Retailers: Why we struggle to pay suppliers
By Graham Kajilwa
| Aug 13th 2021 | 2 min read
Tough conditions by suppliers and manufacturers make it difficult for retailers to settle their dues, a traders' lobby has said.
The Retail Trade Association of Kenya (Retrak) says the margins on some products such as milk are so low that the sellers hardly make a profit.
Retrak Chief Executive Wambui Mbarire said suppliers have more power than retailers.
“For example, if you want 10 cartons of product X and the supplier also has product Y, it is declared that for you to get the 10 then you must also take five cartons of Y,” she said during an interview with a local TV station.
“Y is a new product with no promotion but you want to stock X because that is what your customers come for.”
Ms Mbarire said some suppliers abuse their powers, which puts retailers in a tough position between adhering to the trade laws and maintaining partnerships.
She noted that some retailers have been unable to withhold the 16 per cent value-added tax when paying suppliers.
“We have a manufacturer saying ‘if you withhold we will not supply’. Or you must pay first before they supply...then do not get the goods in the next three weeks,” she said.
Payments challenges are some of the woes that led to the downfall of Nakumatt and Tuskys supermarkets.
It is from this that the industry came up with a code of practice in 2019 to help prompt payment for goods and services.
The code replaced the ‘handshake’ agreement that was governing the relationship between suppliers and retailers.
“We have realised that if issues of late payments are not addressed at early stages, they tend to snowball and become difficult to resolve,” said Association of Kenya Suppliers Chief Executive Ishmael Bett.
“If you see the tell-tale signs, (such as) moving payments from 30 to 45 days, that’s worrying. If it goes to 60 days, you might not be the only one, there are a number of you.”
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