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Tuskys to lease brand in the race for survival

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Tuskys to lease brand in the race for survival


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A Tuskys outlet at a mall in Nairobi. FILE PHOTO | NMG

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Summary

  • CAK on Monday revealed the franchising plan, adding that Tuskys has sought regulatory guidance on how to lease its brand to investors.
  • CAK noted that a franchise agreement may qualify for exemption from regulations banning restrictive trade practices by companies in the same industry.
  • At its peak, the retailer was an acquisition target for global giants like Walmart seeking a foothold in East Africa.

Struggling supermarket chain Tuskys has sought approval from the Competition Authority of Kenya (CAK) to lease its brand through a franchise after losing most of its stores due to non-payment of debt to landlords and suppliers.

In the proposal, Tuskys will allow various independent retailers to trade using its brand at a fee following delays in closing a Sh2.1 billion financial deal with a mystery offshore investor.

The CAK on Monday revealed the franchising plan, adding that Tuskys has sought regulatory guidance on how to lease its brand to investors.

Franchising will allow the retailer to keep its brand alive besides generating fees from the partnerships.

It will also give the cash-strapped Tuskys – whose branches have whittled down from more than 60 to an estimated seven — an opportunity to bounce back in the future should it get deep-pocketed investors.

The move follows a limited franchise strategy by rival Uchumi Supermarkets which also fell on hard times.

Tuskys has rejected a creditors court petition to reveal the offshore investor seeking to rescue the cash-strapped retailer, more than nine months after the supermarket chain announced a financing deal.

“The Authority received an advisory request from Tusker Mattresses Limited regarding a proposed franchising project. Specifically, Tuskys sought advice on the necessary legal steps and requirements that they should put into consideration to enable the project become a success,” the regulator says in its latest annual report.

“Tuskys was requested to furnish the Authority with the final draft of the franchising agreement, once prepared and before execution, for its review.”

The CAK noted that a franchise agreement may qualify for exemption from regulations banning restrictive trade practices by companies in the same industry.

Tuskys is betting that its brand will be strong enough to attract business partners that will stock stores, pay employees and rent in the retailer’s latest bid to keep its brand afloat in the competitive sector.

Tuskys has been losing employees, stores, customers and suppliers as its cash troubles worsened amid stock-outs.

At its peak, the retailer was an acquisition target for global giants like Walmart seeking a foothold in East Africa.

The investor intending to provide Tuskys with the Sh2 billion loan seeks to secure the debt using all of the supermarket operator’s shares, putting the ownership of the existing shareholders at risk in the event of default.

The unnamed investor, based in the tax-haven Cayman Islands, was ready to disburse the funds but sought Tuskys’ shareholders to approve the deal, including committing the shares.

A successful franchise strategy will keep the retailer’s brand alive, buying it time to raise the funds needed to rebuild its nationwide network.

Tuskys could buy out the franchisees in the future and take back full ownership of the business.

The franchising model in Kenya’s retail market faces several challenges including enforcing standards such as customer experience, types and variety of goods.

The biggest and most successful supermarkets are owned, operated and centrally co-ordinated by the same entities.

Such ownership structure also brings advantages like sharing of costs including marketing and logistics.

Tuskys, which was at one time the country’s largest by sales and branches after the collapse of Nakumatt Holdings, has closed tens of stores across the country including major towns like Mombasa and Kisumu.

The outlets closed by the company include Digo Road in Mombasa, Mtwapa in Kilifi and Tom Mboya Branch in Nairobi’s central business district.

Tuskys’ decline started with defaults on suppliers, a matter that was brought to the attention of the CAK in April last year.

The regulator intervened, requiring the retailer to pay overdue debt, among other directives.

“The Authority imposed Prudential and Reporting Orders under Section 24A (2) on Tuskys retailer and continues to monitor compliance. Tuskys to date has paid a total of Sh2.1 billion owed to various suppliers,” the CAK says in the report.

Rivals have taken advantage of its shrinkage to take up space at the branches previously occupied. Naivas, for instance, recently signed a lease agreement with Greenspan Mall owner Ilam Fahari I-Reit.

Its rivals such as Naivas and Carrefour have continued to expand, fuelled by access to billions of shillings of debt and equity financing.

Naivas is now the largest supermarket operator in the country with more than 70 branches. It has expanded aggressively after raising Sh6 billion last year from sale of a 30 percent stake to a consortium of institutional investors.

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


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Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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