Naivas Supermakets is locked in a family feud over the sale of a majority stake in the retail chain to South African retail giant Massmart.
Mr Newton Kagiri Mukuha has moved to court seeking to stop the sale on grounds that his siblings led by Simon Gachwe and David Kimani have excluded him from owning a piece of the retail store, which targets low income earners and is Kenya’s fourth largest supermarket.
Mr Kagiri told the court that he contributed Sh20,000 in 1990 of the Sh100,000 seed capital that led to the establishment of Naivas Supermakets by their late father Peter Mukuha Kago.
But Naivas, through its chairman Gachwe, said that Mr Kagiri was a stranger to the retail chain in a dispute that echoes that of Tuskys Supermarkets that a family feud threatens to tear apart.
Mr Kago was the brother of Joram Kamau, the founder of Tuskys Supermarkets, and the family feuds will offer a rare peep into the lives of the secretive families that that run the two retail chains
The Naivas feud is set to derail Massmart’s plans to set shop in Kenya, which has been identified as the next growth frontier for huge South Africa retailers as well as some of the world’s biggest investors keen to cash in on a growing middle-class and rising consumer demand.
Mr Kagiri, represented by advocate Evans Ondieki, said that he stood to suffer irreparable loss if the sale of a 51 per cent stake to Massmart Limited is allowed to proceed.
“My client’s interests are protected by Article 27 (of Constitution) that explicitly prohibits direct and indirect discrimination. He is the first born son of Mr Mukuha and cannot be excluded from gains made by his father when he was alive,” said Mr Ondieki.
“If this order is denied, Mr Kagiri stands to suffer since his siblings have entered into an agreement to cede majority stake in Naivas Supermarket Limited to a South African company and have allocated them shares while excluding Mr Kagiri.”
On Wednesday, High Court judge Anyara Emukule granted the application an urgent hearing and gave Mr Gachwe 10 days to file his defence in the succession dispute.
The business, started trading as Rongai Self-Service Store on June 1, 1990, and grew into the fourth largest retailer after Nakumatt, Tuskys and Uchumi Supermarkets. It has 26 stores under the Naivas brand.
Francis Mwangi, the advocate representing Mr Gachwe, reckons that Naivas is a private company incorporated legally with a list of directors that excludes Mr Kagiri.
Naivas notes that its directors are Mr Gachwe who has 12,500 shares amounting to a 25 per cent stake, Mr Kimani (25 per cent), Peter Mukuha (20 per cent), Grace Wambui (15 per cent) and Linet Wairimu (15 per cent), in an affidavit sworn by its chairman.
Mr Mwangi opposed the application saying a “stranger” should not block operations of a limited liability company that he is and has never been part of.
The entry of Massmart, which operates 105 stores in 12 African countries, will shake up Kenya’s formal retail market and offer the South Africa retailer a piece of the market after the exit of retail chain Metro Cash and Carry in 2005.
Companies from South Africa have found it difficult to crack the Kenyan market, prompting the exit of big brands like movie firm Nu Metro, fast foods giant Nandos and Supreme Furniture.
This could have informed its entry through the buyout of Naivas rather than starting operations from scratch.
Citigroup reckons that dominance of the sector by local firms has acted as barrier to the entry of retailers like Shoprite and Massmart to the Kenyan market.
“East Africa is where SA retailers lack scale due to strong local retailers. Acquisition looks to be the easiest route to build scale in this region,” said the report.