Treasury allocates Uchumi Sh500m in first tranche of bailout package

The National Treasury has allocated half a billion shillings to cash strapped Uchumi Supermarkets, as part of government efforts to revive the retailer’s operations.

In the supplementary budget tabled in parliament, treasury says the funds are for equity participation in Uchumi, in which the government holds a 14.6 percent stake.

This is the first tranche in a Sh1.8 billion bailout plan for the 47 year old retailer, which was committed in August.

The money will be released in three tranches to offer liquidity support to the debt burdened organization

Uchumi management ditched plans to secure strategic investors to pump in money into the business after the government committed its support to inject cash.

Uchumi has been strained by a mountain of debt and inability to generate revenues fast enough to sustain its operations.

The release of the funds has been delayed as the government ensured all structures have been put in place to stop revenue leakages.

Speaking to Citizen Digital, Uchumi Chief Executive Officer Dr Julius Kipng’etich expressed confidence the money would be released within the next two weeks.

“We shrunk the company to the right size. We were bleeding so we closed our subsidiaries and seven stores in Kenya and that took a while. We have significantly shrunk our cost base and anything that was bleeding the company is already sealed so sales should improve significantly once the liquidity is injected,” Dr Kipng’etich said.

Uchumi plans to use the newly acquired funds to stock up ahead of the Christmas holiday, traditionally a period when retailers experience higher sales.

Dr Kipng’etich expressed optimism the funds would give Uchumi headroom to boost revenues and meet supplier payments.

“We are not fully back at our peak because the capital did not come as quickly but once we get the liquidity injection the sales will pick up as quickly,” he said.

The retailer currently owes its suppliers Sh3.6 billion but has structured an agreement to make prompt payments on new deliveries as it structures financing to pay off what is owed.

Additional Reporting by Denis Otieno