Uchumi: The misuse of taxes

The supermarket chain founded in 1975 has been a household name to many Kenyans for over 25 years. The chain has been one of if not the only retail store that most of our age mates or older will relate to. Uchumi has been around with the like of Woolworth and Sunbeam, and tuskermatt and now nakumatt being it’s biggest competition. The national icon has withstood the tides, and posted profits every year for the last 14 years; it has maintained a significant growth in turnover over the same period; had no long-term liabilities and has had none for the last 10 years. In fact, Uchumi is so liquid that it has been investing its excess funds in treasury bills. What begged answer was why the supermarket chain was not investing these "excess funds" in its core business while Nakumatt was aggressively breaking into new markets. If someone had seen the necessity of investing in the company's core business, Uchumi's leadership position in the East African market would be unrivalled.

Yep, that is that, “if”, well we know the story, the chain closed it doors on June 1, leaving a bunch of suppliers, investors and worse, 1700 employees stuck with the no one to turn to. The suppliers, are owed Sh1.8 billion, while KCB is owed Sh416 million and PTA Bank Sh475 billion
The company folded and in a few days was put into receivership. There was a murmur in Nairobi about the immediate former CEO a Kennedy Thairu causing the giant to sink. He is linked to an attempt to sell Uchumi to a South African investor with a supermarket chains, well looking at his guys past, you can substantiate the murmurs, he was previous associated with Spurs of South Africa - a supermarket chain.

The gist of this is the government declared of its plan to rescue Uchumi, the government is talking about using Sh675 million as a loan it will extended to the chain for it’s revival. This is all good but where is the money coming from, well take a guess, yes taxpayers.

The government should not be in the forefront of reviewing a private company, the government has an obligation to its citizen to providing essential services and the revival of Uchumi is not part of these mandates. Uchumi by definition is a private company and it investors and suppliers should not be rescued using public funds.

The government should instead of applying the Band-Aid on the broken bone, it should start looking for fixes that would not result to the same thing happening. Government main focus at this point should be more regulatory; making sure the public is not taken for a ride, and prosecutes the offenders. Uchumi did not misrepresent their condition (like Enron), the CMA should have highlighted the risk that would be involved in investing in a company with its history.

As in developed counties across the globe, the Government should shifts its focus to worker protection, the employees don’t have any mechanisms in place that can protect them from such incidents. Government role in the protection should provide some kind of compensation to the employees, and force the various companies to do the same, so that people do have something to fallback on before they are adjusted to their new status.