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High CEO turnover yields little fruit for struggling firms

by kenya-tribune

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Changing top management has failed to be the magic wand in getting struggling firms out of the woods, financial statements and share prices show, casting doubt on this popular trend among Kenyan corporates.

Search for fresh capital and way out of heavy debt has complicated the effectiveness of top management changes, making the terrain too tough to win.

This even as losses, dividend drought and erosion of share values at the Nairobi bourse make it hard for these firms to attract strategic investors.

Debt-ridden Mumias Sugar Company #ticker:MSC has become the latest firm to activate this move, sending home its acting CEO Patrick Chebosi last week, barely seven months after he replaced Nashon Aseka who was also in an acting position.

Isaac Sheunda, a former chief security officer, replaces Mr Chebosi in acting capacity, becoming the sixth CEO to serve the troubled sugar miller since the exit of Evans Kidero. Among those who have been there in the recent past are Peter Kebati, Coutts Otolo and Errol Johnston

“I was not told why I was being asked to take leave, but I complied with the request of the board, and that is why I’m at home awaiting the lapse of the period,” Mr Chebosi said, painting a picture of unclear exit.

Yet, in all these high turnover situations, losses and debt have grown, and farmers have continued to abandon sugarcane farming, casting doubt on Mumias Sugar’s ability to remain in business.

The miller’s board is yet to release its financial results for the year ended June 2018. It missed the deadline and had to apply to the Capital Markets Authority for extension up to end of next month.

Mr Chebosi’s exit complicates the audit, with the firm having said in December that it was working on restructuring plans and finalising the audit. By law, its half-year results for the 2018/2019 financial year are also exempted by up to the end of February.

A trend similar to this was seen at ARM Cement before it was finally put under administration.

Shake-up in top management, including directors, delivered pretty little for the firm as it sank deeper into loss.

Long-serving chief executive Pradeep Paunrana was ousted in a management shake-up orchestrated by UK sovereign wealth fund CDC Group, which owns a 42 per cent stake in ARM. Board chairman Wilfred Murungi’s 24-year service was also cut short.

But the changes lasted for less than two days as the firm sunk into receivership. Prior to this, it had carried out numerous changes even as losses persisted.

The same trend was adopted by Uchumi Supermarkets, which is yet to recover from the mess that gripped it since pulling out of receivership in 2006.

Former CEO Jonathan Ciano, who helped revive the company, was ousted and linked to abuse of office that sunk the firm into red.

Mr Julius Kipng’etich embarked on rebuilding the past glory of the retailer, but debts and little government support proved costly, making him bow out.

“If you look at the books of Uchumi, you can see the extent of the hole. Without sealing it, you can’t do much, however ambitious you are,” Mr Kipng’etich once said.

He was replaced by Mohamed Mohamed, who is now battling to save the company from being wound up.

Former chairperson, Ms Catherine Ngahu, exited last year, leaving behind the struggles that at one point saw the company locked out of its office.

The retailer has missed the deadline for publishing its performance for the year ended June 2018. It said the audit will begin this January and results released in March. This even as its branch network shrinks and debt remains the elephant in the room.

At East Africa Cables, Chief Executive Paul Muigai will be looking to break the jinx set by his two predecessors, who both quit along the way as the company’s fortunes failed to improve.

He was confirmed into the position in April last year, eight months after Mr Peter Arina resigned from the company. Mr Arina’s move marked the second such departure from the corner office in two years.

Mr Arina’s exit coincided with a deterioration in the firm’s performance as sales, earnings and shareholder funds all dropped. He had replaced Mr George Mwangi, who also resigned.

Despite these changes, the firm’s performance remains bad, having last posted a profit in 2014.

Last year, the company had to hire a debt consultant to help it space out maturing obligations.

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