Inside last days of Tuskys and how staff stole cash, stock to ease salary delays

Between May and August 2020, Tuskys Supermarkets wrote several bad cheques to buy time from suppliers and landlords who were tired of unending payment promises, as staff stole cash and stock to ease the pain of no pay for months.

There were, in many cases, no more security cameras to catch employees in the act. Some of the workers that opted to pay themselves from the tills had been working at Tuskys for years, and were paid to ensure no stock or cash was lost.

By this time, security cameras and personnel in some branches were not working as the supermarket was unable to pay the firm tasked with guarding its stock from theft.

Suppliers, sacked employees and other creditors faced the embarrassment of being told that the cheques they deposited with various banks had bounced as there was not a single cent in Tuskys’ accounts.

These were just some of the things that culminated in last week’s High Court decision to appoint seasoned accountant Owen Koimburi to take over Tuskys’ liquidation from Kolluri Venkata Kamasastry, who resigned from the job.

After the Covid-19 pandemic struck and Kenya was forced to implement a partial economic shutdown, many firms started chasing down their debts as they sought survival strategies.

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For companies like Tuskys, which had bullied its way past suppliers, it was time to peel back the mask and unravel the web of deceit that allowed its owners to live large while gambling with the livelihoods of thousands others.

Despite bragging about its success to anyone who cared to listen, there was not much to Tuskys other than being a source of pain and loss to suppliers, workers, banks and other service providers that thought they would thrive in the retailer’s seemingly unending growth.

Money owed to suppliers mostly sustained ambitious expansions across East Africa and uncontrolled growth as well as six figure salaries for the directors and a select few others.

John Kago, Samwel Gatei, George Gashwe and Stephen Mukuha had for years reaped millions in dividends, as they also banked over Sh500,000 in salaries each month.

Hotpoint’s insolvency petition gathered steam, followed by support from hundreds of other Davids, whose stones merged into a boulder that culminated in the retailer’s death.

On July 8, 2020, Tuskys Supermarkets CEO Dan Githua received two letters with terrible news on his desk along the retailer’s Mombasa Road headquarters.

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Hotpoint Appliances and Samsutech Corporation Ltd – two of Kenya’s biggest electronics distributors – had just threatened to file insolvency petitions against the country’s largest retail chain.

Tuskys was at the time East Africa’s biggest chain with at least 65 branches spread across Kenya and Uganda and selling goods worth billions each year. The two electronics distributors were seeking a total of Sh384 million and hoped that the statutory demand letters would trigger payment.

Tuskys recorded a Sh369 million profit after tax in 2019, a milestone it could only hit after selling goods worth nearly Sh45 billion over the year.

In the end, it has collapsed with debts of at least Sh20 billion, leaving behind a mystery over where the money went.

Such profit made Tuskys akin to Goliath, the Philistine giant whose name alone spread fear in all the land. But much like the Philistine giant, the retail behemoth was felled by the David of this battle.

Hotpoint was making a second attempt in as many months. The firm first sent a statutory demand on June 3, 2020 seeking Sh259.9 million for goods supplied over four years with no pay, which sent shivers down Tuskys’ spine.

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After the June demand, Tuskys scraped the bottom of its barrel and found Sh11.7 million that it sent to Hotpoint. There was no more action from the retailer, prompting Hotpoint to send the second statutory demand through Macharia-Mwangi & Njeru Advocates.

For Samsutech, it asked Faith Oketch & Company Advocates to dispatch a statutory demand after supplying goods over a two-year period with no pay. Tuskys held a meeting with Samsutech on July 10, 2020 and it was resolved that the debt would be reconciled and thereafter paid.

Mr Githua and Samsutech’s Priyesh Patel exchanged emails with the common ground that the debt stood at Sh128 million. That was the last time the two parties ever communicated.

“We tried to resolve the matter amicably, unfortunately Tuskys has gone silent on us and as such the debt of Sh128,176,275 remains unpaid,” Mr Patel said when his firm eventually joined the insolvency petition in January, 2021.

This was the order of the day for Mr Githua and his superiors, the family of founder Joram Kamau, as they played hide-and-go-seek with creditors who had grown tired of endless and broken payment promises. Even before the employee-led pilferage, Tuskys was no stranger to huge leakage.

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At one point in 2015, the retailer was averaging losses of Sh100 million each month, all attributed to shoplifting. A firm that once had spies in its outlets and rival supermarkets each earning between Sh35,000 and Sh40,000 per month could not afford to even keep watch of its own shelves and tills. The writing was on the wall, but Tuskys’ directors still wanted to attempt flogging the dead horse to get one last kick from it.

For years, Mr Kago, Mr Gatei, Mr Gashwe and Mr Mukuha had been at war with their brother, Yusuf Mugweru, over management of the retailer. Mr Mugweru’s warnings over the years that Tuskys was on the brink of collapse had gone ignored.

The war was so bitter that his brothers locked him out of nearly all Tuskys affairs, especially after a Sh1.6 billion theft complaint by Mr Mugweru led to the prosecution of Mr Mukuha and Mr Gashwe.

As the brothers controlling Tuskys were trying to hold creditors at bay, they were also holding multiple meetings with Mr Mugweru. This time, they needed his blessing to seek capital injection which required the company to be free of any boardroom wrangles.

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Mr Mugweru initially rejected a move to get funding from a mystery Mauritian firm that intended to pump Sh2.1 billion into Tuskys.

But after several talks, the family feud took a break and Mr Mugweru agreed to try rescue the family jewel, a 30-year-old supermarket chain, from death. The retailer, however, remained tight-lipped on the investor’s identity.

A Sh500 million initial injection was lost in bank overdrafts and other debts, and was not enough to even get a pulse beating. The Competition Authority of Kenya was also breathing down Tuskys’ neck, demanding that it settle supplier debts of Sh2.7 billion in June, 2020. By August, 2020 most landlords were tired of hearing excuses and false promises, hence Tuskys lost 53 branches.

Hotpoint grew tired of being relegated to the hide-and-go-seek field, and filed an insolvency petition on August 24, 2020. Syndicate Agencies, a security consultancy that Tuskys hired in 2017, had also sent a statutory demand for payment of Sh30 million in September, 2020. The demand was, however, withdrawn.

The Hotpoint petition gathered steam, and dozens of creditors joined to support the retailer’s liquidation. Within a year, Mr Githua had left Tuskys and was replaced by former Uchumi CEO Chadwick Okumu. Mr Okumu held the position at a time when it was one of the least glamourous corporate jobs.

When Hotpoint made good its threat to sue, Tuskys was busy battling claims in several courts across the country. A group of five former employees had been awarded Sh3.9 million by the labour relations court in Nairobi, and threatened to auction some assets to recover their dues.

Tuskys wrote them cheques. All five cheques bounced. The retailer’s default started troubling other firms.

Samsutech’s Mr Patel told the High Court in 2021 that Tuskys’ debt hit the firm so hard that it could not afford hiring lawyers to appear in the insolvency petition to vote for the retailer’s liquidation, adding that Tuskys had hurt Samsutech’s profitability. The firm may have to consider writing the Tuskys debt off its books.

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