How founder’s magic faded from Tuskys stores
By Wainaina Wambu | December 13th 2020
Empires are not built in a day. Tuskys took about 40 years.
But in just a few months, a multi-billion-shilling dream jump-started with just Sh7,000 now lies in ruins.
For Kenya’s supermarket business, it appears there are no fairy tale endings.
And in the aftermath of Tuskys Supermarket’s collapse, multiple small businesses, thousands of jobs and livelihoods relying on the retailer’s ecosystem have also suffered.
Sometime in the 1980s, Joram Kamau, a village shopkeeper, took his bull to an open-air market in Rongai, Nakuru County.
The bull fetched Sh7,000 and upon that rock Tuskys was founded.
After decades of sheer grit, Kamau’s vision thrived and Tuskys perfected its model of “selling to the poor.”
At the beginning of the year, it was Kenya’s largest supermarket with over 50 branches stretching to even Uganda and attracting almost two million shoppers a month.
Now, the family jewel has only a few soulless branches that would be lucky to register even the Sh7,000 startup capital in a day.
Roped in sons
The reality of the collapse came recently when the supermarket shut its Magic Stores outlet in Nakuru. It was the oldest store, which opened in 1983 when Tuskys started expanding.
The branch made the Kamaus the first indigenous African family to own such a self-service store in Nakuru.
From the onset, Kamau roped his sons into the business where they began working after high school.
The larger family seems to have found its calling in supermarkets with Kamau helping his brother’s children start Naivas, now Kenya’s largest supermarket chain. It opened its 69th branch on Friday.
In a previous interview with this writer, Naivas co-founder and managing director David Mukuha, while appreciating the special links with Tuskys, said that even if they wanted to, they could not bail out their cousins.
This is because Naivas is no longer a family business, having sold a 30 per cent stake to a consortium of investors to raise Sh6 billion that has propelled the business and boosted corporate governance.
“The problem right now is that Naivas is not a family business. I have the other partner who wouldn’t support me to help (Tuskys) because they are competitors,” Mukuha said.
“Had it been the other way round, as a family I could have done it but right now as we are, I’m controlled by the board.”
Both supermarkets have at some point been rocked by bitter family disputes. Naivas managed to resolve its family issues, helped by improved corporate governance.
Tuskys on the other hand has been unable to resolve its wrangles.
Retail experts cite the family feuds, fraud and aggressive expansion among the reasons for the retail chain’s woes.
The firm has been in a restructuring process in the last five years seeking to separate ownership and management.
It had set its sights on listing at the Nairobi Securities Exchange but family wrangles disrupted it — with chief executive Dan Githua ousted at some point.
At the height of its powers, Tuskys offered to bail out Nakumatt — pledging as much as Sh3 billion — but the deal failed.
Peter Kahi, Nakumatt’s court-appointed liquidator from PKF, sees some similarities between the collapse of Tuskys and Nakumatt.
“The problems are more or less the same,” he told The Sunday Standard.
Nakumatt’s founders also helped Tuskys grow by giving Kamau credit as they both hailed from Nakuru.
After selling his bull, Kamau and his children went to Nakuru town to meet with an old woman who had grown tired of operating a wholesale shop and was looking to sell it.
It is said that the woman was impressed with Kamau’s work ethic and his stellar reputation to settle debts as he bought stock for his village shop from her.
She was even willing to give him Sh15,000 worth of inventory after he took up the shop.
What would Kamau, whose portrait hangs in every Tuskys branch near the tills, think of what his sons have done to his investment?
They have driven the supermarket into debt and lost the trust of suppliers. It is saddled with a Sh6.2 billion debt and it is not clear how much it has managed to repay.
Trust is crucial in the supermarket business with suppliers nowadays more cautious, owing to the billions of shillings lost with erstwhile retail giants such as Nakumatt and Uchumi.
Tuskys came to Nairobi in 1990, and it would take years for it to gain trust of suppliers as they demanded cash before delivering the goods.
The main competitors then were Uchumi and Nakumatt.
Lower and middle class
Tuskys, however, adopted a model of opening branches at bus stops and estates where a gap existed. This traffic also saw other small businesses thrive around the Tuskys footfall.
In a 2004 press interview when Tuskys had 10 branches and had started getting noticed as a retail powerhouse, Stephen Mukuha, one of the siblings at the heart of its operations for the past 40 years, said the vision was to create a supermarket chain that served the true lower and middle-class market.
In August this year, Tuskys embarked on a “rebirth” after securing Sh1.2 billion working capital from suppliers in the form of merchandise.
This was at Donholm’s Greenspan Mall, one of its largest outlets where it was an anchor tenant. Barely a month later, auctioneers had descended on the outlet and it has since lost the space.
It was here that Mukuha took responsibility for running down the supermarket and promised a turnaround.
“I own everything that has happened in this organisation ... I own that 100 per cent. The success of this organisation is for us all, but the failure is mine, we are going to make it good because we are committed as a family,” Mukuha told an audience of staff, banks, suppliers and landlords.
The exit of anchor tenants has been cited as a one of the reasons why other businesses in malls are worse off.
It was one of the reasons cited for the fall of fashion retailer Deacons.
“The collapse of anchor tenants such as Uchumi and Nakumatt led to a decline in foot traffic and decreasing revenues,” says the Deacons joint administrators’ report and statement of proposals compiled by PKF.
Tuskys has closed most of its branches in Nairobi’s central business district. Others across the country have temporarily been shut by auctioneers and most of the remaining ones are operating below par with few staff.
Tuskys has said it will trim its 52 stores to 25 to stay alive as part of its restructuring measures.
Formerly employing 6,000 staff in Kenya and Uganda, the retailer has sacked over 1,000 with most told that their terminal dues would be paid some time next year.
While defending layoffs in court in June this year, Tuskys Human Resources general manager Francis Kimani said the wage bill had become untenable as footfall to its stores had fallen owing to Covid-19.
Sales had dropped 35 per cent in April and May this year compared to 2019, he added.
Due to delayed pay stretching for most of the months of this year, it emerged that frustrated staff were even resigning and paying themselves with daily sales from the till. Others took some stock home.
“I have just decided to reduce my unpaid salary and paid myself,” one worker wrote in a resignation letter after pocketing Sh90,000 of the day’s sales.
“In case anyone has an issue with this, kindly deduct from my salary.”
Frustrated sacked workers also took to the streets and social media over unpaid salaries of up to six months.
A number of senior managers and employees fled the supermarket because of the challenges.
In September, Tuskys said it had procured Sh2 billion from an offshore fund to keep afloat and had already received Sh500 million as part of the first tranche.
Part of the money was to pay staff, landlords and suppliers.
The company has since gone silent on recapitalisation efforts. Our attempts to reach the management for a comment were futile.
It now seems even after the commitment, the family wrangles were never resolved with one of the siblings, Yusuf Mugweru, even offering his stake for sale.
In 2016, Mugweru took Mukuha to court for allegedly assaulting him.
He also claims that Mukuha and another brother, George Gachwe, had embezzled Sh1.6 billion from the firm.
Now, Tuskys is repeating the script that other troubled retailers have used before their eventual collapse — bouncing cheques, escrow accounts and promises of the entrance of a strategic investor.
Liquidation proceedings are in the courts with over 10 creditors pursuing for its winding up.
It managed to get a 45-day window, pleading that the business was being turned around.
The hearings will be on January 28 next year.
UK firm finalises acquisition of Kenyan insurer
- Bank profits surge to Sh60b in 4 months on economic rebound
- Firms to snub Kenya for not reducing emissions
- Tourist numbers edge up after record 2020 slump
- When boots and batons were met with twangs, cards and stethoscopes
By Peter Kimani
- Regent to manage Pangani low-cost housing project
By Peter Theuri