Uchumi strikes deal with suppliers to stock up shelves

After a month of back and forth negotiations, listed retailer Uchumi has finally struck a deal with its suppliers to stock up shelves.

The move comes as a major relief for Uchumi that has been struggling to regain the confidence of its suppliers over delayed payments. But through a new payment structure, suppliers appear confident enough to do business with the 41 year old supermarket chain.

Under a deed of settlement agreement signed between Uchumi and the suppliers, Uchumi will open an escrow account that will be used to manage payments. The retailer has also established a suppliers’ council that will oversee delivery of goods and payments as both parties work towards managing the outstanding debt.

Already suppliers have agreed to convert half of the Sh3.6 billion debt owed to them into a stake in Uchumi. The agreement gives Uchumi headroom to settle the outstanding Sh1.8 billion without straining its finances.

Upon acquiring the stake, Uchumi has also agreed to create three board positions for the suppliers.

“I am pleased to state that this is the onset of a new and transparent relationship with our Suppliers,” Uchumi Chief Executive Officer Dr Julius Kipng’etich said of the deal.

With the deal reached, Uchumi expects at least Sh300 million in sales by the end of its financial year in June. The retailer’s net sales dropped to Sh4.26 billion at the half year from Sh6.83 a year earlier.

Uchumi is however yet to convince six suppliers who have filed a wind up suit against it. San Giorgio, Kenblest, Githunguri Dairy, Kappa Oil, Insync Media, Star Times and Nairobi Flour Mills moved to court to wind up Uchumi to recover debt owed to them. They were joined by Wow Beverages, Professional Marketing Services and Wazaran seeking to recover at least Sh39.7 million.

The wind up suit has also been seen delaying the retailer’s capital raising efforts. The government has committed at least Sh1.2 billion as a bridging loan while Uchumi has also been searching for a strategic investor to pump in at least Sh5 billion.

The wind up suit will be determined on 17 June.