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Deacons East Africa’s 60-Year Story Has Been Truncated By A Familiar Retail Glitch

| September 16, 2020

Pullouts, shutdowns and divestments are almost becoming the new norm for retail chains across Africa, most especially in the eastern part of the continent. The latest in the fold is Deacons East Africa, a fashion brand that has operated in East Africa for up to 60 years.

Possible Liquidation

The fashion and clothing retailer has announced that it will sell its assets and business. Deacons owns 4U2, FNF, Adidas and Bossini clothing and shoe stores in Nairobi and Kigali. An investment firm known as Dyer and Blair is expected to show interest in buying the brand’s stores once the deadline for purchase submissions elapses.

This exit is somewhat a repeat of the ordeal suffered by Nakumatt, the once-was retail giant which has now been brought to its knees. Similarly, ShopRite, Uchumi and Choppies carrying out plug pullings on the Kenyan retail market due to certain difficulties. One common factor is the grim repercussion of debt overload.

Deacons East Africa has been trying to turn its business around for good. The brand had a plan to raise up to USD 4.15 Mn to offset inadequacies. Nevertheless, such ambitions never saw the light of day. Having been hanging on a thread, the business has finally decided to resort to liquidation.

Hurting From Selling Franchises?

In November 2018, Deacons East Africa was placed under administration, after it lost its biggest franchise, Mr Price. Parting ways with the South African retailer earned the fashion brand USD 1.3 Mn. But as it appears, the business never remained the same.

Nonetheless, the sell-off of Mr Price was not the only factor that made the firm experience lean times. Recall, in 2016, Deacons sold its Woolworths franchise in Kenya to South African fashion retailer, Woolworths Holdings. Even though the deal plucked it a USD 4.7 Mn fruit, the NSE-listed firm became a less profitable divestiture.

Because of its financial troubles, Deacons was among the firms that were suspended from trading on the Nairobi Securities Exchange. Alongside Mumias Sugar Company, it was placed under receivership on September 20, 2019 and November 19, 2018, respectively. These businesses have defaulted on loans amounting to billions.

Debt Trap

The debt burdens of Nakumatt, Mr Price, Uchumi and Tuskys are not isolated. Deacon East Africa’s liabilities stood at KES 1.12 Bn (USD 10,334,414), per a January 2019 report by the joint administrators. From that amount, it owes KES 387.6 Mn (USD 3,576,373) to NCBA Group and KES 152.8 Mn (1,459,736) to UBA Kenya.

Deacons made efforts to recover from the loss of its key franchises amid overbearing debts. It listed on the Nairobi Securities Exchange by way of introduction on the alternative investment segment of the bourse in August 2016.

Deacons listed 124 million shares, hoping to give its shareholders an opportunity to trade and discover the brand’s value. But, even with operations in Uganda and Mauritius as well, the struggle to remain on its feet has been challenged by a debt quake.