Consider bailout for Nakumatt to minimise effects on the economy

Opinion is sharply divided on whether the Government should spend taxpayers’ money to bail out a troubled private business in the name of Nakumatt Holdings. There is no doubt about the ownership status, but Kenyans could do well with looking at the wider picture in the debate. Its management has confirmed that the business is under great financial strain at the moment, blaming a series of misfortunes for its troubles.

The claim can easily be dismissed as failure on the part of the managers to handle problems as they came. It can be said that they could have done a better job; but only now with the benefit of hindsight. More than anything, the giant retailer is offering direct employment to over 1,600 workers.

Nakumatt’s history from the time it was set up as a kiosk to the multinational firm it has become, is a Kenyan gem. It is the holding tenant in several of the city’s iconoc addresses. From Thika Road Mall, NextGen, Galeria, The Junction, Westgate, Lifestyle, Two Rivers, Garden City, Nakumatt’s symbolic elephant stands astride the doors. No doubt, its death will have huge ramifications for the economy given the web of supply chain networks it has established. It is comforting that the Government has taken interest in the dwindling fortunes of the supermarket chain. It should do more than standing in as a mediator between the troubled firm and its anxious creditors.

In the interim, the Government could advance a bailout to the company to help it finance its operations as a longer-term solution is sought. As the US reeled from the 2007 financial crisis, President Barack Obama advanced $80 billion to GM, the giant automaker in February 2009. GM’s impressive turnaround is largely attributed to that bailout.

With full information of the risk to the taxpayer, injecting cash into the retail chain will no doubt go a long way to rescueing one of Kenya’s signature businesses. In any case, the Nakumatt brand must surely have some value. The Government could also give a loan guarantee to enable the retailer find a lender. No effort should be spared to keep Nakumatt afloat.