Kenyan billionaires are reeling from a relentless pile up of debt and alleged involvement in fraud that has impaired their wealth, leaving them at the risk of permanent exit from the club of the super-rich.
It has recently become clear that retail mogul Atul Shah of Nakumatt Holdings and politician Cyrus Jirongo top the list of those who built their empires on big debt that has come back to bite them.
Businessman Peter Munga has also fought a number of debt storms in his empire arising from a series of deals gone sour.
Last year’s sudden collapse of Chase Bank left the lender’s former chairman, Zafrullah Khan, facing the prospect of total assets seizure after he was accused of stealing Sh1.6 billion from the bank that is being sold to Mauritius’ SBM Holdings.
The list also includes former Imperial Bank chairman Alnashir Popat who is set to lose his 14 per cent stake previously valued at more than Sh1.5 billion in the lender, which collapsed under the weight of a Sh28.8 billion internal fraud.
Mr Shah, who is staring at one of the largest wealth resets in the country’s history, is scrambling to save what remains of Nakumatt Supermarkets, the retail giant he built in 25 years.
With Nakumatt’s stores closing in quick succession, Mr Shah has recently pegged the retailer’s survival on a proposed merger with rival Tuskys, but most financial analysts have dismissed the proposal as impossible.
Landlords, including mall owners, are already replacing Nakumatt with other anchor tenants and it remains to be seen what a tie-up with Tuskys will look like.
Nakumatt emerged as one of Kenya’s most leveraged companies after utilities KenGen #ticker:KEGN and Kenya Power #ticker:KPLC that are immune to dangers of death by debt because of their captive markets and State guarantees.
As of December 2016, Nakumatt was on the hook for Sh18 billion, its debt having ballooned from Sh4.7 billion in 2012.
“Growth of the business has been highly leveraged, with the ever-growing working capital and capex requirements largely relying on short-term debt funding,” ratings agency GCR said of Nakumatt in a report.
The company used debt to expand into prime locations, placing it ahead of the competition and building for itself a reputation as a premier retailer pushing the value of the Shahs’ ownership to billions of shillings.
Awash with cash
Mr Jirongo was recently adjudged bankrupt after defaulting on a Sh700 million loan he owed to eight companies. The declaration is ironical for a man who was previously so awash with cash that the Sh500 note was named after him.
Mr Jirongo’s reputation as a high roller emerged in the 1990s when he headed a lobby group that was funded from government coffers to help Daniel arap Moi retain power upon the re-introduction of multiparty democracy in Kenya.
Mr Jirongo, who later went on to win multi-billion shilling construction deals, including development of the Hazina Estate in Nairobi’s South B, finally lost most of his wealth after years of battles with creditors.
Though Mr Munga’s multi-billion shilling empire remains largely intact, he has paid or has offered to pay tens of millions of shillings to creditors in new deals that went bad. Last week, for instance, the businessman settled a loan with Jamii Bora Bank to avert the auction of his Sh400 million properties.
Not all Kenyan billionaires are, however, undergoing a recession. Some like Adil Popat, the proprietor of Simba Corporation and brother to Alnasir, have continue to expand their empires in spite of the short-term economic headwinds brought by political uncertainty and a credit crunch.
Adil has recently acquired a 35 per cent stake in Hemingways Holdings, adding another jewel to his Simba Corporation’s hotel properties that include Nairobi’s Villa Rosa Kempinski.
He is also set to buy a 50 per cent stake in Mombasa-based Associated Vehicle Assemblers (AVA) from Marshalls East Africa, giving Simba full ownership of the company.
The fast-paced growth of Simba saw a reorganisation of the company, with Mr Popat relinquishing the CEO role to Dinesh Kotecha and retaining the role of an executive chairman.
Billionaire businessman Chris Kirubi has also been bullish with a proposed buyback of a 51 per cent stake in Haco Industries that he had sold to South Africa’s Tiger Brands in 2008.
The move comes after he raised his ownership in the acquisitive Centum Investment Company to 30 per cent.
Businessman Benson Ndeta is also set to raise his interest in Savannah Cement to 74 per cent from 44.6 per cent, giving him control of the company.