How profitable chain lost its way

By Philip Ngunjiri 
The EastAfrican 

Due to its legacy, having been established in the 1960s, generations of Kenyans, particularly in Nairobi grew up under its patronage. With a major government shareholding no one believed that the giant Kenyan retailer could run into financial trouble.

But signs that things were not well began about two years ago when Titus Mugo, who had succeeded long-time managing director Suresh Shah, abruptly resigned in 2002. Kennedy Thairu was then appointed chief executive in the same year. With talk about product mix and differential pricing becoming common, actual marketing took a back seat. The result was that under Mr Thairu's watch, Uchumi hit troubled waters. But soon employees were demonstrating on the streets calling for the ouster of the chairman, Chris Kirubi.

A massive layoff followed and that was the beginning of the loss making period. Mr Thairu sought to explain this as a tiny price to pay for the long-term benefits. But the loss making continued. Suppliers and creditors soon cut off deliveries, claiming Ksh1 billion ($13 million) in unpaid receipts. With shelves emptying, customers heading elsewhere, the 2003 and 2004 results showed the full extent of the damage the retail giant had undergone since Mr Shah's retirement. 

Explanations for this state of affairs has been fast and furious, but focus has remained on what should be the role of the chairman of the board on the day to day running of an organisation and his relationship to the CEO.

The staff demonstration pointed to the board's interference in the running of Uchumi, giving some credence to charges of insider trading, with board members and senior management being accused of doing business with the stores. 

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