What you need to know:
- Nakumatt had by Monday not paid 1,555 employees their May salaries and had sent more than 100 on compulsory leave, citing low business volumes.
- Nakumatt has in recent years been on a debt-funded acquisition spree that saw it take up space in multiple new malls, chalking up financing costs and disrupting cash flow.
Kenya’s largest retail chain Nakumatt’s financial troubles appear to have deepened last month with cash-flow problems delaying payment of salaries for more than two weeks.
The supermarket, which runs the highest number of outlets in East Africa, had by Monday not paid 1,555 employees their May salaries and had sent more than 100 on compulsory leave, citing low business volumes.
The retailer, which has 5,700 employees in Kenya, said a delay in completing the restructuring of its business – which involves attracting fresh capital -- has seen it fail to honour this monthly liability on time, leaving its staff in financial distress.
Some employees told the Business Daily that Nakumatt has also not been remitting statutory deductions to various agencies such as the National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF, but the retailer insists they are up to date.
Nakumatt, which is planning to shut down nonperforming branches, on June 6 sent hundreds of employees at its Mombasa Road warehouse on forced break, following a dip in supplies that had left them “idle” for weeks.
The retail chain Monday admitted that it had not paid the May salaries, but promised that the matter would be settled next week.
“We had a delay in some salary payments. The restructuring has taken longer than anticipated and affected some of our liabilities,” Andrew Dixon, Nakumatt’s marketing director, told the Business Daily in an interview.
Mr Dixon said the retail chain had informed its staff of the looming delay and was “working to ensure that everybody receives their salaries this week.”
Nakumatt has in recent years been on a debt-funded acquisition spree that saw it take up space in multiple new malls, chalking up financing costs and disrupting cash flow.
The retail chain, which is awaiting a $75 million (about Sh7.7 billion) cash injection from an unnamed private equity fund, has in the past three months seen stocks disappear from its shelves as big suppliers such as Unilever stopped deliveries due to mounting debts.
Nakumatt has since the year began closed some stores in Uganda – a move that has seen aggrieved suppliers and landlords sue for non-payment of Sh515 million.
Uganda’s minister for veterans, Bright Rwamirama, last week took Nakumatt to court seeking to be paid Sh58.6 million in rent arrears that he, and other partners, are claiming from the retailer for use of their premises in Mbarara. The outlet has since been closed.
In order to ease the financial pressure in anticipation of the capital injection, the retailer has decided to consolidate its business by closing non-performing branches and culling slow-moving stock.
As part of this process, Nakumatt last month shut down one of two warehouses (where it stores imported goods as well as furniture and electronics) along Nairobi’s Mombasa Road.
Management has also installed a new warehouse management system which, coupled with the low turnaround of stocks across the country, has left many jobs at risk.
Two weeks ago, Nakumatt’s human resource team rounded up employees at its headquarters and asked them to fill compulsory leave forms, promising to recall them at a later date.
“We have peaks and drops in demand. And since the demand has dropped in recent weeks, we thought it was not wise to have people sitting around idle. It is not good for morale,” said Mr Dixon.
“This is not a permanent situation. When the anticipated refinancing happens, we will be better placed in terms of stock and we shall recall the staff we sent home.”