Companies

Tuskys signs finance deal with DTB for upfront payment of suppliers

DAN

Tuskys Supermarkets chief executive Dan Githua. PHOTO | SALATON NJAU

Tuskys Supermarkets has signed a financing facility that will see its suppliers get payments from the Diamond Trust Bank even before their invoices are due.

The financing partnership will also enable small and medium sized companies (SMEs) that supply the retailer get loans from DTB at preferential rates.

Kenyan manufacturers in September wrote to the big supermarkets seeking a meeting to resolve the issue of delayed payments, which they said was squeezing their working capital.

“The suppliers will access 100 per cent of their cash because the risk is undertaken by Tuskys,” Daniel Githua, Tuskys’ chief executive officer, said in an interview with the Business Daily.

“They will get the credit facility at rates significantly lower than what they would have been charged if they borrowed directly. ”

Tuskys, the second largest retailer in the country by revenue, has more than 1,600 SME suppliers who deliver goods worth between Sh500,000 to Sh5 million every month.

Three months ago, suppliers, through the Kenya Association of Manufacturers (KAM), wrote to Nakumatt, Tuskys and Naivas claiming that delays in settling their invoices had forced them to borrow heavily – and expensively – to keep their operations afloat.

READ: Big three supermarkets in payments row with suppliers

In the letter to the retail chains, KAM said some of the big retail chains were holding back payments dating back to 2014).

Tuskys acknowledged the outstanding payments even as its peers declined to comment on the matter. The retailer said it intended to meet the suppliers “to resolve outstanding issues”.

Tuskys now seems to have settled on a solution by partnering with DTB to ensure that suppliers are paid even before their invoices fall due.

“SMEs play an important role in sustaining our economic growth and trade and supply chain financing solutions help them manage their liquidity better,” said Nasim Devji, the DTB chief executive officer.

Tuskys’ invoice period is between 60 and 120 days and is based on the relationship that the retail chain has with specific suppliers and the type of product.

Products like furniture and electronics have lengthier invoice periods compared to fast-moving goods such as milk, sugar, cooking oil and bread.

Delayed payments are a thorny issue in the global retail industry, having recently engulfed even global retail giants such as Britain’s Tesco which early this year was accused of bullying and paying its suppliers late.