Chinese retailer China Square has leased a branch owned by Uchumi Supermarkets on Nairobi’s Langata Road and invested Sh600 million even as it seeks to grow its reach in Kenya.
The retailer, which also operates two stores within Kenyatta University’s Unicity Mall and The Waterfront Mall in Karen, Nairobi, has been rebranding the store commonly known as Uchumi Hyper, and targets to start operations on June 15.
Uchumi has opted to develop a food market in a smaller space adjacent to the mall it has leased out to the Chinese retailer.
"This is a seven-year lease and we will be paying directly to Uchumi because they no longer need a bigger space at the moment and that is how we got an opportunity to invest in that area,” said Lei Cheng, director at China Square, in an interview with the Business Daily. “They [Uchumi] are setting up a smaller unit next to Langata Hyper, focusing on the food market.”
Mr Lei said China Square will make a Sh600 million investment for rebranding and stocking the 100,000 square feet of space that it has leased. The money has been raised internally as well as through external borrowing from banks. China Square wants to capitalise on the human and motor traffic in the Langata area, which Mr Lei said is good for business growth and product uptake. The shop, which is known for pricing its goods cheaply, plans to hire 130 locals to run the business.
Mr Lei said China Square will open another store in Mombasa later in the year, adding, “Kenya is a thriving market for business and the business environment is conducive.”
China Square, in early 2023, found itself under fire from local traders who accused it of unfair competition due to its low prices, pointing to Kenya’s struggles in striking a balance between attracting foreign investment and free trade while protecting locals.
Mazars Consulting Ltd, the firm supervising Uchumi’s company voluntary agreement (CVA), said in March this year there has been some positive developments in the retailer’s recovery strategy. According to Mazar's latest report, revenue collection from the Langata property is on “the right trajectory with anticipation towards a better-improved performance,” supported by the acquisition of the new tenant.
Mazars, who had not made it public that China Square was entering Langa’ta Hyper, said the new tenant would ensure the financial viability of the property.
Uchumi’s unaudited financial records show it was averaging Sh5.1 million in sales per month between July and December last year compared with an average of Sh3.03 million in 2022. This translates to a 68 percent growth.
Uchumi late last year also managed to sell three acres of the 20 acres it had intended to sell in Kasarani. The transaction was at Sh401 million, leaving it with net proceeds of Sh351 million and thereby making available the much-needed funds for operations.
