Category Archives: Nakumatt

Nairobi Supermarket Shoppers and Economics Trends

Chris (@blackorwa) has a blog on Kenya supermarket buyers, deciphering consumer patterns and habits of Nairobi shoppers by analyzing and decoding their discarded supermarket receipts.  This is an interesting experiment, in which they actually paid street kids to dig and dive for recipes in the garbage. They based their search for trends on a previous study at Walmart to draw out patterns of shoppers.

some interesting findings

  • Supermarkets not within malls have 61%  of their customers buying less than 3 items and spending Kshs 200 (~$2) on average.
  • M-PESA is yet to dominate retail – it was used for just  3.6% of supermarket transactions, with cards (credit/debit) used for 1.8% of transactions 0  as cash is still king at supermarkets. Safari com hopes to change that with 1tap which makes it faster to make purchases.
  • On a typical weekday, a small well-positioned supermarket does 2,350 transactions with a value of about Kshs 360,000. This translates to about Kshs 10.8 million in revenue a month.
  • Margins are thin, and supermarket profit are determined by controlling labour expenses.
  • Cooked food, mineral water, and bakery drive a lot of sales – they have the highest sales volume and greatest profit margins.

Take  a look at it the study

Nakumatt Voluntary Administration

Troubled supermarket chain Nakumatt applied for voluntary administration to enable the chain to continue operations while freezing a mounting series of claims from banks, mall landlords, suppliers and other creditors as they seek options on how best to survive.

Nakumatt in administration

The move effectively ends the management of Atul Shah and surrenders  decision-making at Nakumatt to Peter Kahi of PKF Consulting. One of the first orders of business of the company in administration will be for Kahi to draw and publish a statement of Nakumatt’s assets and debts while separating bank ones, preferential creditors, unsecured creditors, and connected creditors. Up to now, the true and total debt has been a matter of speculation that could be up to Kshs 30-40 billion.

The Nakumatt statement reads that “the senior lenders are aware of Nakumatt’s financial position and are supportive of Nakumatt’s application for an administration order.  Further, Tusker Mattresses Limited has, subject to the Competition Authority of Kenya’s approval, undertaken to forge ahead with its investment in Nakumatt in connection with its proposed merger with Nakumatt.”

Past funding proposals prior to the Tuskys deal under consideration have not materialized. The insolvency law, which Nakumatt cites in its application for administration is among a series of new corporate laws passed in 2015 and is now focused on bringing troubled companies back to life. Aspects of the laws have been used at distressed companies including Uchumi and Kenya Airways.  Going into administration lowers the voting powers of banks, who are secured, and it gives Nakumatt power to deal with the unsecured debts.  The banks themselves were legally prevented from appointing an administrator as there have already been cases filed by some creditors asking for the liquidation of Nakumatt.

State of Kenya’s NSSF

Kenya’s National Social Security Fund (NSSF) published their financial accounts in the newspapers last week after they were earlier gazetted.

The Kshs 174 billion statutory fund, had income in the year to June 2016 of  Kshs 10.7 billion which was down from 19.3 billion the year before. The was after the fund received 12.8 billion of contributions from members (up from 11.7 billion) and paid out 3.1 billion. They had investment income of Kshs 12.8 billion, and paid administrative expenses of Kshs 5.5 billion leaving a surplus for the year of  Kshs 5.2 billion, and which was down from 13.2 billion in 2015.

In terms of assets, they have quoted shares of Kshs 49 billion (down from 57 billion in 2015), treasury/infrastructure bonds of 52 billion, 8.9 billion of corporate bonds, undeveloped land of 9 billion and buildings/ land of Kshs 19.9 billion.

Top shares in the NSSF Kshs 49 billion quoted investments portfolio include 25 million EABL shares (worth 6.9 billion shillings), 320 million Safaricom shares worth 5.6B, 116 million Britam worth 5.6B, 185 million KCB shares worth 6.2 billion, 88 million Equity Bank worth 3.4 billion, 3.2 million BAT worth 2.6 billion and 56 million Bamburi Cement shares worth 9.6 billion. NSSF also owns 24 million EAPCC shares worth Kshs 868 million and 148 million National Bank (NBK) shares worth 1.4 billion.

In the 1990’s the fund was sold illiquid plots at inflated prices and in the 2000’s, it deposited some funds in shaky banks that collapsed soon after. They still have a few issues with land, and the undeveloped land assets of the NSSF include 3.2 billion worth of plots at Mavoko and a Kshs 3.5 billion plot on Kenyatta Avenue in Nairobi.

The NSSF accounts were audited, by the Office of the Auditor General of Kenya (OAG) who qualified the accounts of the fund owing to some issue including

  • Unremitted contributions; A sample of 20 employers found that they had not remitted Kshs 755 million of deductions to the NSSF.
  • Another 764 million of contributions were held in suspense accounts.
  • Hazina Plaza/Polana Hotel Mombasa had rent owed to the NSSF of 239 million.
  • Milimani Plots at Kisumu where a Kshs 178 million estate that brings no income.

Other issues flagged included:

  • The stalled Hazina Trade Centre in Nairobi, which remains 38% complete with construction having been halted after Nakumatt Supermarkets who have a branch in the building had refused to give the contractor (China Jiangxi) access to the basement where they were to provide reinforcement to pillars of the building. The OAG recommended that the NSSF take legal action against Nakumatt in order to complete the Kshs 6.7 billion construction.
  • NSSF new rates

    NSSF budgeted income for the year was  Kshs 44 billion, but only 10.8 billion was raised; This was partly due to poor performance of the portfolio of shares listed at the NSE, but also due to non-implementation of changes to the NSSF act which would have seen increased contributions from members into the scheme.

  • Illegal transfer of a plot of land from the NSSF to Kenya’s Judiciary, and works at Nyayo estate at Embakasi.

$1 = ~Kshs 100

Nairobi Supermarkets & Mall Moments

It has been an interesting few days in the Nairobi mall and supermarkets space.

It started off with a notice on social media from the Junction, a 26,000 square meter mall stating that Nakumatt had surrendered their space at the mall. Nakumatt was the anchor tenant of the mall which opened in 2004 and now has  115 stores.

But Nakumatt which has been having cash flow and supplier payment issues, and which have all resulted in  most common everyday products like fresh foods and supplies missing from their store shelves, then put out a statement alluding to ongoing talks with the Junction mall and their suppliers with advanced plans to restock their shelves.

Later on the same day Nakumatt got a court injunction temporarily stopping their removal from the Junction and issued another more formal statement about how the Junction management had tricked them and illegally took over their space after they had paid Kshs 20 million, hurting their image in the mind of employees, suppliers, and customers.

Knight Frank who manage the Junction also issued a statement acknowledging the court order, which they would follow, but stating that Nakumatt had signed a surrender on 15th September and then failed in its payment obligations and had not documented a commitment to restock the shelves by the surrender date.

Tuesday also saw an announcement by Majid Al Futtaim that they would be opening their third Carrefour store in Kenya at TRM (Thika Road Mall),  a 28,000 square meter mall on Thika Highway. The space had been surrendered by Nakumatt just two weeks before that. Carrefour operates stores at the Hub in Karen and Two River malls.

The release also contained some interesting stats on suppliers and employment:

– We are looking to stock over 30,000 items at the hypermarket, including fresh produce, groceries, a fresh bakery, and a butchery
– (We) work with over 640 suppliers, local manufacturers, producers, and farmers, which contribute to the overall economic growth in Kenya both directly and indirectly. Only one of the suppliers is foreign.
– The opening of the new branch at TRM will boost the staff employment count at Carrefour in Kenya to 800, with 600 already working at the other two branches located at The Hub in Karen and the Two Rivers Mall.

There has been quite a bit of clamour by customers of Carrefour, which was becoming quite crowded at Karen on month end, to expand.

An equity deal to rescue Nakumatt deal seems to have floundered, and a new announcement about ongoing discussions for a management partnership arrangement  between Nakumatt and a rival supermarket chain Tuskys have not inspired the confidence of supplier and financiers of Nakumatt.

Other believed beneficiaries of Nakumatt surrendering any more stores are expected to be Naivas and Khetia. This week also saw Naivas launched Naivas Pay in partnership with Interswitch. The launch was a Ciata Mall, at their store in a space Naivas took over after it had been previously booked by the management of Uchumi.

Uchumi itself is in the process of concluding a deal to raise Kshs 3.5 billion from a  private equity investor.

Another interesting concept in the supermarket space, is Seven 2 Seven, a franchise of mini market stores that only stock fast-moving consumer goods (FMCG) and serve as agents of some banks. They are on track to have 100 stores in Machakos, Kajiado, Nairobi, Kiambu, Muranga, Nyeri, Embu, Kirinyaga, Meru and Nakuru counties by year-end.

Urban Inflation Index: July 2017

Comparing prices and inflation in Nairobi to four and five years ago. 

Price and inflation comparisons are made a bit difficult by the unprecedented (in recent years) shortage of certain food commodities. Back in 2008 as post-election violence rocked the country, supermarkets opening shop, receiving supplies, stocking shelves and selling fresh foodstuffs and household items were seen as one of the barometers that life was getting back to normal. But going into the August 8 elections, several supermarkets have had empty shelves, notably at Kenya’s largest chain, Nakumatt that is limping under debt, and empty shelves, with lawsuits from landlords and key suppliers and a delayed shareholder deal. Unlike Uchumi who faced a similar situation just over a year ago, Nakumatt has not shown humility in asking for a bailout from the government or relief from suppliers and partners.

On to the index

Gotten Cheaper (in four years)

Finance: Bank loans are 14.0% due to the interest capping law of 2016. Average bank rates were 17% in July 2013

Fuel: A litre of petrol is Kshs 97.1 (~$4.25/gallon) today in Nairobi. It was 109.52 per litre in July 2013 (and 117.6 five years ago).

About the Same

Staple Food: With just under two weeks to the elections, maize has been hard to find, even at the government subsidized prices of Kshs 90 per pack. In July 2013 the pack cost Kshs 104 (and it was 118 five years ago) But just how long it will stay at 90 is not clear as the 2017/18 budget drafted at a time of high maize prices and low supplies, zero-rated the importation of white maize for a period of four months. Will it go back up after this window closes?

Communications: Phone call rates flattened in 2013 even though at the time Airtel and Yu were bringing the prices down, while now Safaricom battles distant Telkom Kenya (rebranded from Orange) and Airtel, as well as Equitel from Equity Bank, with competition more on data pricing, and mobile money transfers – where M-Pesa still dominates.

Beer/Entertainment: A 200 bottle of Tusker beer is Kshs 200 at the local pub. This is the same price it was in July 2013. (And it was 180 five years ago)

Utilities: Pre-paid electricity is about Kshs 2,500 per month, which is unchanged from the last review. The calculation of pre-paid tokens remains a complicated exercise.

More Expensive

Other food item: Sugar is hard to find, more so for traditional brands like Mumias. A 2kg bag of Chemelil sugar is Kshs 290  compared to 250 in July 2013 and five years ago it was 237. Prices of other food commodities like milk and butter have also gone up.

Foreign Exchange: 1 US$ equals Kshs. 103.9 compared to 87.15 in July 2013 and 84.25 five years ago.

There has been quite some outward flow of currency ahead of the election.