On 20 November 2018, the debate over East Africa’s growth story was sharpened by the collapse of Nakumatt, once one of the region’s best-known retailers. What had been a flagship supermarket chain ended up as a cautionary tale about expansion, debt and an economy that looked stronger on paper than in the market.
At its peak, Nakumatt operated 65 stores across Kenya, Uganda, Tanzania and Rwanda. It employed more than 5,000 people and reported gross annual revenue of Sh45 billion. But in July the previous year, management admitted it did not have enough money to pay rent, suppliers and wages.
Within a year, the chain had shut more than 58 outlets and was left with only seven branches, which it described as “bounce-back stores.” The reversal was especially stark in Nairobi, where Charlie’s Restaurant now occupies premises that had previously housed Nakumatt opposite the Supreme Court and City Hall.
The retailer’s rise had been built on confidence in regional economic growth and the expectation that an emerging middle class would keep spending. Kenya and its neighbours had been posting strong macroeconomic numbers, and the optimism encouraged aggressive expansion.
Kenya’s economy had, in the five years leading up to the article, averaged more than five per cent growth. Gross National Income per capita stood at Sh116,000 ($1,160), above the World Bank’s middle-income threshold of Sh103,700 ($1,036). The article also cited figures showing that 44.9 per cent of Kenyans were in the middle-income bracket, that the country was creating more than 800,000 jobs a year, and that unemployment had fallen to 10 per cent.
Even so, the broader business environment was showing strain. Woolworths had also shut down operations, while Sameer Africa closed its tyre plant over competition from cheap imports and Eveready batteries exited for the same reason. In banking, Equity, Barclays and Bank of Africa had cut 2,017 jobs after the interest cap law slowed lending and squeezed the sector.
Kenya Airways was also in a loss-making cycle that forced layoffs as part of its survival strategy. Other multinationals, including Cadburys, Unilever, Proctor and Gamble and Reckitt Benckiser, had either left or scaled back. The article argued that the pattern pointed to deeper weakness across the economy rather than an isolated corporate failure.
One explanation offered was that much of the reported growth was tied to construction projects financed through Chinese debt arrangements. MP Jude Njomo was cited as saying that when China funds a project, the contractor is usually Chinese and arrives with equipment, materials, staff and even food. In that model, the article said, most of the money circulates outside Kenya, with only a small share reaching local workers as wages.
A second concern was the reliability of official statistics. Two months before the 2017 elections, Treasury released 2016 economic data showing GDP growth of 4.8 per cent, even though agriculture, construction, banking, financial services and manufacturing had all slowed. The article questioned where the growth was coming from and said the answer appeared to lie in ICT, real estate and services. It added that the same statistical mismatch was reflected in that year’s economic survey.
The credibility of growth figures was not being challenged in Kenya alone. In Dar es Salaam, the article noted, a law had been passed criminalising questions about statistics. In Rwanda, anonymous researchers writing in a series of blogs titled Poverty and Development in Rwanda in the Review of African Political Economy said household survey data suggested the economy was growing much more slowly than the government claimed.
The researchers distinguished between GDP per capita and household surveys, noting that official figures can miss informal activity, black-market trade, state investment effects and cases where households misstate income. They said the two measures usually move together over time, but in Rwanda the lines tracked each other from 2001 to 2005 before the household survey flattened while per capita figures kept rising.
That divergence led the researchers to question the country’s growth narrative. One of them was quoted saying: “If there ever was a Rwandan economic miracle, it probably fizzled out some time ago and is likely to come crashing down soon.”
The article also cited an Oxfam Uganda report titled Who is Growing, which said Rwanda was the most unequal country in the region. It said the gross national income of the richest 10 per cent was 3.2 times that of the poorest 40 per cent. The comparable ratios given were 2.81 in Kenya, 2.33 in Uganda, 1.65 in Tanzania and 1.35 in Burundi.
Against that backdrop, Nakumatt’s collapse was presented as more than a retail failure. It was treated as evidence that strong headline numbers, regional optimism and official growth claims did not always translate into stable businesses or broad-based prosperity.
