The pain of running a retail giant that’s on its knees
By Wainaina Wambu
| March 10th 2020
Deep inside Nairobi’s busy Industrial Area, silence masks unending economic fear at the Uchumi Supermarkets head office.
In its heydays, Uchumi touched the hearts of many consumers, but today the once giant retailer’s reputation is in tatters.
The listed supermarket last turned a profit over a decade ago and has survived several insolvency attempts. It is now saddled with a Sh7.6 billion debt that is more than its assets.
Uchumi is one of the worst performing stocks at the Nairobi Securities Exchange despite being the first retailer to list in the region in 1992.
Its shares closed last week at 30 cents from a high of Sh19.80 recorded in 2012.
This puts the retailer’s current paper value at a modest Sh109 million, far from the Sh3.85 billion valuation between 2007 and 2015 when the shares traded at Sh14.50.
Though Uchumi has been written off countless times, Chief Executive Mohamed Mohamed is still convinced that the retailer will stage one of the greatest comebacks in corporate Kenya.
When Financial Standard visited the headquarters, a weary guard opened the iron gates to a compound that speaks loudly of its lost glory.
It is reminiscent of broken promises and ruined livelihoods.
There are many vehicles at the parking lot, but inside the building it is deathly quiet. Finding the receptionist at their desk is a game of chance.
Later, we learn that Kenya National Trading Corporation (KNTC), Uchumi’s landlord and a top shareholder, has since commercialised the parking yard after fights with the tenant over rent.
Hints of a fallen empire are in the empty offices full of old computers, equipment and stacks of dusty files. The many meeting rooms where ideas were once birthed now house loneliness.
Life might begin at 40, but for the 45-year-old Uchumi Supermarkets, the 40s are an unending race to escape the grim reaper’s deadly kiss.
On the way to the CEO’s office, one gets a picture of how deprived the “Home of Value” has become.
Mr Mohamed has taken on what may be his toughest assignment yet - trying to revive a company that seems on its last kicks.
Besides, the retail business has seen its fair share of the downturn. One of the employees sought reassurance from this writer on whether it is possible to turn around Uchumi as the staff are tired of delayed salaries.
At one time Uchumi had over 1,500 employees and indirectly gave jobs to more than 250,000 people. Today, it has only about 200 countrywide.
Up the stairs to the first floor, across the hallway and into the corner office sits a soft-spoken man - coincidentally the same age as Uchumi.
Mohamed believes he can make history where many battle-hardened corporate gurus have failed and return Uchumi to profitability.
He is not your ordinary chief executive. The trappings of power do not ooze from his tall frame.
His office tells the tale of a big man making it with meagre resources. It is nearly empty with the shine of his large mahogany desk long gone.
The grand bookcase is empty and the shelves are not lined with troves of documents, trophies or memorabilia.
While other executives keep a few books and “pretend” to read, Mohamed says he has no time for books as he is too busy.
The chief executive, who inked a three-year contract in 2018, says he will only fully move into the office and even put up personal mementos when the business “stabilises.”
Most executives of firms listed at the NSE are well compensated, earning millions in salaries and hefty bonuses. But for the Uchumi boss, his title is just that, and he is not complaining.
Mohamed wears resilience well. Beneath the power suits, it is hard to tell that he sometimes endures the embarrassment of not paying bills.
He might be the only chief executive who lives in fear of electricity disconnection at home, or whether he will make his monthly rent. He is content with an iPhone 5 released to the market five years ago.
“People cannot understand how one can go out daily but not be able to put food on the table,” he says.
“Sometimes rent arrears have accumulated, or I’m always under the constant threat of electricity being disconnected and sometimes even I’m late in paying school fees.”
He is cautious, owing to the volatile nature of commerce, and is wary of making big promises.
“I’m not here to promise heaven and earth, I’m only here to say that we have to execute on what we have been promising,” he told Financial Standard.
In the couple of years that Mohamed has been at Uchumi’s top seat, he has endured it all, including ridicule, delayed paychecks and sleepless nights.
He admits that it is sometimes hard to get out of bed in the morning. “I’ve faced a lot of ridicule from many people. They don’t understand why I’m still working here,” Mohamed confides.
“There are people who call Uchumi a dead dog or say I’m trying to revive a corpse. I’ve received bad comments, but my focus is on the tough assignment before me.”
Equating himself to a professional boxer, Mohamed says he cannot waste his energy brawling on the streets with every detractor.
“You use your energy to add value to the business. I’ll just frustrate myself by getting annoyed and allowing that negativity to get inside my mind. I just laugh and move on,” he says.
One major reason why Uchumi has lost workers is delayed salaries. Mohamed says he sometimes cannot pay his own rent but calls that a “personal distraction” to a higher goal.
He says the job has humbled him to the core and taught him profound lessons on patience. He is quick to point out that he has adapted and learnt to survive the many “shooters” from all sides.
It has brought to him a sense of humility and changed his perspective about life – that one can survive on meagre resources.
Mohamed says at first, he was reluctant to take up the chief executive role knowing that he would be plunging into murky waters that have seen several of his predecessors quit.
“It took me a while before I sent in my application after the advertisement. I kept questioning whether I was sure I could do this. Many of my colleagues were also trying to encourage me to take up this position,” Mohamed says.
Exactly a week ago, a key vote saved Uchumi from liquidation. This has boosted the CEO’s morale to turn around the retailer.
The company owes creditors, including banks, suppliers and shareholders close to Sh5 billion. It entered into an agreement - Company Voluntary Agreement (CVA) - with the creditors, with a promise to eventually settle the pending bills.
The CVA, which restructures the retailer’s debt, will see the creditors take a 30 per cent cut and get repaid in parts over six years.
The deal is the final gamble for Mohamed to kickstart Uchumi’s recovery. It had been rejected twice before it was agreed upon last week.
Aside from the haircut, 40 per cent of the debt owed to unsecured creditors will be converted to non-cumulative convertible preferred shares.
“The confidence was a big milestone for us because now we can move forward in the business immediately to get into some point of stability,” says the CEO.
Mohamed, who has a telecommunications background, joined the retailer in October 2016 as a deputy to the former CEO.
When he took office, he says, two strategic investors had promised to pump in substantial cash, which gave him hope of quick recovery.
Besides, a government bailout was in the pipeline and they expected to sell a piece of land worth billions in Kasarani.
Then, Uchumi had 20 branches. Sadly, a chain of disappointments followed. Mohamed said the government bailout of Sh570 million came late and in two tranches that had minimal impact on the recovery.
“By the time it came in, there was already a significant reduction in the foothold and we lacked the trust of consumers,” he said.
Strangely, months later, the new investors they expected went quiet.
This triggered mistrust as they were in talks with banks for some short term financing that was shelved after the deal failed to go through.
At the moment, Uchumi is in talks with a strategic investor, but Mohamed is now wiser not to be too optimistic.
“I’m very cautious … I don’t want to reveal as we previously did until I’m sure of the seriousness of the investor,” he says.
The Kasarani land, currently valued at about Sh2.8 billion, also proved difficult to sell after the Kenya Defence Forces laid a claim to it.
The matter is currently at the Attorney General’s office, where the two have gone for an alternative dispute resolution.
A deeply religious Muslim, Mohamed says faith has played a deep role in his daily routine as Uchumi CEO. It has given him great patience.
“Religion has given me that patience, the Prophet says that Allah is with those who are patient. I get back to faith to give me that peace of mind, I pray to God to give me consolation because I’m not the cause of this problem and whatever happened, I’ve done my best.”
The Uchumi captain does not go deep into what led to the retailer’s collapse, only saying the evolving leadership at the top took a toll on the business.
He, however, warned if anyone was found to have played a part in running down the supermarket they should be charged.
“Anyone who had a sort of vested interest and caused these challenges we are in, if there’s proof, should face the law,” he says.
He describes his current management style as very strict in enforcing the laid down rules and tightening internal controls.
“Even today, anyone I find involved in a funny transaction I fire on the spot. I’ve had to be very strict in making sure processes are followed because I want everything to be above board,” says Mohamed.
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