Piling debt a heavy burden for retailers

Christmas tree decorations at the Junction Mall in Nairobi on Tuesday. PHOTO | DIANA NGILA It is almost certain that every year a Kenyan retailer will bite the dust as if there is a generation curse emanating from the woes of the country’s first chain store, Uchumi Supermarkets.

Since Uchumi started collapsing from 2015, Nakumatt, Deacons, Choppies and now K Shoe (Nairobi Business Ventures) have all experienced turbulence in the years that followed.

The death of Kenyan retailers has been mainly the effect of debt, especially to suppliers who finally said enough was enough and cut stocks leaving empty shelves.

With the Competition (Amendment) Bill, 2019 that seeks to standardise supplier contracts to tame buyer power, including terms of payment, payment date, interest payable, mechanism of dispute resolution and conditions of contract termination or variation, more retailers are about to face challenging times.

The Act provides that all buyers and suppliers develop and adhere to an industry code of practice, which was signed at the beginning of the year. In instances where the code is breached by either party, the matter can be escalated to the Competition Authority of Kenya (CAK).

“You seem to be stuck at that point two years ago since Nakumatt had challenges, a lot has been put in place since then,” Wambui Mbarire, Chief Executive, Retail Trade Association Kenya said.

“We have looked internally at corporate governance, the structure of cash flow management which was the biggest challenge, inventory management and rationalisation of stock so that we do not just buy the stock that supplier bring us but what can be sold,” she said.

Ms Wambui said the issue of outstanding debt has been at the centre of reforms but at any given time retailers will always owe suppliers.

“There has been a misconception about how much debt is outstanding but the issue is what is due and unpaid. We will never clear all the debt. We operate a credit business and not a cash business,” she said.

Suppliers pull the plug from retailers mainly because of their past experiences, where they have been taken on a ride in unviable turnaround plans to save ailing retailers only for them to throw good money after bad money.

Nakumatt was given a lease of life when court granted it administration and it managed to keep Nakumatt Mega Prestige, Lavington, Kisumu, Embakasi and Nakuru branches. It now appears it has sold what was left of the six branches […]

Stay in the Know!

Sign up for the latest news and information on African Companies and Economy.

By signing up, you agree to receive MoneyInAfrica offers, promotions and other commercial messages. You may unsubscribe at any time.

Leave a Reply