What you need to know:
The supplier roll had not been verified.
The number of goods claimed to have been supplied differed from what was on the shelves.
CEO Jonathan Ciano’s wife was among Uchumi’s top suppliers and she was paid in full and on time despite inflating costs.
Businessman Chris Kirubi was believed to have the Midas touch. As a man who had built several successful companies, his entry into Uchumi Supermarket as a major shareholder was expected to infuse the kind of ingenuity required to turn around a sinking ship.
On December 13, 2001, the Industrial and Commercial Development Corporation (ICDC) seconded Mr Kirubi to chair the Uchumi Board of Directors.
The government had divested its stake in ICDC and Mr Kirubi was among the tycoons who bought into the investment firm.
He knew – or thought – Uchumi was a good venture and would acquire about five per cent of its shares by 2005.
During Mr Kirubi’s tenure as Uchumi board chairman, an expansionist drive pushed the company off the rails. It was the first time payment to suppliers was delayed and the share price started to fall.
In the annual reports, Mr Kirubi blamed the near collapse of Uchumi on the expansion plan. Wiped out
While the expansion saw gross profit improve from Sh1.224 billion in 2001 to Sh1.373 billion in 2002, it was all wiped out by increased operating costs, especially on the six new branches.The operating profit for 2002 decreased from Sh118.5 million to Sh83.2 million, according to Mr Kirubi in the 2002 annual report.Uchumi was in deep trouble by 2004. The retailer had taken short-term loans amounting to Sh3.6 billion between 1997 and 2004 to fund its expansion.Some of the new branches were opened without a business plan or feasibility studies, and soon the expected foot traffic dried up.At the same time, poor management meant no money was being raised internally, employees were stealing from the firm, which was also guilty of buying stock that was difficult to move.The retailer had also formed a subsidiary, Kasarani Mall Ltd, and given it a Sh109 million loan to buy 20 acres from Solio Construction, a firm owned by former President Daniel arap Moi and his associate Joshua Kulei. As it later emerged, the land had been given to the military. Ownership issues The piece of land is still is riddled with complex ownership issues. It was Uchumi’s hope […]
