Treasury silent on Uchumi, promises to revive KQ and Mumias
By Dominic Omondi | June 14th 2016
The fate of cash-strapped Uchumi Supermarkets hangs on the balance after Treasury Cabinet Secretary Henry Rotich omitted it from the list of government's bail-out plan.
In his Budget speech on the floor of the National Assembly last Wednesday, Rotich said that the government was working on plan to resuscitate three of its strategic investments including national carrier Kenya Airways (KQ), telecommunication firm Telkom Kenya and sugar miller Mumias Sugar. The three, just as Uchumi, have been reeling in financial ruin.
However, Rotich was tight-lipped on the fate of the retail chain which recently requested for Sh1.2 billion bailout from government to pay suppliers their outstanding debt.
Uchumi CEO Julius Kipng'etich did not confirm whether or not this omission meant that the government had thrown them under the bus. "We have handed over Cabinet paper for discussion. We are just waiting for feedback and hope it will be positive for the company's turn-around strategy," said Kipng'etich.
The struggling retail chain is banking on a plan to have suppliers convert half of their debt into equity which will still leave them with a supplier debt of Sh1.8 billion. Also outstanding would be Sh2.5 billion loan from Kenya Commercial Bank (KCB) and United Bank for Africa (UBA). However, some suppliers have complicated the debt-to-equity conversion plan when they said they will have to get approval from their parent companies.
Besides having suppliers convert their debt into equity, the retailer is also selling some of its properties including its pieces of land in Kasarani and Langata and its Ngong Road branch. The Government has a 15 per cent stake in Uchumi. Getting the Government's cash is too critical for the retail chain's revival plan as the money would be used to settle debts for close to 800 suppliers owed Sh200,000 and less by the chain.
On KQ, Rotich said the Government was working on a way to turn around the financial fortunes of the airline to ensure that it gets back to its profit making ways.
He also had nice words for Telkom Kenya in which he announced that Orange East Africa has sold its shares to Helios Investment Partners even as the government itself increased its shareholding from the current 30 per cent to 40 per cent.
"We expect the new investors to turn around the fortunes of the company so that it can be sustainable business capable of competing effectively in the communication sector," he said. British private equity firm Helios has since announced plans to sink capital into the telco whose previous majority shareholding found competition from Safaricom too intense to bear.
Even Mumias Sugar which had to close shop at some point as it struggled to stay on its feet was lucky to be given Sh2 billion in the Sh2.3 trillion budget in which the government extended its generosity to other fledgling manufacturing firms such as Pan-Paper mills, Rivatex and New KCC.
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