Share |

Long-distance running

Nakumatt is a Kenya-based family-run retailer. It wants to be the Walmart of Africa. CampdenFB looks at the Shah family’s ambitions.

Atul Shah, the chief executive of east African retailer Nakumatt, is in the middle of an animated discussion with Olympic medallist Paul Tergat. Over a pot of English breakfast tea, Shah is telling his fellow Kenyan – who held the world marathon record between 2003 and 2007 – that they’ve got a lot of work to do. There are many people to speak to, to get on board, says Shah, if his vision is to be realised.

His plan is ambitious, if not plain crazy. And it’s linked to his trip to the UK, where far away from the sun and busy streets of Nairobi, the men have just finished breakfast at a countryside hotel, an oasis of calm deep in the heart of Warwickshire. They’re here to carry the Olympic torch – and it seems Shah has been inspired. “The vision that I have is that we should hold three major events in east Africa,” he says. “We need to now start pushing and lobbying for the football World Cup to be in east Africa in 2030, the cricket World Cup in 2031 and the Olympics in 2032.”

Could it really happen? “People will think that we are crazy, but it is very possible, because we are looking at east Africa as a region, we are not saying Kenya only.” And, he says, with a little bit of help from the rest of the world, east Africa would be ready.

It might seem a lofty goal for a region still trying to find its footing in the world, but Shah has always aimed high – and he has a reputation for successfully achieving what others either never thought to do or didn’t think was possible. At a time when Kenyans predominantly shopped at informal markets, the 51-year-old was already making plans to bring western consumerism to the country. Inspired by the world’s biggest supermarket chain, family-controlled Walmart, he wanted to create a modern, westernised retail brand – complete with huge stores, selling everything from food to furniture. It took a while, but his empire now includes 30 branches in Kenya and has already begun expanding into the rest of east Africa.

It’s a far cry from the family’s business roots. His father Nemchand emigrated from India to Kenya in 1947 and later established a small shop selling clothes and other items in Nakuru. “I started working at the age of 10 with my dad,” says Shah. There was “no spare time” – school and work dominated his and his brother’s life. But that meant he gained plenty of experience – going on buying trips with his father to cities like Nairobi and Mombasa, where his dad gave him “the authority” to decide which products to buy. But it wasn’t all smooth sailing for the family business, says Shah. “There was a time when the small group didn’t do well and my dad had issues with it. So he went to work with my uncle, who owned Nakuru Mattresses.”

After finishing school in 1976, Shah began working with his brother Vimal, setting up a number of “side businesses”. This was the start of an on-off working relationship that would last right up to his brother’s death in 2010. The pair and their father bought Nakuru Mattresses in the late 1970s, expanding the business in the following years. Later Shah spent time in Florida, where, after becoming enamoured with giant superstores, he began questioning why Kenya hadn’t anything similar. “The idea was too big at the time. But I was confident that it would work,” he says.

Finally, in the early 1990s, his dream came true and the first megastore was opened – it was 450 square metres in size, but has since “grown like a baby” to 12,500 square metres. The stores are modern, with large aisles and a place for everything. Most of all, they are bright. Shah, it seems, isn’t a fan of dark buildings. When he leaves the hotel – a former 12th century monastery built in a time when windows were small and defence systems were big – his eyes blink in surprise at the sudden light and he says: “Why are British buildings so dark?”

Nakumatt is growing rapidly – turnover last year was 38 billion Kenyan shillings (€353.8 million), up 28.5% year on year. Net profits rose by more than 32% to 312 million Kenyan shillings. In 2011 and 2012, it appeared in CampdenFB’s list of top global challengers. The aim is top line revenue growth of 20% year on year – which it so far has managed to achieve by targeting Africa’s growth, he says they need to open more stores in Uganda, Rwanda and Tanzania, as well as opening shops in Burundi, Djibouti and South Sudan. To do so, Shah reckons the family will need to dilute its ownership, currently at more than 90%. Expansion requires capital – and “borrowed money is too expensive in Kenya or in Africa in general”. Shah is hoping to sell “25% maximum” to a corporate or individual within the next year. Later a listing on a local stock exchange might be on the cards, but not yet. Despite reducing its stake, the family has no plans to bow out of the business. “The family will keep control,” says Shah, not least because the next-gens are already showing an interest in the business. Shah’s son Neel, 24, and nephews Sameer, 28, and Amit, 30, have been working at Nakumatt for a few years, while his younger son Ankoor, 21, joined during the summer after finishing his degree at the UK’s University of Warwick.

But if they think being a family member will mean an easier road to the top, they need to think again. “It’s not like they can become the boss the first day – no, they are all going through the stages,” says Shah. Working their way up won’t be enough either; “they need to have the vision and they need to have the will”. What if they lack this? “Bad luck,” he says. “We are not only family working here, we have a team of 5,500 – we have to look at all of them and ensure we have the right-thinking minds at the top.”

And in a region where – despite huge improvements – corruption, infrastructure problems and instability are still all too common, having a “right-thinking mind” at the top is important. That, and a natural instinct for business – a gut feeling for what will work, reckons Shah. “There is nowhere we can go and say ‘show me this statistic or that statistic’,” he says. “So we always go by gut feeling … we’ve always been successful.”

Some of those gut decisions were risky, in more than one sense. During the post-election violence that swept Kenya in 2007/2008, Shah’s decision to keep Nakumatt stores open turned the retailer into a refuge of sorts – a place where people could get food and escape the chaos. It could have meant that Nakumatt became a target for violence – not least because it sells machetes, the weapon of choice for rioters at the time. “Kenya is a farming country and everyone has big gardens. So yes, we sell agricultural tools and [machetes] are one of the tools,” says Shah.

But the retailer escaped unscathed – the community even protected stores in some cases. Why? “I think we give a lot back to the community, we are a Kenyan company – the roots are all in Kenya, we have grown with the Kenyans, we have 5,500 Kenyans working for us. And they appreciate what we are doing,” says Shah. Employees, according to the company, are paid “more than benefits such as meals and healthcare.

Still the whole experience has left its mark on the grey-haired 51-year-old. “Neighbours, brothers, sisters all killing each other – it was very painful.” Next year is another election year. Does he expect the same level of violence again? “Nobody wants chaos. They all have had a taste of what chaos can bring,” he says. “Kenya is stable.”

In fact, he reckons Kenya is more than stable; it and the rest of east Africa is the new hub of the continent. “The growth is immense, at the moment we are on the fast-track,” he says. Multinationals, including Pfizer and IBM, are setting up operations. And western retailers are eyeing up the continent, including Walmart, which last year entered the African market by buying a majority stake in discount chain Massmart, based in South Africa. Shah doesn’t seem worried about the competition. “For Walmart to have entered Africa, that is an assurance that there is something in Africa, where we already are.”

There are still problems, he admits. Importing goods into east Africa can be tricky and some of the countries Nakumatt wants to target, like South Sudan, remain untested. The country only came into existence in 2011. But development and democracy is changing the face of the region. All it needs now is a big event, or three, to propel it to the global stage. Kenya seems game – in August, it said it would bid for the 2024 Olympics.

But Shah wants all of east Africa to be involved. And he seems intent on trying to make it happen. “I have spoken to many here and there [about bringing the sporting events to east Africa] and they all think this is a dream that can never come true,” he says. “But I say all dreams come true one day.”

Economic promise
When Kenya discovered oil in its northern Turkana region and gas off its coast in 2012, the reaction locally was not one of jubilation. The country is already a big tourist destination and exporter of tea, coffee and flowers to world markets. In the past few years it has also begun to pull ahead of the rest of the continent as a hub for telecommunication and technology investment.

Nairobi’s Ngong Road is for many the centre of the African “Silicon Savannah”, with start-ups working side-by-side with global blue-chip technology companies. Oil, for some analysts, seems more trouble than it is worth. For consumer goods and food products, Kenya has benefited from improved relations with its neighbours. As well as its own population of around 42 million, the country is the dominant economy in the East African Community, a regional grouping that is increasingly integrated economically, meaning that Kenyan businesses are able to exploit an even larger market of more than 140 million people.

The country, though, is far from risk free. Its economic growth slowed considerably after its last presidential election in 2007, when politicians stoked ethnic tensions within Kenya, leading to outbreaks of violence across the country. GDP growth slumped from 7% in 2007 to 1.5% in 2008. With the onset of the global economic downturn, the economy has yet to hit those heights again. 

Click here >>
Close