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CAK goes hard on all retailers delaying pay

BUSINESS
By Wainaina Wambu | May 6th 2020

The competition watchdog has started investigating supermarkets over delayed payments to suppliers without justification.

In a notice yesterday, Competition Authority of Kenya (CAK) Director General Wang’ombe Kariuki requested local suppliers owed by supermarkets beyond a 90-day credit period to submit information to the watchdog as part of the investigations.

Mr Kariuki claimed that supermarkets could be “abusing buyer power” hence contravening the Competition Act that is meant to protect suppliers.

“The Authority has commenced investigations into possible contraventions of the Act in the retail sector through delays in payment of suppliers without justifiable reasons,” said Kariuki.

“The authority is requesting local suppliers owed by major supermarkets beyond a credit period of 90 days from the date of supply to submit information to it.”

Persons found abusing buyer power face, upon conviction, a jail term of not less than five years or a fine of at least Sh10 million.

The investigations might also see supermarkets speed up processing of payments owed to suppliers. 

Kenya Association of Supplier Chief Executive Officer Ishmael Bett yesterday confirmed to The Standard that his lobby members had raised concerns over delayed payments by the retailers.

He, however, couldn’t disclose the amounts owed to suppliers at the moment.

He explained that his entity is in the  process of collecting the data.

“Delayed payments have been a problem and our members have been inquiring about them. We’ve also received the letter by CAK and have started submitting the information that has been requested,” said Mr Bett.

He noted that the 90-day rule was put in place as a protective measure for suppliers. However, payment period limits for suppliers differ because of the various goods being supplied such as fresh produce.

Bett further noted that the Government decided to put measures to protect retailers following the collapse of such giants as Nakumatt and Uchumi.

Nakumatt, that fell with a Sh38 billion debt, owed suppliers Sh18 billion while Uchumi, that recently survived a liquidation vote, owes over Sh5 billion.

“The issue of non payment is nowadays well monitored. There are methods to pursue payments,” he said.

In 2018, CAK established a Buyer Power Department to address increased concerns over the negative impact on businesses caused by delayed payment of supplies.

Due to low margins, supermarkets chose to expand often with money that is supposed to pay suppliers.

They trade on the brand name and when they collapse, they don’t even have assets - including the shelves and trolleys they have been using - that could be used to offset some debts.

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