State gives new conditions for Uchumi's Sh1.2 billion bailout
By Graham Kajilwa | July 31st 2016
NAIROBI: Troubled Uchumi chain of supermarkets has to meet a set of new conditions to warrant a proposed Sh1.2 billion State bailout.
Contrary to reports that an earlier cabinet meeting had approved a Sh1.8 billion bailout plan, on Sunday State House spokesperson Manoah Esipisu refuted the claims.
"I can confirm that there were discussions to bail out Uchumi where they (Uchumi) had tabled a proposed Sh1.2 billion bailout plan," said Esipisu.
He added: "The cabinet has not yet made a decision as reported...but it is close to making one. The cabinet asked Industrialization Cabinet Secretary to provide further details on some four specific issues for the final determination to be made."
Among the stipulated conditions is that the terms of the cash bail out have to be detailed and made clear.
"If the government cash injection will be turned to equity it has to be spelt out. If the cash will be a loan, then the applicable interest rates have to be spelt out as well," said Esipisu.
Also, Uchumi is required to elaborate entirely how different they expect this bail out to be from the other bail outs the retailer has had through their journey of turn around proposals.
"We have also to look at the moral hazards of the retailer. No one wants to see the crooks who brought Uchumi to its knees not taking responsibility," Esipisu said.
He added that a full audit of the retailer's management has to be done to ensure the personnel expected to handle the bailout cash are of high levels of integrity.
"Once these proposals in those terms go back to cabinet, then a decision will be made," said the spokesperson.
Uchumi is currently struggling with a Sh3.6 billion debt which also led to downsizing of the retailer by closing its regional branches.
It was earlier reported that a cabinet meeting held on Thursday last week had approved a Sh1.8 billion bailout.
In the Cabinet meeting, President Uhuru Kenyatta had directed ministries to pay up pending bills especially those owed by youth, and people living with disabilities who got tenders through the Access to Government Procurement Opportunities Programme (AGPO).
"Delayed payments to these groups have become more detrimental to them considering that they also have limited access to funding," noted Esipisu.
A special cabinet meeting chaired by President Uhuru is scheduled for tomorrow with every ministry expected to table a report detailing the paying up plan.
On the issue of banking amendment bill (that proposes caps on interest rate), Esipisu noted that President Uhuru has not yet formally received the bill: "...but when he finally gets it, he will spend time consulting extensively on the provisions, before applying his mind and making his decision."
He added: "The President warmly welcomes the goodwill proposals by commercial banks who have offered to set aside over Sh2 trillion for lending to SMEs at concessionary rates. Ultimately, the President believes that all stakeholders will find a solution to this issue of interest rates."
Esipisu further said that President Uhuru had reached out to his regional counterparts to intensify trade talks on the Economic Partnership Agreements between the European Union and East African Community following the current debated impasse.
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