By Victor B. Nzomo & Perpetua N. Mwangi**
Nakumatt Holdings Limited (Nakumatt) is the proprietor of the largest supermarket retail chain in East and Central Africa. According to Superbrands, Nakumatt is one of the leading brands in East Africa with branches in Kenya Uganda, Tanzania and Rwanda. However the biggest story of 2017 has been the financial woes of Nakumatt with the retail chain facing liquidation over unpaid debts totaling over Sh30 billion. From an intellectual property (IP) perspective, Nakumatt’s brand power is based on its portfolio of over 23 registered trade marks including word marks, logos and slogans all currently subsisting on the Register of Trade Marks. This blogpost departs from the premise that the recent enactment of the Movable Property Security Rights Act was envisaged to allow individuals or businesses like Nakumatt to leverage their IP assets to access much-needed financing.
For over a three-decade period the Nakumatt brand has achieved a wealth of goodwill, consumer confidence and customer loyalty. Nakumatt introduced the first 24-hour retail store in the country and it has its own product brand Nakumatt Select/Blue Label. In addition, the retailer embraced innovation by introducing the Nakumatt Global Prepaid Card in partnership with MasterCard. Nakumatt is the official sponsor of Nakumatt FC, a local professional football club and it also has a multimedia arm; Planet Media Cinemas. All these arms have distinct names and logos a key feature for brand recognition.
It is said that about forty years ago, about 80% of most companies’ assets were pegged on tangible assets such as buildings, inventory, equipment and the like with the other 20% perhaps tied to intangible assets. Presently, it is accepted that close to 90% of any company’s value is related to intangible assets. This paradigm shift justifies the attitude to brand value and the impact on any business. Every year, reports released showcasing the most valuable brands in the world emphasis this shift. Quoting James Potepa an Associate professor of Accountancy at George Washington University who co-authored a study with Kyle T. Welch entitled “Innovation Worth Buying: The Fair-Value of Innovation Benchmarks and Proxies”: “It is clear that having a recognisable name and an associated reputation is valuable, but our evidence indicates trademarks are able to pick up something above and beyond the value of recognition”.
In the Kenyan context, there have been several efforts aimed at enhancing the ability of individuals and businesses to access credit using movable assets including intangibles such as IP. One notable legal development is the Movable Property Security Rights Act which came into effect in 2017. The stated purpose of the Act is to provide for the use of movable property as collateral for credit facilities and to establish a collateral registry to facilitate registration of interests in movable property. The Act defines ‘collateral’ as ‘a movable asset that is subject to a security right or a receivable that is subject to an outright transfer’. Meanwhile ‘movable assets’ are defined in the Act as tangible assets (meaning all types of goods including motor vehicles, crops, machinery and livestock) and intangible assets (including receivables, choses in action, deposit accounts, electronic securities and intellectual property rights). In other words, Kenyans should now able to use their IP, including copyright, patents, trademarks, certificates for industrial designs, certificates for utility models, and other related rights, to create security rights through which they can acquire credit facilities.
According to the CIPIT Trade Marks Database (a free fully searchable database of trade mark applications in Kenya), Nakumatt’s trade mark activity dates back to 2002. A cursory search reveals that there are over 10 registered marks with the word “NAKUMATT” filed by Nakumatt along with over 13 composite marks owned by Nakumatt as pictured above. This array of trade marks is only part of Nakumatt’s entire IP portfolio which may include domain names, copyright content, trade secrets, know-how among others.
Despite the retailer’s woes, it cannot be denied that Nakumatt is a brand that has value in Kenya and East Africa and that fact might be a key aspect in seeing it recover from the turbulent times. The brands may be engaged in co-branding and franchise agreements which are innovative ways to lock in consumers and increase earnings. With increasing talk about a mergers and acquisition deal involving the iconic elephant branded retailer, the value of its trade marks and other valuable IP both registered and unregistered must be taken into consideration. Perhaps Nakumatt’s current financial woes should be a signal to the government to fast-track the full implementation of the Movable Property Security Rights Act.
**Perpetua N. Mwangi is an Advocate of the High Court of Kenya specialising in IP. Follow her tweets at: @swtspaps. The views expressed in this blogpost are solely her own and should not be attributed to her law firm or any clients.