Monday, June 5, 2017

Nakumatt #Uganda: Landlord & suppliers head to court seeking $0.5M+


As Nakumatt Holdings awaits a cash injection for 25 per cent of its equity, its Ugandan suppliers and landlords are clamouring to be paid, as claims of fraud compound the regional retailer’s woes.
Mpororo Group Ltd, Bright Rwamirama and Florence Rwamirama have filed suit at the High Court’s Commercial Division seeking orders to be paid $569,339 and legal costs.
Mr Rwamirama is a minister in the government and Florence is his wife.
According to court documents filed on April 12, 2017, the three plaintiffs say that the amount is accumulated rent for Nakumatt’s store in Mbarara, western Uganda.
The suit emerges from a tenancy agreement entered into in September 2011.
The suit puts at risk all property held by Nakumatt (U) Ltd ahead of any other court orders.
Default
It reveals that Nakumatt started to default from 2013 forcing the plaintiff to dispatch protest letters that were acknowledged by Nakumatt.
The retailer promised to make good the debts.
An e-mail presented as part of court documents shows that Nakumatt executive director Atul Shah acknowledged the indebtedness.
He promised to pay up but pleaded for time, “as discussed, we will try and pay part of the rent by Tuesday next week, please bear with us on the delays as we sort our restructuring,” Mr Shah wrote on March 31, 2017.
Indeed, it paid arrears for June, July and August 2016, via cheques but subsequent cheques were not honoured by the banks, attracting an extra accusation of fraud against the retailer by the landlords.
“In a shocker, the defendant has been claiming VAT refunds every time the plaintiffs have invoiced for the money that the defendant has not paid.  This now stands at $46,357 on VAT claimed irregularly on money not yet remitted to the plaintiffs’ account,” reads the plaint.
Irregular VAT claims and issuing of bouncing cheques are criminal offences under the Penal Code.
The plaintiffs further argue that before subleasing the premises, Nakumatt demanded that physical adjustments be made to suit its supermarket needs, which necessitated borrowing from the bank to effect the changes as demanded.
Nakumatt also demanded that the landlords terminate a tenancy agreement with two other tenants who were running electronics and mobile phone set shops respectively so as to convert the spaces into additional space for the supermarket.
Rent-free period
This, the plaintiffs argue, attracted separate costs that since November 2012, have not been paid.
They are demanding $10,530 from the retailer.
Owing to delays in payment, the plaintiffs claim they have defaulted to repay loans that are now attracting penalties.
In response, Nakumatt argues that the adjustments were necessary to create a common area that was factored into the long-term relationship they were to enjoy and would not be paid for.
The sub-lease agreement was to run for 11 years.
“Nakumatt required Mpororo to undertake structural changes at its own cost to fit specifications required for the supermarket business and as a pre-condition for renting the premises,” Bernard Mutua, Nakumatt’s country manager said in an affidavit to court filed on May 5, 2017.
Mr Mutua added that Nakumatt advanced $150,000 interest-free to Mpororo to facilitate the structural changes upon an understanding that the money would either be refunded or converted into rent.
Nakumatt further argues that the parties had agreed that there would be a three months’ rent-free period (which Mpororo has never provided) totalling $110,385, for which it is making a counterclaim.
In court arguments, details of which this newspaper has seen, Nakumatt argues in its defence that it has always requested the landlord to reduce space because the operation turned out unprofitable but the plea went unanswered.
Regional chain
Nakumatt is headquartered in Kenya but has operations in Uganda, Rwanda and Tanzania.
At its peak, the retailer mounted an ambitious expansion programme opening 10 stores in Uganda alone and at least 60 in the region.  
But starting last year, the Uganda operations started to struggle on account of low business and difficulty in accessing credit.
Suppliers went unpaid forcing many to halt supplies.
The firm has been making efforts to attract equity investments to revamp operations with little success so far.
At its Entebbe branch, 33 kilometres from Kampala, court bailiffs earlier in the past week hauled out bread making equipment to recover some debts.
Nakumatt’s woes are identical to another Kenyan giant, Uchumi, which closed operations in 2015, leaving many suppliers crying over unpaid debts.
THE EAST AFRICAN

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