Still, I have Faith in the Kenyan Enterprise Story

This week I have had mixed feelings about a subject I love most  entrepreneurship. And more so, about Kenyan startups and enterprises.

After a short period of mourning one of the major brands I have celebrated over and over because of their ingenuity, I got some really glad news about three of our brands, two of them home grown that won major awards at the World Tourism Awards. Kenya Airways, our national flag carrier, was voted as the top airline brand in Africa for the second straight year. It beat South Africa Airlines, Rwanda Air and the likes. Maasai Mara Game Reserve, the eighth wonder of the world, was voted the best in the national parks category beating Kruger National Park (South Africa) and the Namibian National Park. Sarova Hotels and Lodges, our premier tourist hotel chain, also won top awards in the hotels category in the continent.

But that is not news. Nakumatt was the biggest surprise of them all. After a prolonged period of negative publicity due to dwindling business fortunes, there was some good news  they have started restocking their stores again! To those who are not up to speed with the goings on in Nakumatt, the retail mart chain has been having it rough in the last 24 or so months. Faced with growing debt and a strain on their working capital reserves, the supermarket chose to start rolling out of the markets they had entered. They first closed the Ugandan store and later on, followed up with their Thika Road Mall (TRM), NextGen Mall and Westgate Mall stores. Last week, their landlords, the Junction Mall in Nairobi threatened to close their shop due to reduced traffic. One more in Nairobis Industrial Are and another in Mombasa too have gone down too. People have been avoiding going to their stores for lack of sufficient supplies despite their we need it, we’ve got it brand tagline.

It was therefore a sad thing to see the mighty bronze elephant statues being dismounted from the entrances of their stores as the giant slowly fell.

But the story of Nakumatt is reminiscent of the Kenyan entrepreneurship story. An entrepreneur comes up with a great concept, works his way to make it established like a colossus. But the problem starts to arise when the firm reaches its maturity stage and the growth either stagnates and declines or continues to rise and forms its Achilles heel. The latter is what happened to Nakumatt. Nakumatts rise has been anything but phenomenal. In a few years from being a small backstreet store, it established its footprint all across the region. As at the beginning of the year, it has slightly more than 60 stores across Kenya and Uganda. With increased stores and pressure to deliver to its clients, Nakumatt relied heavily on suppliers credit to meet the demand. With no cash to pay for its supplies, it resorted to extend its debtor days from the standard 60 days to more than twice that number 120. But what even made things worse was a strategic decision by the Nakumatt management to start producing their products under the famous Blue Label brand. In this case, it approached producers of various products and bought in bulk to resell to its customers, undercutting its suppliers. The Blue Label products were even more popular with consumers as they were cheaper than the conventional ones.

However, we have to appreciate  that the Nakumatt enterprise is a wholly owned family outfit. Atul Shah, the current heir, is the son of its founder. Many suitors have approached the family to invest into the firm but they have continued to hold on. As such, the working capital has been provided through external borrowing and sources from within the family, which limited its operations. With a restricted cash inflow to finance operations, suppliers refused to provide more suppliers on credit since the delivered goods were not being paid for. And that is how the firm was pushed into a corner since human traffic was reduced significantly. Stories of stores with empty shelves were abound on social media and the print media, further eroding its brand position and equity. They remained with no option but roll out of the markets they had entered, further deteriorating the situation.

This therefore means the cookie started crumbling when the owners of the firm refused to adjust to the demands of the business in terms of capital. A business that grows demands a huge outlay of capital and when the owners are restricted, it ultimately collapses. Most startups are started with an all- mine mindset by the owners. They start businesses with an intention of being the sole beneficiaries of returns and hence choke it up in the fullness of time since growth is stifled for lack of capital. What we need to appreciate is the fact that a business is like an asset. No asset is held for good. There must be an exit strategy sooner or later in the course of time. The owners must be ready to cede part of the shareholding and ownership in exchange of additional resources (financial or knowledge) to help their vision advance to even bigger proportions.

As the founder, you will still remain the originator of the business idea and the vision carrier. But moving the business from its nascent stages to maturity would demand that you leverage networks and resources. And this is where the call for additional shareholding is most welcome. It is time we learnt from firms founded in the West. Facebook, Google, Apple and the likes, were started off by one or two people who came together. With time, they needed additional resources to grow and as such, they had to cede control of their firms in exchange for additional resources that have made them the conglomerates we know them to be, today. It pays to know when the time is ripe for an exit in any undertaking.

Nakumatt was approached by investors interested in injecting additional cash but they chose to cling onto their baby. Now they are struggling. It is my hope that they would indeed heed to the needs of the business and give in, for the preservation of this important national success story. And I do believe that other startups would learn this lesson and follow suit. This is why I still have hope for the Kenyan Enterprise, that indeed we will thrive!This week I have had mixed feelings about a subject I love most  entrepreneurship. And more so, about Kenyan startups and enterprises.

After a short period of mourning one of the major brands I have celebrated over and over because of their ingenuity, I got some really glad news about three of our brands, two of them home grown that won major awards at the World Tourism Awards. Kenya Airways, our national flag carrier, was voted as the top airline brand in Africa for the second straight year. It beat South Africa Airlines, Rwanda Air and the likes. Maasai Mara Game Reserve, the eighth wonder of the world, was voted the best in the national parks category beating Kruger National Park (South Africa) and the Namibian National Park. Sarova Hotels and Lodges, our premier tourist hotel chain, also won top awards in the hotels category in the continent.

But that is not news. Nakumatt was the surprise of them all. After a prolonged period of negative publicity due to dwindling business fortunes, there was some good news  they have started restocking their stores again! To those who are not up to speed with the goings on in Nakumatt, the retail mart chain has been having it rough in the last 24 or so months. Faced with growing debt and a strain on their working capital reserves, the supermarket chose to start rolling out of the markets they had entered. They first closed the Ugandan store and later on, followed up with their Thika Road Mall (TRM), NextGen Mall and Westgate Mall stores. Last week, their landlords, the Junction Mall in Nairobi threatened to close their shop due to reduced traffic. One more in Nairobis Industrial Are and another in Mombasa too have gone down too. People have been avoiding going to their stores for lack of sufficient supplies despite their we need it, weve got it brand tagline. It was therefore a sad thing to see the mighty bronze elephant statues being dismounted from the entrances of their stores as the giant slowly fell.

But the story of Nakumatt is reminiscent of the Kenyan entrepreneurship story. An entrepreneur comes up with a great concept, works his way to make it established like a colossus. But the problem starts to arise when the firm reaches its maturity stage and the growth either stagnates and declines or continues to rise and forms its Achilles heel. The latter is what happened to Nakumatt. Nakumatts rise has been anything but phenomenal. In a few years from being a small backstreet store, it established its footprint all across the region. As at the beginning of the year, it has slightly more than 60 stores across Kenya and Uganda. With increased stores and pressure to deliver to its clients, Nakumatt relied heavily on suppliers credit to meet the demand. With no cash to pay for its supplies, it resorted to extend its debtor days from the standard 60 days to more than twice that number 120. But what even made things worse was a strategic decision by the Nakumatt management to start producing their products under the famous Blue Label brand. In this case, it approached producers of various products and bought in bulk to resell to its customers, undercutting its suppliers. The Blue Label products were even more popular with consumers as they were cheaper than the conventional ones.

However, cognizance has to be taken into consideration that the Nakumatt enterprise is a wholly owned family outfit. Atul Shah, the current heir, is the son of its founder. Many suitors have approached the family to invest into the firm but they have continued to hold on. As such, the working capital has been provided through external borrowing and sources from within the family, which limited its operations. With a restricted cash inflow to finance operations, suppliers refused to provide more suppliers on credit since the delivered goods were not being paid for. And that is how the firm was pushed into a corner since human traffic was reduced significantly. Stories of stores with empty shelves were abound on social media and the print media, further eroding its brand position and equity. They remained with no option but roll out of the markets they had entered, further deteriorating the situation.

This therefore means the cookie started crumbling when the owners of the firm refused to adjust to the demands of the business in terms of capital. A business that grows demands a huge outlay of capital and when the owners are restricted, it ultimately collapses. Most startups are started with an all- mine mindset by the owners. They start businesses with an intention of being the sole beneficiaries of returns and hence choke it up in the fullness of time since growth is stifled for lack of capital. What we need to appreciate is the fact that a business is like an asset. No asset is held for good. There must be an exit strategy sooner or later in the course of time. The owners must be ready to cede part of the shareholding and ownership in exchange of additional resources (financial or knowledge) to help their vision advance to even bigger proportions.

As the founder, you will still remain the originator of the business idea and the vision carrier. But moving the business from its nascent stages to maturity would demand that you leverage networks and resources. And this is where the call for additional shareholding is most welcome. It is time we learnt from firms founded in the West. Facebook, Google, Apple and the likes, were started off by one or two people who came together. With time, they needed additional resources to grow and as such, they had to cede control of their firms in exchange for additional resources that have made them the conglomerates we know them to be, today. It pays to know when the time is ripe for an exit in any undertaking.

Nakumatt was approached by investors interested in injecting additional cash but they chose to cling onto their baby. Now they are struggling. It is my hope that they would indeed heed to the needs of the business and give in, for the preservation of this important national success story. And I do believe that other startups would learn this lesson and follow suit. This is why I still have hope for the Kenyan Enterprise, that indeed we will thrive!

***** Ends******

The writer is an acclaimed business author of Passionpreneurship Demystified and Business Networking: How to maximize on your contacts for Business and Professional Growth. Both books are available on Amazon. He is also a Personal Branding and Business Speaker with PBL Africa and a Cytonn eHub Mentor. In case you need assistance to give your business or profession a jump-start, he can be reached via the following contacts:

Email:                pblogix@gmail.com

LinkedIn:             https://www.linkedin.com/in/mike-okinda-9652b210a

Telegram:             @Mokinda

Telegram Community:      https://t.me/joinchat/EkprBT6zCKCRUmQUaDD9cQ



Author: pblafrica
Passionate about personal branding and entrepreneurship. Wana be influence!

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