The Uchumi Supermarket Ponzi Scheme killing Small Businesses

The year was 2002, Uchumi Supermarket opened it’s first retail store outside the Kenyan borders in Kampala, Uganda amidst a lot of fanfare and pomp. The branding alone was enough to attract the trigger happy Kampala elite whose love and admiration for anything new lasts as long as it takes a matchstick to burn. I was among those sucked into the craze of shopping there and indeed the service levels were quite impressive. Little did I know that it was a matter of time before I became a supplier of this very supermarket chain.

In 2009, I was able to get one of my company’s products onto their shelves and honestly, it was such a big break for the business. What begun as a symbiotic affair where we supplied and were paid (albeit after a 45 – 60 day period), eventually became parasitic. The supermarket from as far back as 2010 begun falling back on its payment promises and one had to occasionally ‘go native’ in order to be considered for payment. Eventually we stopped supplying them and as a result accumulated unpaid invoices over two years old.

How did Uchumi respond to our plight as unpaid suppliers? The company simply took on new suppliers who had no idea how much of a bad business partner they were getting in bed with. These new suppliers would also supply for about a year then cease upon realising that they are offering interest and security free loans to Uchumi. The cycle continued to the extent that in one interaction with their Finance Manager a one Richard, I did warn him of the imminent collapse of the Ponzi Scheme they were engaging in. I proposed to him that a meeting between Uchumi Management and Suppliers would help generate ideas on how the situation could be turned around. Unfortunately, some of these powder milk stuffed corporate expatriates for lack of a better term have no clue about what it takes to maintain a business ecosystem and only focus on ensuring that their salaries hit the bank account as well as massaging the egos of their god fathers.

At this point I chose to sit on the sidelines and watch the gradual collapse of a giant. In a matter of just one year, the Uchumi Ponzi Scheme has fallen apart in Uganda. However, what do we learn from all this?

Small Businesses that form the bulk of suppliers to the supermarkets are the biggest victims of such corporate financed misadventures. Businesses that have outstanding payments with Uchumi of between US$ 500 and US$ 5000 are not less than 600. This translates to a supplier debt of at least US$ 1.5 Million. Now these are the businesses that you and me set up with plans of growing into something bigger tomorrow. To be made a fool of by such a major retailer that continued to carry out promotions even when they were at bleeding point is the biggest insult I have ever witnessed. I am only glad that our products are selling in most of the major retail outlets and the loss of Uchumi can’t drive us out of business but what happens to that Mama Mboga (Poor little lady who packs ground nuts and sim sim snacks to supply in order to fend for her fatherless children)? Family incomes are shattered, this has a rebounding effect on individuals’ lives but for the corporate smugglers in form of Managers and owners at Uchumi, it’s business as usual.

Look at this interesting trend, in 2002 when Uchumi came to Uganda, they were already facing teething problems in Kenya that led to the company being put under receivership in 2006 and eventually being delisted from the stock exchange. Uganda gave them a lifeline as it was a cash cow till the same internal thieving and stock control problems that caused the Kenyan collapse caught up with them. Now that Uchumi Uganda is on it’s knees (as expected anyway), they are rapidly opening up branches in Rwanda. One only wonders for how long they will profitably operate in that market before the same cancer that plagues the Kenyan and Ugandan operations permeates there. As of writing this, Uchumi has closed their Freedom City, Garden city, Nateete, Kabalagala and Gulu branches in Uganda. They are neck deep in lawsuits and it looks like this time round, the Kenyan Government just might not bail them out like it did in a politically brokered deal when the Kenyan operations had hit rock bottom.

The scene of this has been in the Supermarket space but similar cannibalistic attributes are being witnessed in different industry sectors. A friend that runs a small business that offers services to Advertising Companies keeps lamenting about the delayed payments that take at least six months to come through.

Why then should the Small Business owners always be blamed for the horrendous statistics quoted that “90% of Ugandan businesses never live to reach 5 years?” The major cause is clear and it is a cash flow problem usually induced by supposedly professionally run big businesses. The Uchumi Ponzi Scheme is a case in point.

Without appearing to be a prophet of doom, if Uchumi doesn’t clean up house right from the top (A fish starts rotting from the head – Acholi Saying) the Rwanda operations will bite the dust within two years from now leaving many small business owners destitute. Word coming in indicates that Uchumi Tanzania is likely to close shop soon too with suppliers and workers are already protesting.

Like the Telexfree fraud, Uchumi Supermarket is taking Suppliers on a wild goose chase.

Someone stop Uchumi’s Ponzi Scheme. NOW!!!

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5 responses to “The Uchumi Supermarket Ponzi Scheme killing Small Businesses

  1. Sasha Namaganda

    The Ugandan gov’t really should get involved in this crazy situation. I personally worked with these thieves for sa few years and it was a painful relationship when it came to paying me. I supplied goods on consignment which meant I was only paid for what had gone through their tills. They sold my goods but kept the money. I have tried to call their head office but nobody gives a straight answer. I have also heard from a reliable source that their head office in Kenya – the one they kept saying was sending the money to pay suppliers is a separate entity from the collapsed Uchumi in Uganda.

    Honestly, I think these theiving bastards planned to milk Ugandans and run away with our money

  2. Pingback: Doing Business with Supermarkets in Uganda | The Wire Perspective

  3. Uchumi Mbale already closed as of 18th Oct 2015 !

  4. My concern is what happens to us – the small business suppliers hoping to make it big. Can we call out a Ponzi scheme before making losses?

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