The 56-year-old entrepreneur last week agreed to talk to the Business Daily about the retail chain’s fall from the top.
Nakumatt Supermarkets’ implosion to the point near-insolvency in a matter of months remains one of the country’s biggest stories. Atul Shah, the man at the helm of the business, has remained quiet amid the raging storm, until now.
The 56-year-old entrepreneur last week agreed to talk to the Business Daily about the retail chain’s fall from the top.
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Nakumatt’s downfall has been extensively documented over the past year. However, you have remained in the shadows, only speaking through your lawyers in court. Why is that?
We have been bashed unrelentingly. I have chosen not to defend the truth or criticise lies. If I did so, people would still come up with new conspiracy theories. I only speak when I have something to say.
Your supermarket chain was once the poster child of successful entrepreneurship. How did it get to this point where you are fighting liquidation?
I can point to one thing; the Nakumatt engine relied heavily on bank loans to roar on. We also had commercial papers. Remember, we were present in 15 counties and each branch cost us around Sh100 million to set up. For a long time, things were fine; we would repay the loans and readily get some more. However, just over a year ago, Imperial Bank was placed under receivership and shortly thereafter Chase Bank. In October 2016, the interest rate capping law took effect and money dried up. Despite repaying our loans, nobody was willing to finance us.
The cycle stopped abruptly; Nakumatt’s fuel was no longer available. The loss of our most profitable branch, Westgate, also impacted us heavily. It accounted for 12 per cent of our revenues. In the space of a few days, it was gone in very painful circumstances which included the loss of lives.
Many people have opined that mismanagement was another cause of Nakumatt’s downfall. They also point to fraud, including pilferage by your staff. Your views on this?
Look, I would prefer we skip the question on mismanagement but let me say this; we have experienced people from outside and others from inside the family. Some external people we brought in were simply unable to understand how the business works. We have seen it all and all I can say is that the mismanagement claim is invalid. As for fraud and pilferage, that is part and parcel of any business. People want to earn a shilling but spend two. We are continuously taking measures to minimise it. However, the real cause of our problems were external.
At some point, there was talk of an equity investor coming in with Sh5 billion to save the business. How come this never materialised?
I have no reason to give. It just did not happen. At some point, Africa was rising, now people have dropped it. Our prospective investors had their own reasons for choosing not to fund us. Let’s leave it at that.
Some stakeholders have claimed that the prospective investor pushed you to buy out Harun Mwau’s 7.7 per cent stake in Nakumatt as a prerequisite to them signing on the dotted line. It is also said that a decision to pay him off brought your business to its knees. Was this the case?
As I told you before, there are a lot of incorrect narratives being peddled around. This is one of them. Yes, Mr Mwau sold his shares to me. I haven’t paid him a shilling. In business, people come and go and so his exit was not abnormal.
What was the transaction value?
That’s confidential. We are not a public company so I do not have to reveal that. All I can say is that this transaction did not have anything to do with our downfall as has been alleged.
Many people have buried Nakumatt already. Is there hope for the business really?
Look, Nakumatt has come a long way from when my father took over a failing business in 1978. As we grew, everybody in the chain benefited. Our suppliers, bankers, our landlords, staff, everybody. We were pioneers in the retail space. We are going through a rough patch but we shall surmount this as we have with other problems. We are here to stay. This is all we have. We do not have castles and mansions abroad to run away to.
How do you intend to do this, now that government has ruled out offering financial assistance? Your investor bailed on you and the merger deal application with Tuskys Supermarkets was also denied.
Contrary to what many people think, our suppliers are very supportive. Even our employees, despite us having not paid their salaries in full, are behind us. Most of our suppliers have agreed to park their old debt until an administrator is appointed. They are supplying us afresh under new terms. We created an escrow account and are paying their dues on a weekly basis. So far we have restocked seven branches and expect to have stocked the rest by the end of February. Tuskys Supermarkets is helping us with this.
I thought the Tuskys merger plan was dismissed by the Competition Authority of Kenya?
Yes, but in this specific arrangement, our relationship with Tuskys is simply that of a supplier. We are still following up on the merger application as directed by the regulator.
You admit that the business grew too fast and on borrowed money. Do you regret adopting this strategy? Also, what changes should we expect from Nakumatt going forward?
We did what any other company would have done. There was opportunity for expansion and we took it. I do not regret that. We have, however, learned a lot of lessons along the way and we shall make use of that.
Going forward, our customers should expect a much leaner Nakumatt. Currently, we have 27 stores in Kenya. We shall close a few more slow-performing stores and, once we have an optimum number, build from there. We may never reach our peak, but we shall be around.
We also realised that 70 per cent of the business’ revenues comes from 30 per cent of the items we stock. We shall concentrate on those; we may not sell everything you want but we shall stock the best and fast-moving items. It’s all a work in progress so I cannot give timelines.
What toll has this entire experienced had on your family and yourself? It must be stressful.
Me? Stressed? No. I am a man who has perfected the art of managing stress. I have been through tens of stressful situations including Westgate and the Downtown branch fire. My family and I have learned how to remain mentally fit as we tackle this.
