Tuskys fires contractor over Sh100m monthly loss to employee theft

Tuskys Supermarkets has become the latest retail chain to report losing millions of shillings to theft by employees, underlining the extent of pilferage risk that the sector operators are facing in the market.

The retail chain, which is Kenya’s second largest, last month said it was losing more than Sh100 million every month to theft by employees.

Tuskys made the disclosure in a letter to Hipora Business Solutions East Africa, a firm it had hired to help curb rampant fraud within its shops.

“The audit report showed on average Tuskys is losing in excess of Sh100 million a month on top of costs associated with the [loss prevention] services,” Tuskys said in a letter dated August 25.

Tuskys’ estimated loss of Sh100 million per month indicates that employee theft across the retail industry could top Sh2 billion annually, making it one of the biggest victims of internal fraud alongside commercial banks.

The retailer said video footage has shown some cashiers pocketing cash, failing to issue receipts and walking away from the tills and leaving cash drawers unlocked.

Employees involved in receiving goods from suppliers are also actively defrauding the company, Tuskys says in the letter.

The retail chain consequently directed Hipora to remove its staff from all its stores on August 26 with the exception of double checkers who ascertain deliveries by suppliers.

'Rampant fraud'

Hipora has since complied with the directive, removing its camera room operators and system controllers from Tuskys shops.

The consultancy firm has, however, written back to Tuskys, accusing the retailer of failing to act on rampant fraud perpetrated by its own employees.

“It is on record that in the past we have brought to your attention various loopholes that exist within your operations and even given recommendations on how to seal them,” Hipora wrote in a letter dated September 1.

“Unfortunately no action or very little has been taken as per our advice,” Hipora said, arguing that taking action on the flagged cases of theft by employees is ultimately the responsibility of the retailer.

Tuskys has in the past one year sacked scores of employees after accusing them of fraud. Its protest letter to Hipora signals that the vice has not stopped.

READ: Union protests delays in Tuskys staff theft probe

Retailers have particularly suffered from fraudulent activities at the till, including cases where cashiers bill customers in full but record a lower price in the system and pocket the difference.

Others keep a customer’s receipt and cancel the sale, taking cash from the register and making it appear as if the money has been returned to the customer – a process technically known as voiding transactions.

“You will appreciate that both cashiers and supervisor who enter passwords to void transactions are your staff,” Hipora wrote to Tuskys.

Internal fraud has hit almost all the major retailers forcing Nairobi Securities Exchange-listed Uchumi Supermarkets to also hire Hipora to investigate its staff.

This has expanded the domain of Hipora, which also counts Eastmatt, Nakumatt, Quickmart and Maathai supermarkets among its clients.

For Uchumi, hiring Hipora is part of a broader plan to check fraud at the retailer whose losses have been blamed on mismanagement by former executives.

The retailer made a pre-tax loss of Sh262.3 million in the half year ended December compared to a pre-tax profit of Sh106.9 million a year earlier after sales fell to Sh6.8 billion from Sh7.2 billion in the preceding period.

The retail chain, which has been accused of cooking books, obfuscated its net loss/profit figures by leaving them out of its financial statements.

Besides employee theft, supermarkets also incur substantial losses from shoplifting by customers. The retailers, through the Retail Trade Association of Kenya, recently claimed that they lose goods worth Sh3.5 billion annually to shoplifters.

The Police Service has, however, disputed this figure and blamed the retailers for not pressing charges against the suspects and often letting them go after recovering the stolen items.

Retailers, on the other hand, blame the police for treating the shoplifters as petty offenders and releasing them on cash bail thus making it difficult to contain the crime.

The theft racket partly involves collusion between supermarket employees and shoppers to whom goods are delivered at a fraction of listed prices.

The widespread fraud has seen retailers invest heavily in technology such as CCTV security systems besides hiring loss prevention firms like Hipora, raising their operating costs.