Intellectual Property Collateralisation in the

Age of the Movable Property Security Rights

Act: The Case of Nakumatt Supermarkets

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.