Suppliers bleed out from local retailers collapse

Retail suppliers have taken the heaviest bruising from the failure of Kenya’s long-serving supermarkets which are sinking and taking with them insurmountable sums of cash owed for goods delivered.

The near collapse of Nakumatt and Uchumi, coupled with the permanent closure of Ukwala stores, has for instance locked up a total of Ksh.36 billion to suppliers, this as the retailers pursue court injunctions to stop the creditors from attaching to company properties.

Ukwala supermarkets is indebted to its suppliers to the tune of Ksh.89.7 million with Nakumatt carrying the bulk of the debt obligation to suppliers with pending bills approximated at Ksh.35.8 billion.

The Association of Kenyan Suppliers (AKS) estimates the pending reimbursements to members at close to the Ksh. 40 billion mark and faults supermarkets for the gridlock in payments.

“Supermarkets have not offered any credit terms for purchases made by consumers yet most want to employ credit and not honor the terms in place,” AKS Chairman Kimani Rugendo told Citizen Digital.

Having no immediate regulations in place to assure of prompt payments at the time of the demise of the key retailers, suppliers like retailers have sought for redress from the courts setting the stage for seemingly never ending suits and counter-suits, delaying further, the settlement of pending bills to suppliers.

The courts are however the only way out to the re-capture of debts for the majority of the suppliers.

“This is really the only way; you cannot just show-up at a retailer’s premise and help yourself to the recovery of credit. You have to follow the due process,” Mr Rugendo added.

With many of the drowned retailers under receivership or in administration, the courts have largely sided with the slain entities, allowing them time to re-organize and re-structure their debt in the face of pressure from suppliers who continue to push for the winding up the outlets.

Under the shine of the face-off have been new market entrants represented by the likes of Carrefour and Choppies supermarkets, who have grown to insert themselves as notable players in Kenya’s retail space.

Choppies has for instance taken over a majority of spaces left by Ukwala while Carrefour has replaced Nakumatt in a number of its former outlets to include Galleria and the Thika Road Mall (TRM).

For players in the sector, the changes do not deem a threat to the existence of local retailers but are rather a representation of an evolving sector from the traditional family-run business model.

“The retail sector remains heavily dominated by local players outside the formal setting represented by wholesale players and dukas. Formal retail is only 33 percent of the whole suggesting, even a double down of foreign entries is unlikely to stand as a threat in the domestic retail scene,” Retail Traders Association of Kenya Chairman Willy Kimani said.

“We are learning new aspects around operations, control, management and customer service from the foreign players. Their presence is therefore welcome and is not necessarily viewed as competition,” Mr. Kimani added.

The recently struck memorandum of understanding (MOU) among players in the industry, if fully implemented is likely to put to an end to days of delayed payments by fostering rapid payments to suppliers for delivered goods.

The memorandum, which constrains retailers from unethical practices in their trade relations to suppliers, is expected to be supported further by provisions in law represented by amendments to the Trade Bill.