Uchumi, which was once one of the most important supermarket chains in Kenya, was forced to close 33 of its stores and has been on life support for years. It is now trying to convince suppliers it has a chance to survive. Can it come back off life support?

Probably the most compelling argument for Uchumi’s survival is that it has survived this long, five years after its financial problems first became critical. According to an interview given to Kenyan media, CEO Mohamed Ahmed Mohamed says that its flagship Lang’ata hypermarket in Nairobi is well stocked and appears to be trading successfully. This, by omission, suggests its three stores, also in Nairobi, may not be.

In July 2020, Uchumi owed KSh4.7bn ($43.6m) to suppliers. It signed a Company Voluntary Agreement signed in March 2020. The agreement is between the supermarket chain and 121 suppliers, under which creditors agreed to a 30% cut of the outstanding debt. Additionally, 40% of the debt owed to unsecured lenders will be turned into non-cumulative convertible preference shares.

It had hoped to raise $2.8m ($26.0m) by selling a 20 acre plot of land it claims to own in Nairobi. This ownership has been disputed by the Kenyan military, which promptly sealed off the area and effectively made it impossible to sell. A legal case to resolve ownership is ongoing.

Uchumi’s resolution to build the business back looks very makeshift. At its Lang’ata hypermarket  it is trying to rent out space for KSh2,500 ($23) -KSh10,000 ($92). Previously, it had said it would look at a franchising model. That plan was ruined, among many other reasons, because suppliers stopped supplying Uchumi.

For Nakumatt, the long road to closure followed a similar pattern to Uchumi’s – store closures, supplier problems, a search for investors and an extended period of barely existing while trying to trade out of heavy debts. Tuskys, too, faces a similar problem and although it has only closed 14 stores out of its 64 it is still no closer to clearing its debt. Meanwhile the exit of Shoprite strongly signals that trading is hard in Kenya. In fact, Trendtype believes that the actual penetration of modern retail is only half what is estimated in Kenya and the market was oversupplied with modern supermarkets.

The most obvious gauge is investment. Nakumatt couldn’t find an investor. Nor can Tuskys. We don’t think Uchumi will because of its history of financial mismanagement and the crushing weight of debt still on the business. The lack of investor interest is telling. Without investment, we don’t think Uchumi can overcome its debts. Even if it did, Carrefour, Naivas and Quickmart, all of whom are externally financed, are better managed, considerably larger and more competitive. For Trendtype, the question remains that Uchumi’s failure is a question of “when” and not “if.”