Uchumi staff blame board for financial problems

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SENIOR managers of the troubled Uchumi Supermarkets chain have turned the heat on the board, accusing it of being complicit in the mismanagement that has almost crippled the company.

Troubled: Uchumi Supermarketsboard chairperson Khadija Mire.
Troubled: Uchumi Supermarketsboard chairperson Khadija Mire.

The disgruntled managers want the board, led by Khadija Mire, to resign, to allow a new team that will position the retail chain on a recovery path to recapture its lost market share.
“[The board] worked very closely with Jonathan [Ciano], whom they sacked on June 15 for gross misconduct and negligence, giving him all approvals to open new non-performing branches, borrow, get overdrafts and loans on any available assets,” they said.

The board, they claim, is interfering with an ongoing independent forensic audit into Uchumi’s cash-flow challenges and human resource operations to “protect their interests”.

The staff further alleges that some directors have long ripped off the struggling retailer by appointing relatives and friends as suppliers.

They cited one supply deal – for UGT Sugar – which they claim was given to a brother of one of the most influential directors on the board.

In June, Mire said the board had a “clear roadmap” to return Uchumi Supermarkets to profitability, by selling some non-core assets in a bid to raise at least Sh2 billion, the bulk of which is earmarked for clearing arrears to suppliers.

Delays and non-payment of suppliers have been at the heart of Uchumi’s supply chain woes since early last year, eroding customers’ loyalty.

Last December Uchumi raised Sh895.9 million from its shareholders, which, together with a Sh600 million loan from KCB and Sh405 million asset financing by the Co-operative Bank, was expected to stabilise supplies.

However, by the end of June, the suppliers’ debt had grown to Sh2.3 billion, from Sh1.2 billion in December.

Apparently, it is this “neglect” that led to CEO Ciano’s sacking together with chief financial officer Chadwick Okumu and the suspension of HR chief Michael Kibe.

They claim the leasing of space at Kiambu’s Ciata City (not yet opened) at an upfront payment of Sh60 million and Sh120 million for a Mombasa branch was based on friendship, not business sense.

Procurement of bakery and refrigeration, IT and security equipment, they add, was particularly skewed. They singled out an oven installed at a cost of Sh13 million, including Sh9 million as buy price and Sh4 million installation, when the total cost in the market – including installation – is Sh5 million.

The executives, who remained anonymous for fear of reprisal, claim they and suppliers have been alienated in the ongoing audits.

They claim the new board strategy is driven by Jamii Bora Bank, the majority shareholder, with a 15.19 per cent stake against government’s 14.67 per cent, citing the lender’s planned opening of centres at 32 Uchumi stores.

“What are Uchumi’s benefits?” the executives ask.

Although the board was categorical in June that Uchumi will not be sold, the senior staff claims, “There is a well-choreographed plan to sell Uchumi in a hurry, most likely to a South African supermarket chain”.

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