A fair supplier contract system will go a long way towards restoring the confidence of the small businesses. FILE PHOTO | NMG The move by the Competition Authority of Kenya (CAK) to fine and caution French retailer Carrefour over exploitative supplier contracts is a wake-up call that all is not well with the way large companies have been treating SMEs that rely on them for business opportunities.
Often, and we saw this in the cases of troubled Uchumi and the collapsed Nakumatt, small suppliers are forced into agreeing contracts that often involve long waits for payment, and stringent conditions for acceptance of goods which eventually locks many out of these opportunities.
While we appreciate that retailers need to maintain quality standards and consistency in their products, the solution is not unilateral dismissal of suppliers who fail occasionally to meet the standard. It is also sad that from the Carrefour case, we have seen that retailers are getting to the point of asking suppliers to pay a fee for every new product they stock in their branch.
The move by CAK to stop the unfair actions by the retailer are therefore welcome, but we feel that this might only be the tip of an iceberg and that more needs to be done to root out the problem once and for all. SMEs have long complained of being locked out of opportunities by big businesses, which have been guilty of driving hard bargains as they look to maximise profits.
What they need to realise is that these small businesses are the biggest driver of growth in the economy, and the most vibrant creators of employment.
Supporting them is therefore going to help these large businesses in the long run, since the jobs they create will increase the purchasing power of the general population and drive up customer numbers for all businesses.
It is for this reason therefore that we are calling on the competition watchdog to expand the scrutiny of supplier contracts beyond retail to other sectors, where thousands of small firms may be suffering unfair contract terms silently without hope of recourse.
A fair supplier contract system will go a long way towards restoring the confidence of the small businesses, which are already faced with a myriad of obstacles which include difficulties in accessing credit, harassment and excess fees from county administrations.