Trouble for Uchumi as government suspends Sh1.3 billion loan

The struggle goes on for Uchumi Supermarket.

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Troubled Uchumi Supermarket’s revival plans are now stuck in limbo following the Kenyan government’s decision to suspend a multi-billion loan.

The fate of Uchumi supermarket now hangs in the balance after the government suspended the disbursement of a Sh1.3 billion loan, pending the audit of its expenditure.

The suspension comes as the retailer struggles to find a strategic investor to inject Ksh5 billion into the business.

Uchumi CEO Julius Kipng’etich said that talks are ongoing with the government to have the issue sorted out as soon as possible.

“We have only received Ksh500 million ($5 million) and we are still in discussion,” said Dr Kipng’etich.

The government backed its move to suspend the cash disbursement adding that there was need to have a clear audit of the firm’s spending plan.

“We were not to give money just like that. This is public money we must know how it is being used. Remember the Ksh1.8 billion ($18 million) is not a grant or a share injection. It is a loan,” said Principal Secretary in charge of Trade Dr Chris Kiptoo.

The retailer received Ksh500 million from the exchequer in January, with the government adding that additional funds would be given out on completion of the audit.

The suspension may cripple the supermarket’s local operations and prolonged the financial pain of suppliers in Uganda and Tanzania.

It was expected that Sh600 million of the loan would be used to pay creditors in the two countries, where it closed shop in October 2015.

Uchumi is yet to pay the salaries of its 1,300 workers for the month of May, attributing the delay to constrained cash flow.

Mr. Kipng’etich stated that major shareholders are not ready to inject more funds into the business as they are facing other pressing financial needs.

Uchumi joins the likes of Nakumatt Supermarket who likewise are facing financial difficulties and running out of supplies after a failed expansion spree driven by debt.

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