Retailers drive SMEs out of business

If you walk into any supermarket today, you are unlikely to get the popular Tharaka Honey brand because the family-owned business that produced it closed shop four months ago.

The Ruai-based Tharaka Honeybee Products Ltd, once ranked among the “Big Five” Small and Medium Enterprises (SMEs) in East Africa, was forced to fold up under the weight of debt after local supermarket chains withheld its cash for supplies made.

The firm’s woes, and several other SMEs’, are contained in a new report that highlights the domino effect of the current struggles by leading retailers on local businesses, especially small family-owned entities. 

The report, seen by The Standard, illustrates how retailers have been frustrating suppliers by delaying their payments eventually forcing them to shut down.

In Tharaka Honey Bee Products’ case, the firm was forced to borrow money to pay its 20 employees and keep producing two tonnes of honey a day as it awaited payments that never came.

“The genesis of this sad episode was a loan of Sh5 million that the company borrowed in September 2015,” Miriam Chabaari, the firm’s chief executive, is quoted as saying in the report submitted to Government.

“The company borrowed to produce more stock awaiting payment. The dream to remain afloat as a result of continued production was cut short by continued delayed payments,” she adds.

The CEO cited supplies made to Uchumi Supermarkets in January last year and others to Tuskys Supermarket in December, which had not been paid as at May 10 this year. The company further saw its profitability squeezed by the retailers, who demanded a 25 per cent margin on their asking price of products supplied to them.

According to the report, Natural Salt Manufacturer and Distributor, was treated to a circus of bouncing cheques from Nakumatt worth Sh800,000, with the retailer making no effort to pay them for over four months.

The pioneer brand of natural salt, manufactured using Himalayan raw salt for both humans and livestock, had to relocate from a prime address to a residential estate on Thika Road to cut costs.

The report also accuses the retailers of issuing bouncing cheques and undervaluing their suppliers’ products.

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