The restructuring of Kenyan retailer Uchumi Supermarkets, which has seen it shut down operations in Uganda and Tanzania and cancel plans to enter the Rwandan market, is a cause of pain and anguish for suppliers, employees and property owners across the region.

Mansour Ramadhan, an official of Tanzania Industrial and Commercial Workers Union (Tuico), who has been assigned by the trade union to deal with the matter, said about 460 workers face job losses following the closure of the six outlets of the heavily indebted supermarket chain which owes suppliers and landlords more than Tsh3 billion ($1.5 million).

The retailer owes its local suppliers Tsh2 billion ($1 million) and another Tsh1 billion ($0.5 million) in unpaid rent. This does not include salary arrears and benefits of staff members.

“I know of a Tanzanian businessman who is seeking to recover about Tsh100 million ($50,000) from the supermarket chain,” said an official of the company.

Uchumi is also said to owe the national electricity distributor Tanesco millions of shillings in unpaid electricity bills.

The outlets at Quality Centre, Segerea,  Makumbusho, Shekilango Business Park, Mbezi Beach and Kilimanjaro Commercial Complex were closed two weeks ago when the new CEO, Dr Julius Kipng’etich, announced that the firm was pulling out of Tanzania and Uganda to stem losses incurred over the past five years.

READ: Uchumi sacks 900 Uganda, Tanzania staff

Tanzania Horticultural Association (Taha), an apex body for the multimillion-dollar industry, says the imminent exit of Uchumi from Tanzania is a blow to the industry.

In Uganda, it is estimated that more than 100 businesses have been affected by Uchumi’s closure, with most of them owed hundreds of millions of shillings in unpaid bills for goods and services, coupled with rent, electricity bills and taxes as well as employees’ social security contributions.

Affected firms affiliated to the Uganda Manufacturers Association (UMA), for instance, are owed huge sums of money, between Ush15 million ($4,101) and Ush200 million ($54,677), but the figure could rise as more companies report unpaid invoices, according to Lawrence Michael Oketcho, UMA’s policy and advocacy manager.

Ugachick Limited, a leading Ugandan producer of fresh chicken, has supplied Uchumi for the past six years but faced some challenges in processing payments.

Although the company modified payment terms through reduction of credit days — the period allocated to buyers to pay for goods and services sold on credit and demanding advance payments — the situation remained gloomy.

Uchumi owes Ugachick roughly Ush206 million ($56,317) in unpaid supplies and legal costs, making it one of the worst affected local creditors, according to preliminary estimates. In spite of the huge setback, Ugachick is determined to pursue its outstanding claims through administrative and legal channels.

“We have supplied Uchumi since they opened shop in Uganda almost six years ago,” said Aga Sekalala Junior, the chief executive officer of Ugachick. “But they have experienced challenges for some time, and this forced us to undertake frequent review of our supply contracts.

“As a result, we changed the number of credit days and even demanded advance payments, but all these efforts did not solve the problem.

“I think bad management practices were mainly to blame for their weak performance.”

Mr Sekalala added: ‘The big lesson to pick from their exit is that suppliers need to look out for signs of trouble and terminate contracts early instead of waiting longer and getting exposed to risks of losing substantial amounts of money.

“For example, if a supermarket fails to pay after 30 days, it would not be wise to extend credit days to 50. Since Uchumi is still a going concern and is listed on the stock exchanges, we believe it has sufficient capacity to clear all its financial obligations.”

A small coffee shop chain is owed close to Ush20 million ($5,468) in outstanding sales commissions.

Adam Ddungu of Trusted Global Trading Company has been supplying Tunic Coffee to Uchumi but he is one of the suppliers who were caught unawares by the closure of its branches.

“I just read in the papers,” Ddungu said. “I had no idea what was going on.

“In April, I supplied coffee worth Shs35 million and I was told I would be paid after 90 days. However, they (Uchumi) have been telling me they have cashflow problems, asking me to be patient.

Also, Umeme Ltd is still demanding Ush70 million ($19,137) in unpaid electricity bills attributed to the former Kabalagala branch, local sources revealed.

Things started going wrong when the electricity supplier cut off the power at the Kabalagala branch. At its flagship branch at Garden City, one of the suppliers got impatient and sent bailiffs. Then all hell broke lose.

READ: Bailiffs raid Uchumi outlet in Kampala over debt -VIDEO

In Gulu, the landlord closed the premises over non-payment of rent.

Uchumi has also accumulated significant arrears with the Uganda Revenue Authority and National Social Security Fund over the past three months but verified figures were not available by press time.

On the other hand, government officials are considering financial rescue options for affected local suppliers but details on budgeted resources and implementation timelines were not available by press time.

Compile list of creditors

“The government has asked the Chamber of Commerce and Industry to compile a list of all Uchumi creditors and their claims before it can intervene in the matter,” said Julius Onen, Permanent Secretary in the Ministry of Trade and Industry.

“We have scheduled a meeting on 29th October with our Kenyan counterparts to discuss ways of resolving problems related to Uchumi’s closure in Uganda and Tanzania.

Meanwhile, the appointed liquidator has pulled out, saying he did not wish to be associated with what is turning out to be a messy issue. A source close to the discussions told The EastAfrican that the Uchumi management was reluctant to commit itself to pay its creditors or to even say how much it owes.

Uchumi’s decision to shelve its planned expansion to Rwanda has dampened not only the country’s prospects to expend retail business but also its burgeoning property market.

Rwandan businesses that had entered into commercial negotiations with the supermarket following its announcement that it would be setting up shop in the country have now been left in suspense.

The retail chain, which is listed on Nairobi Securities Exchange (NSE), had leased 6,650 square metres of space in various locations in Rwanda.

Even as the retail chain retracts from its regional expansion drive in a bid to stabilise its Kenyan operations, the Ugandan and Tanzanian subsidiaries have not made a profit over the past five years, draining the parent company’s operations, according to the management.

The board, according to Mr Kipng’etich also suspended its expansion plans into Rwanda indefinitely. However, the decision, which he shared with The EastAfrican, had by press time not been communicated to the property owners in Rwanda.

The retail chain leased 1,400 square metres of space in one of the commercial properties owned by Shyira Diocese in Musanze, a town located 120 kilometres west of Kigali City.

“Keeping quiet and leaving us guessing is not business-like,” said Rt Rev Dr Laurent Mbanda, Bishop of Shyira. “They should communicate.

“We moved the old tenants from the building and customised the building to accommodate the supermarket using money borrowed from the bank,” said Bishop Mbanda.

As it sought to tap into tourist revenues in Musanze, the retail chain entered a 10-year lease agreement with the Anglican Church. The church, which had several tenants in the building, evacuated them to allow a redesign. The complex is owned by Kigali businessmen who pooled resources hoping to cash in on such investors.

The type of agreement the property owners entered with Uchumi does not allow them to let their properties to new tenants. But analysts say the supermarket may also finds itself in a fix as it cannot cancel the contract for fear of penalties arising from breach of contract.

In Kigali, the retail chain leased 3,200 square metres of space from Champions Investment Corporation Ltd (Chic), a commercial complex at former Muhima Technical College, as its main store and headquarters for five years.

At Giporoso trading centre near Kigali International Airport, Uchumi had booked 2,050 square metres for an unspecified period.

Dr Kipng’etich, who replaced his fellow Kenyan Jonathan Ciano at the helm, however said the company advised the landlords to get new tenants for the properties.

Mr Ciano was sacked followed an audit that reportedly revealed suppliers had stopped delivering goods to the retail chain’s stores because Uchumi owed them more than about Rwf8 billion ($10.3 million). He denied the allegations.

READ: Uchumi CEO sacked for gross misconduct, negligence

The former CEO is, ironically, also praised by some as the man who saved Uchumi from going under after its 2006 bankruptcy scare.

Uchumi had more than 900 staff in the Ugandan and Tanzanian subsidiaries. However, many of them had no clue the retail chain would close. In Uganda, at least 400 where rendered jobless. Mr Kipng’etich however told a media briefing that the board was making arrangements to honour all payments due to staff.

“We are making arrangements to pay all monies due to workers who are contracted by Uchumi,” he said.

Workers who spoke to The EastAfrican on condition of anonymity however said nothing of the sort had been communicated to them, highlighting that they never saw the exit coming.

Similarly, in a notice, the retailer said: “The board of Uchumi is cognizant of the responsibilities in respect to obligations of the two subsidiaries to various stakeholders.

“We are pursuing various avenues of raising funds to meet our obligations. We are in the process of engaging all stakeholders, including suppliers, employees, financiers and regulators.”

In Uganda, the retail chain has an estimated debt obligation of more than Ush7 billion due to suppliers, utility bills, salaries and rent arrears.

After the chain announced its exit, hundreds of people including suppliers, workers and key stakeholders converged on the retailer’s head office in Kampala to see if they could salvage anything.