Editorials

EDITORIAL: Tuskys creditors, suppliers must make painful choices

tuskys

A Tuskys branch in Nairobi. FILE PHOTO | NMG

Summary

  • The spiralling problems facing retail chain Tuskys must not be allowed to end like the case of Nakumatt, which left all involved stakeholders staring at huge losses.
  • It is commendable that lessons have been learnt from the Nakumatt case, with the Competition Authority of Kenya now taking a more proactive role in ensuring that there is a solid plan to pay suppliers and keep the business as a going concern.
  • It is important, however, that all parties — shareholders, suppliers, banks — work together if the supermarket is to be saved.

The spiralling problems facing retail chain Tuskys must not be allowed to end like the case of Nakumatt, which left all involved stakeholders staring at huge losses.

It is commendable that lessons have been learnt from the Nakumatt case, with the Competition Authority of Kenya now taking a more proactive role in ensuring that there is a solid plan to pay suppliers and keep the business as a going concern.

It is important, however, that all parties — shareholders, suppliers, banks — work together if the supermarket is to be saved.

It has become patently clear from the state of the retailer’s books that the solution will come from the entry of a strategic investor, who can put in much-needed capital and iron out any corporate governance weaknesses that have brought the firm to its knees.

The first thing that needs to happen is to stop the ownership wrangles that have made it difficult for the retail chain to attract investment, unlike the case of its peer Naivas.

No strategic investor will be willing to put in money when there are such issues bubbling under the surface.

While suppliers are owed money, and are rightly jittery seeing how they lost billions of shillings in Nakumatt, they must also agree to a plan that guarantees the retail chain will not close its doors.

This calls for painful choices, which will likely include continuing to supply the supermarket at a time of great concern, given that without the supplies, it will shut down and will find it hard to attract investment.

Banks that are owed money by the supermarket must also be willing to restructure the debt. It would be better for them to wait for their money longer, but knowing they will eventually get paid, rather than push the business to closure and end up losing the money as unrecoverable debt.

It is encouraging that the CAK has pushed the firm to outline a plan that will see suppliers get paid, albeit over a longer period.

The regulator must continue to keep a sharp eye on the retailer to ensure the commitments outlined last week honoured. These will be key in regaining the trust and cooperation of all the parties involved, and eventually giving a potential investor enough confidence to put capital into the business.