Inside Tuskys’ spying system, theft syndicate and debt crisis

It used the intelligence gathered to grow into East Africa’s biggest supermarket chain.

When it was second only to Nakumatt in size and revenue, Tuskys hired spies to gather intelligence on its rival, and was willing to splash the cash to become the bigger of the two elephants.

The spies were stationed both in its own stores and at Nakumatt.

Each spy got Sh42,000 monthly to gather intelligence, according to numerous documents reviewed by the Nation.

Read: End of an era as Tuskys exits Nakuru, the town where it all started

Secrets of blue elephant

The undercover agents stationed at Nakumatt were to find out what secrets the blue elephant was using to stay atop the food chain.

The ones stationed in Tuskys’ stores were to help stop internal leaks such as shoplifting and theft by employees.

Initially, Tuskys had hired Hipora Business Solutions to curb the internal leaks.

It later engaged Syndicate Agencies Limited for the same service.

Read: Why supermarkets in Kenya are collapsing one-by-one like flies

This was in addition to other measures that, on paper at least, made Tuskys management more than just the proverbial big brother watching from all angles.

The contract Syndicate signed with Tuskys, and which is now part of a court bundle in an insolvency suit against the retailer, states that a separate group of agents were hired to spy on colleagues and shoppers to make sure that nobody was taking a five-finger discount — stealing stock from the shelves.

Each of these “loss control agents” was paid Sh35,500 per month.

Syndicate also put up CCTV cameras within Tuskys, complete with personnel to watch the feeds all day, and hired other individuals to cross check stock with invoices and purchase orders.

Double checkers

Yet another set of workers would check staffers’ pockets and bags as they walked into work and left for the day. These were the double checkers.

There were also the front-end controllers, whose work was to simply watch the cashiers and make sure that all items purchased were being scanned and billed.

Finally, there was a group of supervisors to oversee all the spies, double checkers and camera control room watchers.

But even with the huge spend on intelligence, Tuskys was still losing more than Sh100 million per month to shoplifters. This translated to more than Sh1.2 billion a year.

In 2015, two years before Tuskys engaged Syndicate and when it was still utilising the services of Hipora Business Solutions, the retailer fired 107 workers for running a shoplifting scheme.

The rogue workers would collude with outsiders to steal from the shelves.

In some cases, cashiers would bill customers in full but record lower prices in the system, then pocket the difference.

Some would keep customers’ receipts and then cancel the sale and take the cash from the register, then fake refunds to the shoppers.

Liquidation

The security operations, which were seemingly tight only on paper, have been laid bare in documents filed by Syndicate Agencies Limited, which is among at least 30 creditors currently in court looking to have the struggling retailer put out of its misery through liquidation.

Syndicate Agencies is looking to have Tuskys wound up for failing to pay Sh30.8 million that accrued between November 10, 2017 when the petition was filed, and May 31, 2020 when the two firms fell out over non-payment of dues.

On August 12, 2020, Syndicate Agencies filed the insolvency petition.

And 12 days later, Hotpoint Appliances Limited filed a second insolvency suit against Tuskys.

The electronics firm says in court papers that it has had a business relationship with Tuskys since 2001, and has been supplying electronics to the retailer on credit.

For the first 15 years of the relationship, things were rosy as Tuskys paid up within agreeable timelines.

Hotpoint would give Tuskys coolers, refrigerators, cookers, water dispensers, microwave ovens and television sets. The electronics would be sold to shoppers and pay Hotpoint the agreed sale price.

But since June 3 2016, Tuskys has been taking electronics from Hotpoint without remitting the sale proceeds.

As at August 24 2020, when the insolvency petition was filed, Tuskys owed Hotpoint Sh248 million for electronics sold but cash not remitted.

On September 30, 2020 High Court Judge Francis Tuiyott presided over a mention of the two insolvency petitions. At the time, only 13 creditors had sought to join the case to support the retailer’s liquidation.

Tuskys’ lawyers Ogola & Mujera Advocates took to the floor and gave hope to creditors that they would get paid soon.

“I have some good news. There was a shareholders’ meeting on September 25, 2020. The meeting approved the injection of capital meant to rescue the business, Sh2 billion is to be raised. What follows is to finalise the debt transaction. We request for 45-60 days to finalise and reach out to each creditor with a reasonable payment plan,” an associate from the law firm only identified as Mr Omolo said.

Opposed move

Creditors opposed the move, with Hotpoint insisting that the retailer should only be given a maximum of 30 days.

But Justice Tuiyott ruled that the 45-day request was reasonable and granted it.

The judge also issued an order stopping the attachment of Tuskys’ assets to recover debts.

The only creditor that was allowed to proceed with adverse action against Tuskys was Greenspan Mall.

Kicked out

Greenspan has since kicked out Tuskys from its Donholm mall.

The lawyers were to appear before Justice Tuiyott on October 27, 2020 and give progress on whether creditors had been given agreeable payment plans and a clear way forward.

But on October 27, 2020, creditors were unhappy.

A lawyer representing the Standard Group PLC, Kenafric Industries and Githunguri Dairy Farmers told Justice Tuiyott that her clients had not been invited to any meeting.

Tuskys’ rebutted the claim and insisted that the retailer had met with creditors.

The court proceedings indicate that some creditors had not been contacted.

The meeting in focus was a botched attempt to have creditors accept part-payment as Tuskys had signed a deal with Mauritian private equity, Shield Fund PLC, which would inject much-needed capital to rescue the financially struggling retailer.

But the creditors were only told that there was a Mauritian investor, and that they would have to accept part payments for a couple of years.

The identity of the investor was not revealed, and payment plans were not given.

“Nothing came out of the meeting. The investor has not been made known to us. We do not believe what we are being told. We want to continue with the petition,” Hotpoint’s lawyer Elijah Mwangi said.

“We were not given a strategy, I share Mr Mwangi’s frustration,” Kenneth Fraser, Greenspan Mall’s lawyer, added.

To date, Tuskys is yet to reveal the name of the investor publicly.

The Nation has spent the last five months trying to find out details of Shield Fund PLC, to no avail.

No digital presence

The firm has no digital presence and is not mentioned in any regulatory or government documents in Mauritius, at least online.

Tuskys CEO Dan Githua has not returned any of our calls to his known mobile phone number in the past five months. He also has not replied to text messages sent to the same phone number.

When we called Mr Githua on Thursday, his mobile phone was off.

On the same October 27, 2020 Tuskys filed a fresh application, this time seeking to sell some of its assets to offset its debt.

Suppliers alone are currently owed Sh6.2 billion.

The debt excludes bank loans.

As the court was preparing to hear the Tuskys application, a creditor identified as Pietro Canobbio attached Tuskys stock worth Sh200 million to recover a debt not disclosed in court papers.

Justice Tuiyott ordered the goods’ return, but refused to send Mr Canobbio to civil jail as requested by the retailer.

On March 18, 2021 Justice Tuiyott will give directions on the case, as Tuskys awaits the fate of its application to sell some assets to offset debts.

Before then, all creditors looking to join the petition will need to file their claims in court.

Petitions consolidated

The judge has consolidated the insolvency petitions, which will now be heard together in Nairobi.

A third suit has been filed in Mombasa, but it will now join the list of petitions at the Milimani High Court.

The insolvency case has, however, given an insight into some of the debts Tuskys owes suppliers.

On September 29 2020, Rentco Africa Limited filed an application before Justice Tuiyott seeking to protect equipment it had leased to Tuskys.

Rentco fears that the equipment may be attached by creditors seeking to auction Tuskys’ assets, and wants an order protecting it.

The leasing firm has also claimed Sh383 million due in rent for the equipment.

Rentco had leased movable equipment to 16 Tuskys branches in Nairobi, Mombasa, Kajiado, Kericho and Kisumu.

The leasing firm is not new to retailers. It found itself in the eye of a storm in 2016 when an audit report questioned why Uchumi sold some assets to Rentco and leased them back without approval from its board of directors.

In the Tuskys deal, the leasing firm now risks losing Sh383 million in the leasing agreement.

“Other creditors like Hotpoint Appliances Limited have proceeded to court seeking compensation of their owing amounts from Tuskys and there is a very high risk that the creditors may proceed and be granted orders to attach the leased equipment from Rentco on the belief that the said equipment form part of Tuskys’ assets,” Rentco CEO Robert Nyasimi says in court papers.

Tuskys’ troubles have seen many of its branches closed, some as a result of rent default and others owing to strategic reasons.

From a branch count of 64 barely three years ago, Tuskys now has less than 15 intermittently operational outlets.

Next, read about how Tuskys' collapse is a mirror image of Nakumatt’s.

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