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Is Nakumatt downfall case of ‘too big to fail’?

By Peter Ketyenya | Jan 8th 2018 | 4 min read

The latest eviction of Nakumatt supermarket from the Nanyuki Mall is a grim reminder of the rough times the company is going through. This follows similar evictions at the Thika Road Mall, Junction Mall, Eldoret and Meru branches.

A year ago, if one was told that Nakumatt would be in the precarious position it finds itself in today, it would have been dismissed as a hoax. Nakumatt is fighting court cases (including withdrawal of their lawyers) trying to hold on to the leases to the premises they strategically chose and it looks like a losing battle. One can draw parallels with the case of Lehman brothers as written by Andrew Ross Sorkin in his book ‘Too big to fail’, though on a much smaller scale.

The impossible

Lehman bros was formed in 1885 in the United States by three brothers who were emigrants from South Germany. The company flourished and became the fourth largest investment banks in the United States. No one would have dared dream that such a huge company would go under.

The US financial meltdown of 2007 claimed Lehman bros which unfortunately found itself under a reluctant Republican government that viewed any attempts at bailing out a private company as a form of ‘socialism’ and was highly repugnant to it.

Ironically the same government had earlier bailed out Bear Sterns to a tune of $29 billion and also passed the Troubled Asset Recovery Program (TARP) to bail out both public and private companies to a tune of $700 billion (the amount further rose to $ 1.1 trillion).

The TARP program, which was being steered by the then Secretary to the Treasury –Henry ‘Hank’ Paulson (a former CEO at Goldman Sachs) was unique in that even companies that felt they did not need the bailout were prevailed upon to accept the funds.

Through this process, the US government took a stake in the companies in form of shareholding. As the financial meltdown eased, the government was able to dispose their shareholding and realized a return on the investments.

So what is the impact of Nakumatts ongoing troubles on the local economy? Well for one, with an exposure of approximately Sh40 billion (the amount cannot be clearly ascertained due to lack of financials) to creditors including banks and suppliers, this has constrained their cashflows and hence impacted their growth.

Second, Nakumatt employees have gone for months without their salaries and this has impacted their disposable household incomes and reduced spending. Third, Landlords of the malls housing Nakumatt are reeling due to the unpaid debts as well as other businesses who had followed Nakumatt so as to tap into the shoppers spending.

The troubles have also seen Nakumatt tumble down the list in terms of branches, dropping to third at 41 branches behind Tuskys who have 63 branches and Naivas supermarkets with 43 branches. Nakumatt has already begun downscaling some of their branches (Galleria branch and the Westend mall in Nakuru).

The most critical impact in my view is the inconvenience to shoppers who had adopted the Nakumatt maxim of ‘If you need it we have got it’.

As earlier stated Nakumatt chose the most strategic and ideal locations within malls and due to their large variety had a wide customer base. For example, customers who frequented Nakumatt Galleria now have to go to Carrefour at Hub Karen or go to Tuskys at Mbagathi roundabout which is highly inconveniencing.

Way forward

What is the way forward for Nakumatt? The collapse of talks between Tuskys and Nakumattt on a proposed merger is a major setback.

The two firms who have their origins in Nakuru County would have been able to tap into their synergies and rich backgrounds.  With this option not available, a search for a strategic partner would have been the next best alternative.

A number of potential foreign investors including Carrefour, Shoprite, Massmart and Choppies would be possible suitors. This however poses a challenge due to the debt load that Nakumatt is carrying.

If the debt load could be guaranteed (either by a bank, consortium of banks or the government) then this option would be a panacea to the problem.

Can the government step in with its own TARP rescue package to save a private company the way it is rescuing Kenya Airways and Uchumi? This would have been a viable option if, and only if, there is a systemic threat on the entire economy.

Only time will tell whether Nakumatt was a case of too big to fail.


Dr Ketyenya, CEC –Trade, Industry, Tourism & Co-operatives Nakuru County

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