Naivas

The Naivas Story: They kept the business by giving up the company

In August, two thousand and thirteen, Massmart, the South African arm of Walmart, was negotiating to buy fifty one per cent of a supermarket chain in Kenya.

The figure being reported was about three billion shillings, for control of a company that twenty three years earlier had been one shop in a small town outside Nakuru.

The largest retailer in the world was at the table. The deal did not fail on price, and no regulator stopped it.

A member of the founding family went to court. The filing came under a certificate of urgency, and it argued that the sale would cause irreparable loss.

In October, Massmart withdrew.

Remember the number, fifty one. The rest of this story is a family handing things over, one piece at a time, and that is the one piece that did not go.

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THE GIFT

On the twenty seventh of July, nineteen ninety, in Rongai, a trading town about thirty kilometres from Nakuru, a shop changed hands inside one family.

The shop belonged to Joram Kamau, who had been trading in Rongai since at least the early nineteen eighties. It traded as Gitwe General Stores.

Kamau was moving on to build a chain of his own, which he called Tuskys. He did not take the Rongai shop with him. He let the family take it over.

Two of his nephews, David Kimani and Simon Gashwe, had worked for him in that shop for years.

Their father, Peter Mukuha Kago, was Joram Kamau’s brother, and he came in with them.

The accounts in circulation do not agree on exactly who received the shop. Some say it went to the brother. Some say it went to the nephews.

What the record supports is that it went to the family, and that all three of them ran it.

So one family in Nakuru county gave the country two of its best known supermarket chains. The brother who handed over the shop built Tuskys. The brother who received it built Naivas, with his sons.

And in Nakuru town itself, three years earlier, a mattress business called Nakumatt had relaunched as a supermarket.

The money the family started with, by David Kimani’s own account, was two hundred thousand shillings.

So this is not a founding in the usual sense. Nobody had an idea and went looking for backers.

What passed that July was a going concern, with somebody else’s name over the door, handed from one brother to another brother and his sons.

In nineteen ninety three they registered it as a limited company, Rongai Self Service Stores Limited. The business now carried the name of its town.

A second store opened in Elburgon, in nineteen ninety four or ninety five. The sources disagree on the year.

A third opened in Naivasha in nineteen ninety six. Two of the sisters came into the business as those stores opened.

The Naivasha branch became the head office, and in nineteen ninety eight the company was renamed after it, as Naivasha Self Service Stores.

The name followed the building, not the family.

That is nearly everything the record holds about the nineteen nineties. There is no independent account of the business in that decade, no published accounts, and no outside voice.

What exists is the family’s own retelling, and it is uniformly cheerful. We are not going to add colour it does not have.

In two thousand and one they came to Nairobi, with a store on Ronald Ngala Street, in the centre of the city.

To pay for it, they closed two of their own stores. One was Elburgon.

The other was the shop in Rongai, the one that had been handed to them eleven years earlier.

The first thing they were given, they spent on the next address.

THE WILL

In two thousand and six the company took the name it still trades under. Naivasha became Naivas.

It was the fourth name the business had carried. Gitwe, then Rongai, then Naivasha, and now Naivas.

The shopfronts went purple, and three years later they went orange and green. By then the chain had reached Machakos, and Komarock in the east of Nairobi.

On the sixth of May, twenty ten, Peter Mukuha Kago died. For twenty years he had been the family’s anchor in the business.

There was still no outsider in Naivas. No outside shareholder and no published accounts. Everything that decided who owned it sat inside one family, and, once he was gone, inside one document.

He left a written will. His own holding in the company was twenty per cent, and he did not spread it across all his children.

He left it to four of his nine children.

When the shares had moved, those four held twenty nine, twenty nine, twenty one and twenty one per cent. Between them, they held all of it.

From twenty eleven, his eldest son, Newton Kagira Mukuha, challenged the estate.

His case is that he helped found the business and is owed a share of it. He has asked the courts for a stake in Naivas and, press reports say, a seat on its board and damages.

The High Court upheld the will and dismissed his objection. He appealed, and the case began a long passage between the High Court and the Court of Appeal.

None of it stopped the shops. Through the challenge and the hearings, the stores kept trading, and nothing on the record shows the dispute interrupting a day of business.

The chain went on opening, town by town, with no outside shareholder to answer to and nobody to reassure.

Nine children, and four of them named.

David Kimani. Simon Gashwe. Grace Wambui. Linet Wairimu.

The four who ran the business.

THE DEAL THAT DIDN’T

In twenty thirteen Naivas was twenty three years old and ran roughly thirty stores. No outsider had ever owned a share of it.

Massmart, which Walmart had bought control of two years earlier, offered about three billion shillings for fifty one per cent.

Fifty one per cent is not a stake. It is control: the board, the chief executive, the decision to open a store or close one.

Our arithmetic, not a reported figure: the price values the whole company at about five point nine billion shillings.

There were no public accounts to check that against. The company was private and published nothing about itself.

The talks were public, and they ran through August and September.

The public record does not name who went to court to stop the sale. It says a member of the family, and nothing more, so that is all we will say.

The filing came under a certificate of urgency, which is how a Kenyan court is asked to hear a matter ahead of its turn. It argued that the sale would cause irreparable loss.

The application did not have to win. That is our reading of the timeline, not a finding.

An injunction of that kind only had to hold long enough for a listed buyer, answering to its own shareholders, to decide that the wait was not worth it.

In October, twenty thirteen, Massmart withdrew.

It is the only handover in this story that was blocked, and it was blocked from inside the family.

So there is a Naivas that never existed. In that version, it goes through the collapse of Kenyan retail that followed as a subsidiary of the largest retailer in the world, with that balance sheet behind it and its decisions made somewhere else.

Whether that company would be bigger now, or smaller, or gone, nobody can say. We are not going to guess.

THE FITTINGS

In the second half of the twenty tens, the chains around Naivas came apart.

Uchumi, partly owned by the state, went through the second collapse of its life, and today trades from two stores.

Nakumatt, the largest, went into administration in January, twenty eighteen.

And then Tuskys went the same way.

Naivas has never had a store outside Kenya. Not one.

In late twenty nineteen, as Nakumatt’s assets were sold off through a stockbroker, Dyer and Blair, Naivas started buying.

On the twenty ninth of November it bought the furniture, fixtures and fittings of three Nakumatt branches, for use in its other stores.

By January, twenty twenty, the purchase covered the fittings of six branches, and the price was four hundred and twenty two million shillings.

An independent valuer, Tysons, had put those same assets at a hundred and ten and a half million shillings, and at seventy seven and a half million in a forced sale.

There were other bidders. Chandarana offered two hundred and forty six million.

Tuskys, the chain Joram Kamau had gone on to build, bid seventy million, for three of the branches.

Naivas paid nearly four times the valuation, and more than five times the forced sale figure.

It did not move into all six. It occupied three of the premises, in Nakuru, Lavington and Prestige, having negotiated new terms with the landlords.

The fittings from the other three went to its other stores.

The Nakuru store opened in December, twenty nineteen, in space Nakumatt had left.

Nakumatt’s creditors did not vote to liquidate it until the seventh of January, twenty twenty, with about thirty eight billion shillings owed.

The taking of the space ran alongside the collapse, not after it.

Later in twenty twenty, the Daily Nation reported Naivas opening in Nakumatt’s old space in Kisumu, as its sixty fifth store. How many former Nakumatt sites it trades from today is not on the record.

More space followed. Naivas took the anchor unit Uchumi had held at Capital Centre on Mombasa Road.

And when Tuskys itself collapsed, Naivas took the space it had held at Juja City Mall.

A shelf stripped off a wall is worth very little, and the people selling knew it.

A source on the selling side, quoted by Business Daily, put it plainly. Naivas paid for goodwill and also the location, which cannot be valued. Otherwise there is no value in the assets if we had stripped them off.

FIFTY-ONE

Between February and April of twenty twenty, in the same weeks as the Nakumatt purchase but in a separate transaction, four institutions bought into Naivas together.

Amethis, a French investment firm, led it. DEG, the German development finance institution, came in alongside.

So did MCB Equity Fund, from Mauritius, and the International Finance Corporation, the World Bank’s private sector arm.

Together they took about thirty one and a half per cent, for about six billion shillings. The Tax Appeals Tribunal’s record puts it at thirty per cent and five point two billion.

For the first time in thirty years, somebody outside the family owned part of Naivas, and Amethis was the first in the door.

Our arithmetic again: that price put the whole company at somewhere between seventeen and twenty billion shillings. Seven years earlier, Massmart’s offer had implied five point nine.

Investors like these buy in to sell on, not to stay.

The family’s own shares sat in a holding company, Gakiwawa Family Investments.

The Kenya Revenue Authority later assessed one point seven nine billion shillings against Gakiwawa over that sale.

The authority’s theory is that the family had held the stake for trade, so the gain was ordinary business income and not a capital gain. The Tax Appeals Tribunal ruled for the authority.

Naivas Kenya had also objected to being made the authority’s tax representative in the matter, and that appeal was dismissed too.

By August, twenty twenty two, the outside stake stood at forty per cent, and it had a new holder.

Mambo Retail, a company registered in Mauritius and owned by the IBL group together with Proparco, the French development finance institution, and DEG, paid about a hundred and nineteen point six eight million dollars for that forty per cent.

The shares that changed hands were in Naivas International, a Mauritian company that owns the Kenyan business outright.

That left the family, through Gakiwawa, with sixty. By the twenty twenty two price, the whole company was worth about three hundred million dollars, on our arithmetic.

On the twelfth of July, twenty twenty three, Mambo Retail bought eleven per cent more from Gakiwawa Family Investments, for about forty one point seven million dollars, or about five point eight billion shillings.

That put Mambo Retail at fifty one per cent. For the first time since the shop in Rongai, the family did not control the company.

So the space the fallen chains left behind, Nakumatt’s and Tuskys’s among it, now sits in a company its own founding family does not control.

IBL holds about seventy three point two per cent of Mambo Retail. Multiply that by Mambo Retail’s fifty one, and IBL’s economic interest in Naivas works out to about thirty seven point three per cent.

Nobody publishes that figure. We calculated it from two that are published. A company IBL controls holds control of Naivas, which is not the same as IBL owning it.

Quickmart, the nearest rival by store count, took a different road. In twenty nineteen it was sold outright to a single private equity fund.

Fifty one per cent is the number Massmart offered for in twenty thirteen, and the number one family member’s filing stopped.

Ten years later it was handed over anyway, and not to the buyer who first asked.

Our reading is that the route was chosen. Minority money from development finance first. Then a single buyer for a minority. Then control, sold in a slice of eleven per cent, with the holding company kept.

That is a sequence, not a surrender.

The family kept forty nine per cent.

THE FIRST OUTSIDER

On the twenty first of March, twenty twenty five, the Court of Appeal allowed Newton Kagira Mukuha to revive an appeal that had stalled.

An earlier appeal of his had been dismissed in December, twenty twenty one, as without merit. This one was not finished.

Of the two nephews who had worked in the Rongai shop, Simon Gashwe had died in August, twenty nineteen. The other was still running the company.

On the seventh of October, twenty twenty five, David Kimani Mukuha announced that he would step down, after thirty five years, which is the whole life of the business.

On the first of November, twenty twenty five, Andreas von Paleske became chief executive, and David Kimani moved to the board as an adviser.

Von Paleske is German, a former investment banker and private equity investor. He had joined Naivas in twenty seventeen as chief strategy officer, three years before any outsider owned a share. He is the first person from outside the family to run it.

David Kimani gave the reason himself. The change, he said, was about shielding the company from internal disputes.

The words are his. What follows is our reading of them.

Since twenty eleven this family has been in court with itself, and a family fight of that length is supposed to be the thing that breaks a family business. On this record it did something else.

It did not weaken how Naivas is governed. On his own stated reason, it is why an outsider now runs it.

In February, twenty twenty six, the High Court suspended the whole of the commercial suit over the shares, until the Court of Appeal in Nakuru deals with his appeals there.

In the court’s words, his right to advance any claim in respect of Naivas is inextricably tied to his ability to establish a proprietary interest in the company.

The case is suspended, not finished. One of his appeals was listed in Nakuru in June, and the record we have does not say what came of it.

For the first time since twenty eleven, the fight over the shares is not moving.

In May of twenty twenty six, Naivas had a hundred and fourteen stores, up from a hundred and nine a year earlier, in thirty eight or more of Kenya’s forty seven counties.

In the year to June, twenty twenty five, revenue grew twenty one point six per cent and profit grew forty three point four per cent.

That came after a year in which profit, as first reported, fell by close to a fifth.

The shilling totals circulate in more than one conversion, because the figures reach the public through a parent in Mauritius, so the growth rates are the numbers to trust.

On those figures, by our arithmetic, the chain keeps roughly two shillings of profit from every hundred it takes.

The new chief executive has spoken of taking the chain towards two hundred stores. Supermarket retail, in his words, operates on very low margins and depends on high volumes.

At the World Retail Congress in Berlin, in April, twenty twenty six, he described grocery as infrastructure.

The split is still fifty one and forty nine.

By the company’s own count, about twelve thousand permanent staff work for Naivas.

More than two thousand of the people working in these stores are hired and deployed through a separate company, Achievo, whose director the press describes as a Naivas heir.

The figure is Achievo’s own, given in its dispute with the tax authority.

The public knows the arrangement exists only because of that dispute. The revenue authority assessed Achievo for value added tax on the salaries it pays out, and the High Court has stayed collection until its appeal is heard.

On the twenty ninth of May, twenty twenty six, the Kenya Gazette published Achievo’s dissolution. It had been struck off the register of companies.

In September, the owners of Naivas asked the High Court to restore it.

Nobody has asked those workers what any of this has meant.

In October, twenty twenty one, Naivas opened a store on Aga Khan Walk, in the centre of Nairobi, in Uchumi House, the building that carries Uchumi’s name. Uchumi had closed its branch there three years before.

The family that was handed one shop in Rongai now holds forty nine per cent of the chain, and does not control it. The chief executive is not family. The dispute he was brought in to shield the company from is suspended, not settled.

Its Mauritius holding company belongs to two holders: a vehicle led by IBL with fifty one per cent, and the family with forty nine. Whose company that makes it, we will leave with you. This is Asili Africa. Every empire has an origin. See you on the next one.

Key Takeaways

• THE GIFT. On the twenty seventh of July, nineteen ninety, in Rongai, a trading town about thirty kilometres from Nakuru, a shop changed hands inside one family.
• THE DEAL THAT DIDN’T. In twenty thirteen Naivas was twenty three years old and ran roughly thirty stores.
• THE FITTINGS. In the second half of the twenty tens, the chains around Naivas came apart.
• THE FIRST OUTSIDER. On the twenty first of March, twenty twenty five, the Court of Appeal allowed Newton Kagira Mukuha to revive an appeal that had stalled.

In this series: The Retail Collapse

Who took the shelf space when the chains fell?

1. Uchumi
2. Nakumatt
3. Tuskys
4. Naivas (this episode)
5. Quickmart
6. Chandarana Foodplus

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