Govt rules out Uchumi bailout


Govt rules out Uchumi bailout

Uchumi Supermarkets is staring at a bleak future with the government ruling out pumping in more money to revive the struggling retailer.

Uchumi, which now appears headed for total closure, has been pushing for the release of government funds to shore up capital and resuscitate the business.

While the government had pledged Ksh1.2 billion, it now appears that the second tranche of the bailout will not be released despite Uchumi facing serious cash constraints.

In June, Uchumi had told Parliament that it was eagerly awaiting the release of Ksh600 million after it emerged that it had failed to meet salary payments.

But on Tuesday, Trade Principal Secretary Chris Kiptoo said the government was yet to see value from the previous bailout money arguing the government ran the risk of losing money when entities fail to turnaround.

“It’s not our responsibility. We only do that when we are in a crisis. It creates a moral hazard where every time you have a problem, ‘government come, please support us’,” Mr Kiptoo said.

The PS said Uchumi had failed to live up to the terms of the bailout, forcing the government to pump the brakes on future allocations.

“The remaining money was on condition of the progress that we see. We don’t want to pump in money when we haven’t seen that there is value on what has gone in,” Mr Kiptoo said.

Uchumi has lost creditor and supplier confidence, with few branches still open but heavily under stocked.

Uchumi has 12 operating branches left from 40 it operated three years ago.

The retailer has been forced to close most of its branches for failing to pay rent and even been auctioned by suppliers to recover debt.

Mr Kiptoo however called on other Uchumi shareholders to come to the table to support the business.

“We have also challenged the other owners to come on board, government has done its part,” he said.

Uchumi is currently exploring disposal of assets and franchising to remain in business.

According to CEO Mohamed Ahmed, Uchumi remains optimistic of getting a strategic investor even as luck is evidently running out.

At the Nairobi Securities Exchange, Uchumi’s share declined by 3.85 percent closing the day at Ksh1.25.

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Story By Mumbi Warui
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