Suppliers lodge claims on coal tycoon’s Karrymart Supermarket

Nairobi’s Karrymart Supermarket owned by businessman George Kariithi faces supplier debt claims worth tens of millions of shillings.

The Sh250 million supermarket on Moi Avenue opened its doors in 2014, targeting the growing class of middle-income consumers.

Suppliers who spoke to the Business Daily on Monday said the retailer had struggled to pay back multi-million shilling sums owed for up to two years.

Invoice claims showed the suppliers owed money include a leading milk processor, millers, bakeries and other entities.

Karrymart owner linked the delay in the payments to “tough economic times facing Kenyan retailers”.

“Any delays in payments are not unusual in the current retail market and are being addressed,” said Mr Kariithi.

The businessman who shot into national spotlight after winning a joint contract with a Chinese conglomerate to mine coal from Kitui’s Mui basin said the retailer is undergoing a re-organisation of its business model.

“We are currently reorganising our business model from the typical supermarket model to a departmental store selling the same products but reorganised to create pleasant shopping experiences for shoppers as they move from one department to another,” he said.

“This will give us a better market position since at the moment we have only one outlet.”

Mr Kariithi said the debt load the retailer faces from suppliers would be cleared but did not give timelines.

“There has been misconception by few of our esteemed suppliers about our operations but we want to assure them that there is absolutely nothing to worry about and their interests are fully secured and catered for,” he said.

Mr Kariithi insisted that Karrymart is keen on expanding “to create more jobs and establish a very strong brand in the market”.

“Going forward, this will help us scale up our operations and serve our customers better by refurbishing our Moi Avenue outlet.”

Mr Kariithi had envisioned in an interview two years ago that the Karrymart inaugural outlet named “Karrymart Downtown” in KTDA building would be his “first of more to come”.

The businessman’s company, Great Lakes Corporation, won a joint bid with a Chinese firm to extract coal from Kitui’s Mui basin.

The basin is said to have coal deposits worth Sh3.4 trillion based on government estimates.

The deal, however, raised controversy after some MPs claimed that the consortium of companies did not have financial and technical capacity to undertake the project, but the issues were later settled and the group is said to be in the preliminary stages of opening up the mines.

Retailers in the Kenyan market face strong headwinds related to high operating costs, mounting supplier dues, and margin pressures that have pushed two retailers to the red.

The current suppliers’ disquiet at Nakumatt and loss-making position of Uchumi and Ukwala reveal a retail industry in turmoil.

Troubled Uchumi had to battle a winding-up suit, triggered by mounting suppliers’ dues amounting to Sh3.6 billion.

Nakumatt, Kenya’s biggest retailer, has also admitted challenges settling supplier dues.

The headache of delayed payments has forced the Treasury to draft rules that would see companies which default on paying suppliers face interest on overdue amounts.

The newly enacted Public Procurement and Asset Disposal Act (2015) provides that entities which delay payments to suppliers shall incur additional charges for each day past the due date.

Fresh produce and processed products suppliers said last October supermarkets owe them an estimated Sh40 billion, straining their cash flows and even pushing some to bankruptcy.

Association of Kenya Suppliers chairman Kimani Rugendo told a members’ forum then that small and medium-sized enterprises were being driven out of business as payments delayed for up to several years while deliveries continued uninterrupted.