A Tuskys store on Muindi Mbingu Street, Nairobi. FILE PHOTO | NMG Tuskys will now need approval from the Competition Authority of Kenya before it can pay bonuses to directors, open more branches or start new lines of business in conditions aimed at preserving cash to pay its suppliers.
According to the regulator, the supermarket chain’s debt has risen to Sh1.2 billion, raising questions about the retailer’s ability to pay.
CAK now wants Tuskys to focus on settling its current obligations, with the company’s default resulting in cashflow challenges for suppliers and consumers missing essential goods on the retailer’s shelves.
The latest directive arises from a finding that most Kenyan supermarkets rely heavily on debt for expansion, a model that leaves banks and suppliers with major losses when the retailers run into financial headwinds.
Tuskys has also been stopped from declaring or paying bonuses, fees or other discretionary compensation to its directors who are mostly relatives in the family-owned retail chain.
“Tusker Mattresses Limited from the date of this order must obtain written concurrence of the authority as a pre-condition for expansion,” CAK wrote to the company in a letter seen by the Business Daily. “The Authority imposes a prohibition from declaring or paying bonuses, fees and other discretionary compensation to directors.”
CAK’s move marks an unprecedented interference in a supermarket’s management and offers insight into the kind of regulatory actions struggling retailers can expect in the future.
Such interventions were previously confined to the banking sector where the Central Bank of Kenya (CBK) has powers to force management changes and facilitate sale of lenders in distress, among other actions.
The stance taken by CAK means that Tuskys will now prioritise the interests of suppliers ahead of other parties such as shareholders and employees. This mirrors the pre-eminence of depositors’ rights when a bank collapses. CAK, for instance, has ordered Tuskys to settle all the Sh1.2 billion supplier debts by July 16.
“The Authority has issued Prudential and Reporting Orders to one retailer (Tuskys) who, after several requests and extensions, failed to present a payment plan or evidence of negotiations with the affected suppliers,” Wang’ombe Kariuki, the CAK Director-General told the Business Daily yesterday.
“Out of the 25 retailers, only four retailers were found to have delayed payments exceeding 90 days. Three of the four retailers presented payment plans and have continuously reduced their debt portfolio.”Failure to pay suppliers means the company will remain in the regulator’s cross hairs, […]
