It was mid-morning on a warm Saturday in Nairobi. Atul Shah, the 53-year-old Managing Director of the family-owned retail chain Nakumatt Holdings, sat at his desk scanning through live feeds from CCTV screens at his head offices and warehouses. Then his phone rang. It was the branch manager at Westgate shopping mall. Shah was overcome with dread.
Kenya’s President Mwai Kibaki (C) and Police Commissioner Hussein Ali walk past the burnt-down Nakumatt supermarket in downtown Nairobi, January 30, 2009. At least 22 people died and more than two dozen more were missing after a fire destroyed a supermarket in downtown Nairobi two days ago. REUTERS/Stringer (KENYA)
“There’s a shootout at Westgate,” said the caller.
It was painfully true. On September 21, masked gunmen stormed the mall, throwing grenades and firing bullets at shoppers.
“We all thought it was a plain robbery and that it will end in a couple of minutes.”
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It didn’t. Shah and Kenya were in for a shock.
“After a few minutes we realized it was not just a robbery but more of a terrorist attack as they were shooting anyone on sight,” said Shah.
“This cast a dark spell over business, and generally many sectors have slowed down since, including investment and tourism. The Westgate attack has had a big impact on business. We were all lost. We had never gone through something like that. Yes, a few robberies here and there happen, but a terrorist attack was something very new to us.”
Shah switched into crisis mode and gathered his team. He dashed to Westgate.
“I made my way to Westgate to see if there’s anything I could do to help but unfortunately there was nothing we could do, as we were kept at bay. The police had come by that time and they were doing what they are supposed to do.”
From a safe distance, Shah came face to face with the horror. People filed out in droves, most with gunshot wounds or shrapnel injuries. Some stumbled as they fled. He stood helpless with the relatives and friends of those suffering inside.
“I could see a lot of rescue operations going on and a lot of people moving out of the mall. I was in touch with the manager of the branch and a couple of other tenants to know what was happening but they were all confused. They all said there were dead bodies everywhere and these people were out to kill. The team in the branch did very well, though, by escorting shoppers out through the back door. They had the guts and the will to do what they did to ensure safety for shoppers and staff.”
After four days of battle with the army and police, the siege ended in 67 deaths, hundreds of injuries, the collapse of a section of the mall and several burned shops and cars. It was a scary sight.
“The impact was big. In the first week, we were lost for words. It was one of our flagship branches where everybody frequented. Financially it put a lot of strain on us. But the biggest loss was that of our three colleagues,” he says.
Before the attack, Shah was, like most shop owners, concerned about attracting more customers. The attack, just 10 kilometers away, changed his life.
Like Kenya, he was to live through days of fear, danger and misery.
Westgate was an easy target for terror. It is packed with shoppers, many of them foreigners, and security was lax. Nakumatt, which serves 250,000 shoppers in Kenya a day, was the soft center.
A year on, many shoppers look over their shoulder in Nairobi. A burst tire in the parking lot or a sudden noise can send scores stampeding towards the exits.
“Whenever there is a scare of terrorism, real or imagined, people definitely keep away. We aren’t seeing many scary text messages these days. Some time back, there were lots of SMS alerts warning people to avoid this or that shopping mall and you’d see people evacuate immediately,” says Shah.
The Nakumatt branch in Westgate was a study in ambiance and luxury shopping. It was the middle-class shopper’s paradise in Nairobi; attracting diplomats and senior government officials. At all times, the store had at least 600 shoppers.
The supermarket suffered an estimated loss of $17 million. Only part of the business was insured, he says, so there was no full compensation. Rebuilding Westgate began after a couple of months and could still take many more months to resume operations. Some businesses that operated there have moved elsewhere, while most remain closed, including Nakumatt.
That evening, as Shah watched the live coverage of the siege, he took a hard and long look at his business. It wasn’t that bad, he thought, but one thing was clear: terror needed serious attention. His business was prepared for fire, robbery or a building collapse, nothing had prepared them for what happened at Westgate.
“Internally we were doing a lot in line with the regulatory requirements in terms of safety hazards and disasters. A lot of staff had been trained for disaster, fire-fighting, medical emergencies, and we have been doing these for many years. Now we have engaged more security organizations, where they are more visible to provide security. We still see shootings in other parts of the country and we aren’t sure how much security they can offer in the event of a terrorist attack.”
It was a hard lesson. Nakumatt had terrorism insurance cover because its large proportion of expatriate and foreign customers made it vulnerable to attack.
“Who would have thought we would one day use the terrorism cover? We are adequately covered now although insurance never pays 100 percent because there are lapses here and there. The most painful part, however, is that no insurance can cover loss of life.”
With no hope of Westgate getting back to business soon, Nakumatt is counting the losses. It was the goose that laid the golden egg. Other branches saw increased business after the terror attack but for the first few weeks, people avoided shopping malls. Shah says people are returning to shopping malls, yet the capacity of its other stores cannot handle the business that Westgate once had.
Nakumatt moves on.
“We are confident about the market, we are confident about East Africa and we will continue expanding.”
Westgate is a million miles from where Nakumatt was born in 1978 in the Rift Valley town of Nakuru. In that year, Shah’s father sat with his two sons to review the small shop that they had just bought. The first decision was to change the name to Nakumatt, short for Nakuru Mattresses. In 1992, the first branch opened in Nairobi, on Uhuru Highway.
“We have carried on opening stores, as opportunities have come our way. We have brought the world shopping experience to East Africa. Whatever you get at Nakumatt is the same experience you get in the developed world,” he says.
The fledgling business took a leaf out of Walmart’s book.
“I had the opportunity to be in the United States for a while and saw how stores were managed and operated and brought home the skills as well. During my free time, I would spend a lot of time at the stores and see how it is done. Although it took many years to adopt and actualize the concept in Kenya, we have succeeded in doing that. We adopted the all-under-one-roof policy from the onset,” he says.
The first branch ushered in 47 others in East Africa.
“Location is the key thing in retail stores,” he says.
Kenya is Nakumatt’s biggest market with 33 branches, Uganda has eight stores; Tanzania, four and Rwanda, two. It’s grown into a conglomerate, with a turnover of $600 million and an army of 7,300 employees, that has fought off the multinationals. This year, it expects turnover to top $750 million.
“We have a huge variety of products on offer under one roof. We sell everything and anything except planes. If we had space we would be selling airplanes. Also, we have focused on changing lifestyles through innovations and new ideas. We keep growing our products portfolio in line with changing trends and improving the shopping experience.”
“Nakumatt was the pioneer of late night shopping, pushing it from the initial 5PM deadline in the early 1990s to 10PM when most people in villages and small town are asleep. At the turn of the millennium it went further to introduce 24-hour shopping.”
Shah has traveled on business in 45 countries. He says 25 years ago South Africa had the most developed retail market on the continent and East Africa is catching up.
“Besides South Africa, East Africa is the most advanced market in formal retail. Economies in West Africa are more financially developed, but not retail,” he says.
Nakumatt’s business model is simple. It focuses on what it does best: selling. The rest is left to specialists. It does not own real estate, but works with partners. The managers locate a prime site, get developers to put up a mall and then go in as an anchor tenant. This has helped it improve its cash-flow by steering clear of the cost of bricks and mortar.
He says East Africa is the place.
“We will look beyond but the [East African] area is still wide open and green. Kenya’s 47 counties are all opportunities for us. County governments will learn how to invest to make counties good for investments. We see a lot of opportunities, despite the problems we have faced.”
Days before the interview with FORBES AFRICA, Shah, who talks fast as if it’s your duty to catch up, had arrived from the World Cup in Brazil.
“I was looking at Spain but it was disaster. Brazil were hosts but did not play well. Argentina was my team finally and did very well to play against Germany, and conceded not seven goals but only one.”
Shah is a sports fanatic. He looks more like a cricket coach than a multimillionaire. He dreams of bringing the Fifa World Cup to East Africa.
“People say sports bring people together. In Kenya we are always talking politics. But I am talking about bringing the World Cup to East Africa in 2030. This falls within Kenya’s Vision 2030 but it’s not a Kenyan drive. It is an East African vision. We will need infrastructure, such as stadiums and everything that goes with it. We have 16 years to prepare for that, which is enough time.”
Vision 2030, Kenya’s long-term economic development blueprint, provides for infrastructure development and other facilities that the World Cup requires. Shah has it all worked out. He says Kenya can provide three stadiums, Uganda and Tanzania two each while Rwanda can take care of one.
“It will bring a lot of exposure to East Africa in terms of tourism investments and so on. Everybody will start investing in hotels and other service sectors. This is the right time to start lobbying the right bodies. The triple bonus is that in 2031 we have the opportunity to host the Cricket World Cup and the Olympics in 2032. We are not just looking at one event, but three subsequent events.”
Shah has started speaking to various leaders in the private and public sectors to build momentum.
“Despite the protests and riots preceding the World Cup in Brazil, when the games began everybody was calm and they are still enjoying the fruits. Rio is hosting the Olympics in 2016, one year later. East Africa won’t have a gap; it will be continuous if we get it right.”
“I have been to three football World Cups, three Olympics and three cricket events and I have seen what sports can do to an economy. I go to enjoy and absorb myself but I see the economic gains. I am vying for it and I see the potential. Nakumatt alone cannot manage. We can be one of the minor sponsors because we are a brand. In Kenya there are many brands; Coke, KQ, Safaricom, which can support sport.”
He says to achieve this goal, sport management must improve. He says Kenya, Uganda and Tanzania have great talent yet don’t qualify for major tournaments like the African Cup of Nations or World Cup because of sports politics.
“Look at our runners; we don’t even need to tell them to run yet they bring us medals. We need something similar in football. At one time, cricket was popular in Kenya but politics or something messes up everything. But if the focus is there and the right people are in place, we will get back to glory not just in football, cricket, volleyball, but also in swimming and rugby where we are a big name. Investment in sports is not taken seriously. If well managed it can bring a lot of revenue to countries.”
For now, Shah will concentrate on market share. His company has had its fair share of setbacks. In 2008, one of its biggest stores was pulled down by the government after it had been built on a road reserve along the Thika-Nairobi highway. A year or so later, one of its lucrative stores in the capital burned down, killing more than 20 people.
“We take every tough moment as a challenge and as a signal of what we need to improve on. There are challenges in every business. We get better by the day, we get better solutions. They are obstacles but we look at them as challenges to move on. We had Westgate and the Nakumatt downtown fire. Now and then, we have issues with departments. We believe in improving ourselves. Wherever we see fault we don’t hide it but improve it.”
For Shah and his family, it is no longer about making money, running Nakumatt has become a lifestyle. The inspiration is always spotting the next big thing in retail.
African governments should give more support to home-grown investors to stimulate growth, he says.
“When a foreigner comes the governments are open arms and offering incentives here and there, but for locals, things become a bit tight. They should treat local investors equally as foreigners,” he says.
To strengthen management, Shah has brought on board his two sons as he plans to list on the regional stock markets in the next three years. Even so, he still misses the Westgate branch.
“It was a sad incident for us and Kenya. Everybody loved Westgate and they want Westgate back.”
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