Under-pressure Tuskys seeks to avoid the fate of Nakumatt

Quoting unnamed industry sources, Kenyan website Standard Media reports that local supermarket chain Tuskys is seeking to raise KES1 billion (USD9.7 million) before the end of the year “to boost its working capital.” It added that Tuskys was doing this in order to be able to pay its suppliers more promptly and thus secure more favourable pricing, enabling it to compete more effectively with such international rivals as Carrefour and Shoprite.

Standard Media noted that Tuskys was struggling to compete with Carrefour on price with regard to such staples as cooking oil: “Despite locally owned retailers having established relationships with suppliers, they cannot match newer entrants on pricing.” An unnamed source at a cooking oil manufacturer told the newspaper that its selling prices are “largely dependent on how soon payment will be received.”

Earlier this year, the Competition Authority of Kenya set up a Buyer Power Department to enforce stricter regulations on supermarket payments to suppliers. This followed the large debts to suppliers that were accumilated by former market leader Nakumatt.

Having not yet reached an agreement with its creditors, Nakumatt is now struggling to avoid liquidation. A study of payments overdue to suppliers by at least 60 days conducted by Kenya’s State Department for Trade found that, at the end of 2016, Tuskys accounted for 31% of the total, placing it second only to Nakumatt (34%).

The Sagaci Research View: Tuskys is seeking to list on the Nairobi Stock Exchange, but it is difficult to make an investment case for it as long as the protracted legal row over its ownership among the heirs of deceased founder Joram Kamau remains unresolved. Tuskys’ search for new investment is beginning to echo that of Nakumatt prior to its implosion in 2017 – a lot of sound and fury without tangible result.

If you want to read more, click here