This archive report was first published on 2 January 2020.
January 2, 2020, marked a significant day in the unraveling of Nakumatt's financial woes. The company's financial statements revealed that its directors had been lent over Sh1 billion in interest-free soft loans by the time it was placed under administration on January 22, 2018.
According to a report by Parker Randall Eastern Africa, the retailer's independent auditor, the related party transactions were disclosed in a report for the year ended February 2018. The auditor, however, did not specify which individuals owed the company money, highlighting the weak governance in the board of the former giant retail chain.
Nakumatt's founder and former chief executive Atul Shah was among the two individuals listed as directors of the company as of the report date. The amounts owed by insiders had dropped to Sh948 million as of February 2018, the period for which the latest financial records are available.
“Significant in this net balance is Sh948 million due from the directors. These receivables are not supportable based on the available evidence,” reads part of the report.
The loans to the company's directors are among a series of related party transactions amounting to Sh2.8 billion, which are unlikely to be recovered. The administrator has written off Sh1.5 billion or 53 percent of the receivables, leaving a balance of Sh1.3 billion.
“There are no repayment plans for these balances; the companies frequently lend and borrow funds from each other,” the auditor said.
