Wednesday, June 07, 2006
STOP WHINING ABOUT THE COLLAPSE OF UCHUMI SUPERMARKET
The lessons from the collapse of Uchumi supermarket chain should be heeded by all. The problems at Uchumi did not just happen overnight on 30th May.
The government through ICDC made a hasty retreat from Uchumi in September ‘05 by selling much of its stake in the company. This move meant to infuse fresh capital into the company was like putting a new coat of paint on a rusted leaking hull and did not bear much positive fruits. The new captain Chris Kirubi tried to navigate the ship from the shallow waters. His actions added more weight to the overloaded ship and this accelerated its grounding. What should have been done was to offload excess cargo, dump the inevitable dead stocks and make a radical change in the direction. Like in all government parastatals, the invisible hand of the government was always involved in the boardroom. While the government might profess to have given the parastatals independence of action, it maintained control through the appointment of the board of directors. This appointment is not always merit based. Hence one cannot divorce the collapse of the chain from the government.
The clear lesson from Uchumi is that the government has no business in business. It is not the business of the government to sell Kasuku and roiko. I have no tears for the fallen Uchumi. I do not wish to see the government getting involved in matters best handled by the Nairobi Stock Exchange. The cry in the past has been for the government to get out of business now we are calling the same government to come back and rescue our managerial failures. Give me a break. Either we get the government out of business and it stays out or we forget about privatization. We cannot have it both ways. Who is being rescued here? Is it the business of the government to bail out individuals or institutional investors? Emphatic No! It is the business of the investors to take the responsibility of their investment decisions.
We have to learn to take risks and live with the consequences of our actions. Let us not be sentimental just because we lost our investment. This however does not absolve the management of Uchumi from facing the consequences of their actions. If there was any wrongdoing by the present or past management, by all means let the law take its course indiscriminately. If there is no law in place to protect the small investor, let us hope there is a legislature awake to sponsor one. The whining and blaming is not a solution, the solution lies in enforcing the law or legislating one. Period.
Let us not mourn and whine at the collapse of Uchumi. This might be a good thing for the investors. There is a gap to be filled, there are consumers out there waiting to be serviced. The loss of Uchumi is the gain of the next door supermarket or kiosk. The demand for the products will not cease, somebody will step in and provide the service.
The thousands of individual share holders in various companies should take heed. It is not the number of individuals that count but the number of shares held. As a block they may have the numbers to influence action in the respective companies’ boardrooms. But they lack the capacity to act as a block and are therefore always at the mercy of the big shareholders. This therefore, shifts the responsibility for informing the investing public about the risks of various investments on to the stock brokers. Other than trading shares and earning commissions, it is incumbent upon the brokerage firms to provide all relevant information to enable the investor make an informed decision.
In the past we have seen the hunger for shares by small investors in the various rights issues in the stock exchange. The recent rambunctious scramble for Kengen shares, and the current volume trades of the same, is indicative of the awareness by the small investor of the quick bucks to be made in the stock market. Kenyans are an interesting lot, believe if Uchumi shares start trading tomorrow, there would be many takers. Perhaps it is time some investor tapped this market and built a new Uchumi.
Charles Wairia
The government through ICDC made a hasty retreat from Uchumi in September ‘05 by selling much of its stake in the company. This move meant to infuse fresh capital into the company was like putting a new coat of paint on a rusted leaking hull and did not bear much positive fruits. The new captain Chris Kirubi tried to navigate the ship from the shallow waters. His actions added more weight to the overloaded ship and this accelerated its grounding. What should have been done was to offload excess cargo, dump the inevitable dead stocks and make a radical change in the direction. Like in all government parastatals, the invisible hand of the government was always involved in the boardroom. While the government might profess to have given the parastatals independence of action, it maintained control through the appointment of the board of directors. This appointment is not always merit based. Hence one cannot divorce the collapse of the chain from the government.
The clear lesson from Uchumi is that the government has no business in business. It is not the business of the government to sell Kasuku and roiko. I have no tears for the fallen Uchumi. I do not wish to see the government getting involved in matters best handled by the Nairobi Stock Exchange. The cry in the past has been for the government to get out of business now we are calling the same government to come back and rescue our managerial failures. Give me a break. Either we get the government out of business and it stays out or we forget about privatization. We cannot have it both ways. Who is being rescued here? Is it the business of the government to bail out individuals or institutional investors? Emphatic No! It is the business of the investors to take the responsibility of their investment decisions.
We have to learn to take risks and live with the consequences of our actions. Let us not be sentimental just because we lost our investment. This however does not absolve the management of Uchumi from facing the consequences of their actions. If there was any wrongdoing by the present or past management, by all means let the law take its course indiscriminately. If there is no law in place to protect the small investor, let us hope there is a legislature awake to sponsor one. The whining and blaming is not a solution, the solution lies in enforcing the law or legislating one. Period.
Let us not mourn and whine at the collapse of Uchumi. This might be a good thing for the investors. There is a gap to be filled, there are consumers out there waiting to be serviced. The loss of Uchumi is the gain of the next door supermarket or kiosk. The demand for the products will not cease, somebody will step in and provide the service.
The thousands of individual share holders in various companies should take heed. It is not the number of individuals that count but the number of shares held. As a block they may have the numbers to influence action in the respective companies’ boardrooms. But they lack the capacity to act as a block and are therefore always at the mercy of the big shareholders. This therefore, shifts the responsibility for informing the investing public about the risks of various investments on to the stock brokers. Other than trading shares and earning commissions, it is incumbent upon the brokerage firms to provide all relevant information to enable the investor make an informed decision.
In the past we have seen the hunger for shares by small investors in the various rights issues in the stock exchange. The recent rambunctious scramble for Kengen shares, and the current volume trades of the same, is indicative of the awareness by the small investor of the quick bucks to be made in the stock market. Kenyans are an interesting lot, believe if Uchumi shares start trading tomorrow, there would be many takers. Perhaps it is time some investor tapped this market and built a new Uchumi.
Charles Wairia
