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Top retailers hurt suppliers as debt increases to billions

Kenya’s largest supermarkets have become the bane of suppliers through withholding payments for goods delivered for as long as two years, a new report shows.

But the suppliers of fresh produce and an assortment of processed goods fail to raise complaints for fear of losing tenders, even when they fall deep into debt and some close shop.

READ: Suppliers back regulation of retailers

A report by a joint ad hoc committee comprising of suppliers and retail chain representatives named Nakumatt, Tuskys, Naivas, Uchumi and Chandarana supermarkets as top debtors.

The report, moderated by Kenya Association of Manufacturers chief executive Phyllis Wakiaga and handed over to Trade Principal Secretary Chris Kiptoo last Friday, used a representative survey of 22 suppliers over a period of 60 days to December 2016.

It found that the five retailers owed them Sh309 million. Nakumatt and Uchumi were found to account for 73 per cent of the debt.

“Some retailers issue bouncing cheques despite an agreed payment period of between 90 to 120 days which has seen outstanding payments rising to Sh40 billion in the past two years,” says the report.

“Suppliers also have a new burden of funding promotion cost of new products where unnecessary discounts are provided as dictated by the retail chains. Some chains also reduce orders, forcing suppliers to bear the burden of resale losses,” it observes.

The ad hoc committee suggested that a code of conduct as well as a regulatory agency be established to end the dominance of some retail chains, thought to be using the suppliers’ money to fund new branches within Kenya and across East Africa.

The report says that payments for fresh produce should be effected within seven days of delivery, fast moving consumer goods within 45 days and no payments should be withheld for more than 60 days. The committee agreed that a Supplier Protection Fund be established, from funds raised by retail chains, which reflects a minimum of about 20 per cent of every retail chain’s turnover. The fund will be manned by the soon to be established regulator. It will be used to pay suppliers for overdue payments.   

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