The ongoing unfortunate collapse of Nakumatt Supermarkets, once billed the region's largest retailer, should not be allowed to pass without a thorough probe.
It is for this reason that Cofek welcomes The Senate Committee on Tourism, Trade and Industrialization investigation. The Cofek delegation appeared before the same Committee on May 8.
This article forms part of what Cofek presented to The Senate.
Charterhouse Bank, with all its branches located inside Nakumatt retail stores, was shut down in June 2006 due to allegations of abetting tax evasion and money laundering for various entities1 including Nakumatt Supermarkets, Tusker Mattresses (Tuskys) and W.E Tilley
The transactions records, according to whistle-blower Peter Odhiambo, who worked as auditor at Charterhouse Bank, showed funds were being diverted from Nakumatt Supermarket and related firms into various personal savings accounts, presumably to avoid taxes by under-declaring revenues to the Kenya Revenue Authority (KRA).
Mr Odhiambo's report noted that large deposits into Nakumatt and Tuskys accounts were smuggling proceeds from persons including, Harun Mwau, then a director at Nakumatt.
In October 2015, Imperial Bank was shut down by CBK citing "unsafe and unsound business conditions to transact business.”
A forensic probe into Imperial Bank by FTI Consulting established that W.E Tilley, also named in Charterhouse Bank, was one of the conduits used to siphon Sh34 billion out of the lender.
In November 2016, it was reported that Harun Mwau had sold his stake in Nakumatt Supermarkets
December 2016: Nakumatt opens its 63rd branch at NextGen mall, January 2017: Nakumatt announces it has agreed to sell a 25% stake to an unnamed foreign fund for $75 million
The capital injection deal fell through, and Nakumatt began exhibiting financial constraints such as stock outs, delayed payments to suppliers, landlords
To date, Nakumatt has shut down nearly stores in Kenya, Uganda and Tanzania, with a majority of the remaining stores donning empty shelves
Tusker Mattresses Ltd attempted to takeover Nakumatt Supermarkets but the deal is yet to be approved by Competition Authority of Kenya.
Mr Mwau's exit is believed to have been the trigger of Nakumatt's problems, as he was the provider of liquidity to the supermarket, according to an affidavit sown by Edward Waithaka, a director of Nanyuki Mall Limited, in bankruptcy proceedings against the distressed retailer.
Based on the foregoing, there is reason to believe that Nakumatt's fall is closely linked to the exit and form of exit of Mr Mwau
Persons/institutions of interest:
- CBK – Central Bank of Kenya
- KRA - were they paying tax?
- Nakumatt's bankers - KCB & others
- Nakumatt Executives - MD Atul Shah, Neel Shah, W. E Tilley among others
- Tusker Mattresses Ltd, trading as Tuskys
- All other Nakumatt shareholders - Harun Mwau among others
- Nakumatt external auditors - PwC
(a)Seizure of assets of all those in likely to have engaged in money laundering with Nakumatt
(b)Setting up a retail industry watchdog to police sector (Retail Regulatory Authority), and set up rules on capital requirements, licensing, categorisation of players (Large, mid, small), corporate governance
(c)Require all retailers to publicly publish financial results quarterly, and annual reports by end of March every year
(d) Require all retailers to change their auditors within 3 years
(e) Implement the Kerrow Billow Report on Charterhouse Bank report as per Hansard record of June 28, 2006
(f)The Committee ought to address itself to the WikiLeaks report on Nakumatt and Mr Mwau
Nakumatt is a special Kenyan brand. We hope that it can be salvaged at all costs.