Many of the retail chains’ debts to suppliers have gone unpaid for up to six months. [File, Standard]
The top five largest retail chains in Kenya owed suppliers at least Sh700 million, which was 83 per cent of the total debts outstanding by the end of last year, a report shows.
According to the report released by the Ministry of Industry and Trade, the five retailers accounted for 92 per cent of the debt owed for 60 days or more.
It says the two most troubled supermarkets, Nakumatt and Uchumi, alone accounted for 73 per cent of the debt, making the two the worst nightmare for suppliers.
The report, which for the first time gives a view of the entire retail market, compiled debts owed to 22 suppliers. The figures could be higher because not all suppliers were captured.
Nakumatt led in debts to suppliers, owing Sh278.9 million by December 2016, according to findings from the small sample. It was followed by Tuskys, which owed Sh174.8 million, while Uchumi Supermarkets came third with a debt of Sh123 million.
Naivas Supermarket was fourth at Sh86.4 million and to close the top five was Chandarana, which owed the top suppliers Sh35 million. The rest of the supermarkets combined owed less than Sh100 million, meaning that suppliers of big retailers are the worst hit.
Higher figure
The report notes that total debts could be over Sh40 billion, with some payments having been delayed by between 180 and 240 days.
“The Government places the amount owed to suppliers at an even higher figure than Sh40 billion given disclosures obtained from troubled retailers whom the Government has engaged in trying to understand their challenges,” the report dated July 2017 reads.
“Despite the conflicting numbers on the amount owed, all parties are in agreement that late payment is a challenge that requires urgent action,” the report notes.
Going by the numbers, Nakumatt and Uchumi owe suppliers at least 35 billion if the trend is the same across all the suppliers.
The report notes that retailers failed to honour the agreed terms of payment, some taking as long as a year whereas the agreed period was 90 or 120 days. The arrears have adversely affected cash flow and eroded margins.
Service loans
“Some suppliers have been forced out of business operations since they could not service loans they borrowed from banks,” the report notes.
It recommends an industry-driven regulation to deal with the payment headache and says that the State Department of Trade needs to explore the legislative framework on which to anchor the regulation.
“The suppliers, manufacturers, and retailers need to be facilitated to develop content for the regulation. This will take on board the benchmarks for prompt payment as proposed in this study and retailers and suppliers input based on realities on the ground.”
pwafula@standardmedia.co.ke
