Taxman’s auction notice deepens Nakumatt woes

Mr John Njiraini, the KRA commissioner- general. FILE PHOTO | NMG
Mr John Njiraini, the KRA commissioner- general. FILE PHOTO | NMG 

The taxman intends to auction Nakumatt Supermarkets’ property in a move that signals a deepening of the retail chain’s financial troubles.

In a notice published in the Kenya Gazette, the Kenya Revenue Authority’s (KRA) customs services department has listed five consignments of Clarks footwear and handbags flown in through Nairobi’s Jomo Kenyatta International Airport as the goods to be sold at the fall of the hammer.

The KRA says Nakumatt has not paid the required taxes for the goods that are currently stored in a warehouse.

“Pursuant to the provisions of Section 42 of the East African Community Customs Management Act, 2004, notice is given that unless the under mentioned goods are entered and removed from the Customs Warehouse Keeper within thirty (30) days from the date of this notice, they will be sold by public auction on November 29, 2017 ,” the notice says.

Nakumatt said the goods are kept in a bonded warehouse owned by the retailer and would be distributed to the retailer’s outlets once the duty is paid.

“Arrangements are being made to clear the customs commitments,” Nakumatt said.

The retail chain signed a franchise agreement with UK-based footwear company Clarks in 2013.

The agreement remains intact despite the huge pile-up of unpaid customs duty and the overarching financial debt burden that have brought the company on the brink of collapse.

Operations stalled

Once a formidable giant in the East African market, Nakumatt has in recent months been crumbling under the weight of heavy debt.

The company’s suppliers and landlords, owed billions, have all moved in to recover their money, bringing its operations to a halt.

Nakumatt’s troubles deepened yesterday after its landlords in a Dar es Salaam city mall shut down the local branch over unpaid rent.

The management of Mlimani City Mall closed Nakumatt’s shop, saying the retailer had not paid Sh13.8 million (TSH300 million) in rents accumulated over three months. 

Pastory Mrosso, the owner of Mlimani City Mall, said that the retailer had also been operating below standards, with almost empty shelves, despite being an anchor tenant.

“As anchor tenant, Nakumatt enjoys some privileges, including lower rents because such occupants are expected to attract visitors and benefit other operators within the mall. However, they are operating below average…their shelves are almost empty and at the same time, they are not paying rents,” said Mr Mrosso.

The closure comes barely a month after Kenyan officials went to Tanzania to try to assure the government that Nakumatt and Uchumi supermarkets would flourish in the country.  

The Dar es Salaam meeting in September was co-chaired by the Permanent Secretary of Tanzania’s Ministry of Industry and Trade, Adolf Mkenda, and his Kenyan counterpart, Chris Kiptoo.

Prof Mkenda produced documents showing that Nakumatt had not paid a total of Sh73 million (TSh1.6 billion) to its suppliers for a couple of months.

Latest spat

The closure of the Tanzanian branch is only the latest in a string of spats that Nakumatt has had with its landlords. Yesterday, the High Court heard the case Nakumatt has filed against its landlords at the Junction Mall in Nairobi.

Owners of Junction Mall had in late September sought to eject Nakumatt from the premises citing unpaid rent.

However, Nakumatt moved to court for an order restraining the landlord. Nakumatt has over the past one year shut down a number of outlets in Kenya and Uganda as it became clear that the family-owned retailer was unable to meet its hefty financial obligations.

In July Nakumatt shut three branches in Uganda citing financial restructuring. Locally, the retailer has closed several outlets including its Bamburi Branch in Mombasa; Lunga Lunga in Nairobi; Thika Road Mall; Next Gen on Mombasa Road; and Westgate also in Nairobi.

Merger talks with rival Tuskys are seen as offering light at the end of the tunnel for Nakumatt. The two retailers have written to the Competition Authority of Kenya informing it of their intentions.

Should the merger of the two companies be approved, they would form the largest retail chain in Kenya.