Suppliers and manufacturers in the retail sector have signed a memorandum of understanding to enforce prompt payments.
This is meant to end delays that have seen some businesses close down.
The Retail Code of Practice is an attempt by the sector to self-regulate payment disputes.
It comes in the wake of the collapse of Nakumatt and Uchumi supermarkets, which owed suppliers billions of shillings.
Part of the agreement involves setting up a retail dispute settlement committee composed of seven members – two from the Retail Traders Association of Kenya and two from the Kenya Association of Manufacturers (Kam).
The SMEs that supply the retail sector, the Council of Governors and the Ministry of Trade will each nominate a member to the committee.
“The purpose of this code of practice is to encourage self-regulation and harmonise the retailers’ and suppliers’ engagement while also ensuring that we apply international best practice to the Kenyan market,” said Trade Principal Secretary Chris Kiptoo.
Last year, KAM, petitioned the State to form an industry regulator to police supermarkets, noting that its absence was fuelling exploitation of suppliers by big retailers.
In a memorandum to a parliamentary inquiry into the collapse of Nakumatt and Uchumi supermarkets, KAM said some problems plaguing the sector required intervention from the Government if local supermarkets were to survive and compete with global entrants such as Shoprite and Carrefour.
“Due to the few numbers of supermarkets in the country, supermarkets have over time acquired buyer power that has allowed them to exercise dominance in the market,” said KAM in its submissions to Parliament.
However, competition to supply the few large retailers means manufacturers have no option but to continue supplying goods despite existing concerns on late payment and unfair trade practices.
The Code of Practice is, however, voluntary, with both retailers and manufacturers opting for self-regulation and arbitration rather than Government or legal intervention.
“We understand we are about to sign a voluntary code whose success will highly depend on good faith among all players,” said Kimani Rugendo, the chairman of the Association of Kenyan Suppliers, adding that the code would be the first step in resolving disputes in the retail sector.