Tusky’s retail chain hit by fierce sibling rivalrySunday April 29 2012
The Tusky’s Supermarket chain likes to keep its family secrets to itself-- but not anymore.
Inside its Mombasa Road headquarters in Nairobi– and spilling over to the 37 stores that it operates in Kenya- the company has been rocked by a family feud that could tear down the multi-billion-shilling business behemoth.
Also read: Trouble in the empire: An inside look at Tuskys Supermarkets family drama
The standoff has turned physical- with a case of alleged assault now pending in court in which Stephen Mukuha is alleged to have assaulted his brother, Yusuf Mugweru.
But that is only the tip of a behind- the-scene tussle over the whereabouts of more than Sh1.64 billion believed to have been siphoned from the company’s accounts. It also involves the registration of other companies without the mandate of the board.
Tusky’s prides itself with a dear slogan: “pay less, get more, everyday”.
It is an apt statement on its top family managers too who were left with a monolith- perhaps too big to handle by their late father, Mzee Joram Kamau – a man who built Tusker Mattresses Ltd from a provisional store in Rongai, Nakuru some 30 years ago.
From the humble tiny shop he set up in Rongai town, the business has grown in leaps and bounds into the giant Tusker Mattress- one of Kenya’s fasted-rising retail chains with an annual turnover of more than Sh30 billion.
To capture the youth, it re-branded into Tusky’s some four years ago and abandoned the Tusker Mattresses tag: – after all it was no longer exclusively selling mattresses.
But beneath, despite its phenomenal growth, it lacked proper managerial structures.
From 1990 when Tusker Mattress opened its first store on Nairobi’s Tom Mboya, the chain now boasts of 37 outlets run under the Tusky’s brand across the country and in Uganda. But it is the vicious battle in the family that now threatens to jolt this run of success the late Mr Kamau envisioned.
The family has now turned to their ageing mother, Hannah Wamaitha Kamau, to become chairperson of the board, hoping to cool the matters: after all she was behind the formation of the premier shop: Rongai Self Service Store where it all began in early 1980s.
But can she head a multi-billion-shilling empire?
The current row was sparked by claims that close to Sh1.64 billion belonging to the company may have been illegally diverted to other subsidiary firms secretly registered by some family members and directors of the company.
The stand-off has already claimed the jobs of several family members, including Ms Ann Wamaitha, who served as a senior officer in the supermarket chain’s accounting and internal audit office.
Run by seven siblings with Stephen Mukuha as managing director, the other directors are Yusuf Mugweru, John Kago, George Gachwe, Sam Gatei, Mary Njoki and Kenneth Mwangi Njeri. Mr Mugweru is also the administrator of his late father’s estate.
Correspondence obtained by the Business Daily revealed deep-rooted rivalry with a section of directors and shareholders of Tusker Mattress Limited through its holding company- Orakam- now pushing for a forensic audit of the retail chain’s financial operations and an overhaul of its corporate management structures.
Mr Mugweru in a demand letter to Mr Mukuha early this month claimed there is no transparency and accountability in the management of the company, which also lacked proper corporate structures.
He said the investment of Tusker Mattress funds into other outfits such as Guthera Villas Ltd, Tuskys Uganda Ltd, Pop Media Ltd, Kenspore Ltd, Enkarasha Ltd, Kiran Drycleaners Ltd and Gourment Company wasn’t clear and warranted a probe.
“It is noteworthy that the proposed forensic audit is to rule out fraud and therefore prudence would suggest that the aggrieved parties should seek to pursue through audited financial statement and require the management of the company to provide information and information they may deem unclear,” Mr Mugweru said in a letter dated March 3, 2012.
The estate administrator is also demanding the adoption of a new corporate governance structure for Tusker Mattress to define the role of each official and craft a policy on the employment of family members without compromising integrity standards.
“By resolving and setting our clear structures and guidelines, conflict will be avoided and the business environment will be improved by causing involvement of all stakeholders and staff in their respective agreed roles,” Mr Mugweru stated.
In response, Mr Mukuha wrote on March 5 that he was ready to re-structure Orakam Holdings, Tusker Mattresses Limited and other fully owned and partially owned subsidiaries.
He proposed that shareholding of Orakam remain in the hands of all the seven siblings while Tusker Mattress be fully owned by Orakam same as Tusker Mattress Uganda Ltd,Enkarasha Department Stores(K) Ltd, Enkarasha Department Stores Uganda Ltd as well as Dykak Investment Ltd.
“The shareholding of the partial owned companies shall be in accordance with the Memorandum and articles. However the shares shall be vested with Orakam Holdings Ltd,” Mr Mukuha suggested.
In the case of Guthera Villas Ltd he said shareholding would be determined by capitalisation with Orakam Holdings owning the land where individual house owners shall have invested funds to build nine planned units.
Mr Mukuhua further proposed that all the seven siblings form the management board of Orakam Holdings with their mother Mrs Kamau as chairperson of the board.
He also offered to appoint a qualified chief financial officer (CFO) to oversee the company’s financial activities as well as those of its subsidiaries.
The MD’s proposals were, however. rejected by Mr Mugweru who demanded a forensic audit of investments into the subsidiary companies and removal of Mr Mukuha and the company’s finance director. Frank Kamau. from office.
“Our clients express their shock and disappointment at the sudden change of heart, and qualification in respect of the various items of the agenda and the apparent attempt to delay implementation of various action points, many of which don’t require further deliberation by you as MD,” his lawyers, Murgor and Murgor Advocates, stated in a March 8, 2012 letter to Mr Mukuha.
They further stated: “From the foregoing we are instructed that it is clear you have generated a self serving document, which is wholly unacceptable to our clients,”
The stance by Mr Mugweru prompted action by Tusker Mattress Ltd company secretary—Livingstone Associates, which called for a restructure of Orakam Holding and subsidiary companies.
In a March 30, 2012 letter to Mr Frank Kamau, the finance director at Tusker Mattress, Livingstone Associates said it needed to set up the statutory records of the family companies and ensure annual compliance returns.
“We plan to undertake the second phase of the restructuring exercise to streamline the shareholding structure with the subsidiaries or Orakam Holding Limited to reflect direct ownership by Orakama Holding Limited. We are currently engaged with the company over this matter,” Winnie Jumba, a senior manager at Livingstone Associates, said in the letter.
Mr Mugweru, however, rejected the assertion by Livingstone Associates and said the dispute was between shareholders and directors of Tusker Mattresses and would not respect any interventions initiated by the finance director.
“The purported instructions of the said Frank Kamau are null and void for the want of necessary mandate and authority,” Murgor and Murgor Advocates stated in a letter to Livingstone Associates on April 4.
“Our clients have instructed that you desist forthwith from dealing in any way with Tusker Mattresses Group of companies and the shareholder of companies of Orakam Limited, pending the commencement and completion of a forensic audit and relevant investigations,”
Mr Mugweru lodged a formal complaint with the police over the suspected illegal investment of Tusker Mattress funds into subsidiary companies, prompting a raid on the company offices on April 17, 2012.
Documents from the Kenya Police Economic and Commercial Crime Unit showed that during the raid investigators confiscated mobile phones from the MD, the head of IT and the head of accounts.
Several laptops and desktop computers as well as files and correspondce documents were also confiscated from the Tusker Mattress headquarters on Mombasa road.
“For now, the cyber crime analysts are imaging the information in the computers, laptops and preparing a report which will be compared with the information in the files and other correspondences” the unit said in a memo dated April 18 and addressed to the Director of the Criminal Investigation Department (CID), Francis Muhoro.
Detectives are this week expected to begin questioning directors and shareholders as well as employees of Tusker Mattress. How the matter ends could determine the future of Tusky’s.