Kenya’s largest supermarket has gone bankrupt and rivals are set to snap up its empty stores

Filed for bankruptcy.
Filed for bankruptcy.
Image: EPA-EFE/Dai Kurokawa
We may earn a commission from links on this page.

Kenya’s largest supermarket chain, Nakumatt, has applied to the high court for administration under insolvency laws, in a bid to fight liquidation efforts and shield itself from creditors.

The move will come as no surprise to regular Nakumatt customers who have seen stock dwindle in recent months after suppliers cut it off for failing to pay its debts. The retailer, which has faced a severe cash flow problem, said this will allow it to continue trading and generating revenue and help meet its financial obligations.

Nakumatt has been battling with suppliers and landlords who have been demanding the liquidation of assets in order to recover their monies or rent arrears. In January, the company failed to sell a 25% stake to a foreign fund for $75 million in a bid to settle its mounting debts. After suppliers cut them off, empty shelves became a mainstay in Nakumatt stores, eventually leading to the closure of branches across east Africa. In September, Nakumatt announced a merger with its rival Tuskys in a bid to rescue its dwindling business.

But that hasn’t improved the company’s prospect of survival, stopped it from closing more stores, or assuaged creditors. By filing for bankruptcy, Nakumatt directors said they hope the business would make a turnaround with the support of all stakeholders.

As recently as 18 months ago, Nakumatt had seemed to be a homegrown retail icon of the “Africa rising” narrative of a fast growing middle class in urban areas. The brand also represented the eventual shift from an informal economy of open air markets to a more Western style formal economy of supply chains, credit cards, and 24-hour stores. But the chain, which grew fast to over 60 outlets in east Africa, seemed to struggle to manage its credit facilities efficiently and effectively with suppliers even as it grew rapidly and problems started to surface over the last year.

As Nakumatt hopes for a more favorable outcome in the future, competitors are already coming in to fill its shoes. Retailers across the world have been eyeing Kenya and the region as part of a plan to tap into the growing middle-class families. The French retailer Carrefour, South Africa’s Game, and Botswana’s Choppies have all entered the market over the last few years.

The Africa’s largest retailer, Shoprite, which is based in South Africa, is reportedly in talks with property owners in Kenya to fill spaces left by Nakumatt. This is definitely a sudden change of fortune for Nakumatt, which previously took over Shoprite stores in Uganda as part of its expansion plan.

Nakumatt’s  bankruptcy move will also sanction its attempt to reevaluate its financial standing and come up with a plan to restructure its business. The company also proposed an administrator to perform these duties, whose appointment is pending a court hearing on Nov. 8.