Uchumi closes loss-making Tanzania, Uganda supermarkets

Kenya’s Uchumi supermarkets has closed down its loss-making Tanzanian and Ugandan businesses as part of its turnaround plan, it said on Wednesday.

“Our outlets in Uganda and Tanzania make up only 4.75 percent of our operations yet they account for over 25 percent of our operating costs,” Chief Executive Julius Kipng’etich said in a statement.

“The two subsidiaries have not made any profit over the last five years, which means they have been draining the parent operations.”

Uchumi is facing competition in Kenya from domestic supermarkets such as Nakumatt as well as international retailers such as France’s Carrefour, which has plans to open stores.

Kipng’etich, a former chief operating officer of Equity Bank , took up his post at Uchumi in August to help revive chain after it had fired its previous head.

He said all its stores in Tanzania and Uganda would be wound down and said Uchumi would consider re-entering the two markets in future once the Kenyan operation stabilised.

Kipng’etich said Uchumi would retain cross-listings in Uganda and Tanzania and that it had informed the Kenya Capital Markets Authority and the Nairobi Securities Exchange of its action. It will seek shareholder approval at a later date.

“We are confident that we can now concentrate on turning around Uchumi by focusing on the 95 percent of the business that makes money for shareholders and are optimistic that we will achieve this within the shortest time possible,” he said.

Before the closures in Tanzania and Uganda, plus two outlets in Kenya, Uchumi had a total of 37 branches.

It made a pretax loss of 262 million shillings ($2.54 million) for the half year to Dec. 31.

It said in August its full-year earnings were expected to fall by at least 25 percent from the previous year.

This comes just one day after The Central Bank of Kenya (CBK) placed Imperial Bank Limited under receivership over what it termed as unsound and unsafe business conditions.

In a statement on their website, CBK said that it had put Imperial Bank under the management and control of the Kenya Deposit Insurance Corporation (KDIC) for a period of 12 months.

CBK is allowed by law to place an institution under receivership if, in its opinion, there exist unsafe and unsound conditions for transacting business.

“KDIC is working closely with the Board of Directors of Imperial Bank Limited for a resolution mechanism,” read the statement in part.

Imperial Bank Limited was founded in 1992 and has operations in Kenya and Uganda.

It is the second bank in Kenya to be put under management since August, when Dubai Bank Kenya Ltd, a small lender, was put under receivership after facing liquidity problems.

Imperial Bank, which appointed a new managing director in September after his predecessor died, was ranked 19 out of Kenya’s 45 lenders at the end of 2014. On June 30 this year, it reported assets of Sh70.3 billion ($683.85 million).

“Given the size of Imperial Bank, I don’t think it will have a knock-on effect on the entire industry,” said Francis Mwangi, head of equity research at Standard Investment Bank, noting the case had followed swiftly after the Dubai Bank Kenya incident.