGO 

By BENSON WAMBUGU

Posted  Monday, March 14  2011 at  00:00
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An ambitious expansion programme, weak management, coupled with poor resource policy and unsuitable financing led to the collapse of Uchumi Supermarkets, a permanent secretary has told a Nairobi court.

Mr David Nalo, the East Africa Community PS, testified that Uchumi embarked on an ambitious expansion programme which resulted in serious cash-flow problems and the subsequent fall.

This is according to the key findings of the task force instituted by the government to determine factors that led to the collapse of the supermarket chain.

Bedevilled stores

Mr Nalo, who headed a three-member task force, also cited inappropriate business models characterised by unsuitable merchandising policy and costly lease termination options as some of the problems that bedevilled the retail chain stores.

Besides Mr Nalo, other members of the task force were Mr Wanjuki Muchemi, the Solicitor General, and Ms Esther Koimet, the Investment Secretary.

The PS was the 14th  witness to testify in the case in which businessman Chris Kirubi and 12 others are charged with conspiracy to defraud Uchumi by selling a piece of land along Aga Khan Walk to investors for Sh147 million.

The accused allegedly leased back the building to Uchumi for Sh1.7 million per month in 2004.

In a desperate bid to rescue the retail chain, Mr Nalo said, the task force recommended to the Government and other stakeholders that an immediate cash injection of Sh975 million was necessary to meet working capital requirements.

Interim management

The Government was also asked to release Sh675 million by away of interest free bridging loan to enable the company to constitute an interim management to re-engage employees and lay off others in accordance with labour laws.

Mr Nalo said that the stakeholders were told to support the Kenya Commercial Bank and PTA Bank in suspending the sale of company assets and recommended that an agreement be made with the lenders, for Uchumi to trade as part of the implementation rescue plan.

Mr Nalo was the second PS after Ms Mary Ngare to be cross-examined on circumstances that led to the fall of Uchumi and the irregular sale of its property.