Retailers should pay suppliers promptly

A proposal to introduce policies that will govern how and when suppliers of retail outlets are paid will go a long way in protecting businesses that often have to go for prolonged periods before they are paid by the supermarkets they provide with goods.

It has emerged that some suppliers have gone for several months — and in extreme cases more than two years — before they are paid for supplying goods to supermarkets.

Consequently, retail market suppliers and local manufacturers now want new legislation to compel supermarket operators to settle debts on account of a Sh40 billion bill resulting from late or disputed payments.

The suppliers and manufacturers’ lobby want a framework to be introduced in the trade policy currently being developed in the Ministry of Industrialisation and Trade that is expected to set time limits within which payments must be processed.  The policy will set the stage for regulation of the retail sector.

This is a reasonable proposition by suppliers who find themselves at their wits ends trying to keep their businesses afloat even when they have not been paid for goods supplied or services rendered. The Association of Kenyan Suppliers says most retailers do not honour agreements that calls for suppliers to be paid within 90 days after goods have been supplied. Often the reasons for the delays are flimsy — in some occasions the retailers say they are unable to make disbursements because suppliers do not have efficient payment plans.

Consequently, 80 per cent of small scale and medium-sized businesses which require capital to remain afloat are finding themselves operating in arrears and often have to borrow from commercial banks to run their operations. Many of these small companies do not raise complaints because they fear reprisals from the supermarket chains who, in many cases, threaten to black list them. This is an outrage.

Trade Principal Secretary Chris Kiptoo is spot on — the introduction of a retail market regulator will provide suppliers with an avenue for recourse when grievances over non-payment persist, so that cumbersome and time-consuming litigious court processes are avoided.

Ultimately the government has an obligation to create a business environment that will allow small enterprises to expand and thrive. It is unconscionable that groups continue to hold onto payments for goods supplied or services rendered when they are obligated to make prompt disbursements.

If the introduction of new legislation is required to protect suppliers, then this is something that should be considered. Obviously the system that is currently in place is not working. Let’s protect suppliers to boost trade.