In the case of Nakumatt and Uchumi, their collapse caught many suppliers unawares, with the thinking at the time being that the retailers were too big to fail. [Courtesy] Suppliers delivering goods to supermarkets have devised mechanisms to reduce their exposure to potential losses.
Suppliers lost nearly Sh20 billion for goods they had supplied to the collapsed Nakumatt alone.
The amount is higher when money owed by other supermarkets that are either struggling or have since shut down is factored in.
It is against this backdrop that suppliers have since adopted mechanisms such as information sharing, with companies reporting whenever a retailer defaults on payments or pushes forward the payment date.
The companies manage the information-sharing platform under the aegis of the Association of Suppliers of Kenya (AKS).
“If your payment has been pushed from 30 days to 60 days, it is an alarm in itself. You may also not be alone; there could be other suppliers whose payments have been pushed forward. Unless there is a valid reason why it has been moved, this is alarming… it is a danger,” said AKS Chief Executive Ishmail Bett.
Mr Bett said the lobby offers members a platform to share such information and take action whenever there are several such complaints and where the retailer does not offer satisfactory reasons.
“We are asking our members to do due diligence and control credit limits on their end so that it shields them from extreme exposure,” he said.
In the case of Nakumatt and Uchumi , their collapse caught many suppliers unawares, with the thinking at the time being that the retailers were too big to fail.
Their dealings with the suppliers were also “secret,” with one company not aware whether the other was being paid for its supplies or not.
“We learned some hard lessons… Uchumi was our first lesson. At the time, Uchumi and Nakumatt were the SI unit on how to run a supermarket. Unfortunately, we did not see it coming. It has also happened again with Tuskys and Choppies,” said Bett.Following the difficulties suppliers experienced with Uchumi, the Industrialisation Ministry conducted a study that recommended the development of a code of practice and coming up with regulations governing relations between suppliers and retailers.The challenge, however, was that signing up to the code of practice was not legally binding, while developing a legal framework for the regulations would take time.But Bett said the Competition Authority of Kenya (CAK), which is […]