Uchumi pays suppliers Sh240m for May and June deliveries

Uchumi Supermarkets has paid out a total of Sh240 million to suppliers for May and June deliveries in a new payment system aimed at restoring confidence.

Uchumi reached an agreement with at least 170 of its key supplier to continue stocking up shelves after signing a deed of settlement agreement guaranteeing prompt payment.

Through the deal, suppliers are guaranteed payment in 30 days after the retailer and its suppliers jointly formed a suppliers’ council to control payments. Through the council, all payments to suppliers are held in an escrow account, giving suppliers confidence to continue its partnership with Uchumi.

“The Uchumi brand still has considerable goodwill amongst our customers. Our promise to ensure that they have a fulfilling shopping experience will continue to be delivered at all times. The support of our suppliers is thus crucial in ensuring that we honour our promise and we will do our utmost to ensure they are paid on time,” he said.

The deed of settlement agreement is expected to stay in place until the retailer is back on its feet.

Chairman of the suppliers council Kimani Rugendo expressed confidence the new arrangement would work in favour of getting Uchumi back on its feet.

“We will continue supplying since Uchumi has proved that this new model is working,” Mr Rugendo said.

Uchumi is eagerly awaiting fresh injection of capital to resuscitate the business. The retailer is in talks with the government to inject Sh1.2 billion and has also been engaging strategic investors to pump in funds.

The recapitalizing of the business has however hit a snag with a section of suppliers filing up a wind up suit for delayed payments to the tune of Sh3.6 billion.

Uchumi has managed to convince at least 75 percent of its suppliers to convert Sh1.8 billion of the debt into equity in the retailer as it works on long term financing to clear their debt.

Report by Abalon Babisho