Supermarkets and shop owners will now be compelled to pay suppliers interest on delayed payments in new rules published by the Competition Authority of Kenya (CAK).
The CAK says that the interest to be paid shall be agreed between the retailer and suppliers and must be included in their contracts, which shall also include the dates these interest payments will start being charged.
The stiff regulations contained in the Retail Trade Code of Practice come at time of increasing payment defaults that have pushed suppliers into cash flow troubles.
A number of large retailers, including Nakumatt and Tuskys have in recent years hit the rocks with more than Sh30 billion in unpaid dues to their suppliers, putting a large number out of business.
Nakumatt owed suppliers Sh18 billion by the time it was winding down, while Tuskys that is in search of fresh capital and lease partners for its shops as part of its turn-around plan owes suppliers and banks in excess of Sh10 billion.
Suppliers and factories signed a deal on credit information sharing in November last year, where they share payment history of different supermarkets, helping shape their decision on supplies.
The platform dubbed, Industry Credit Group (ICG) is managed by Veri-Credit and is modelled on the credit reference bureaus that offer lenders borrowers’ repayment information, including defaulters.
Manufacturers have previously said the increase in pending bills within the private sector is hurting the industry’s efforts to recover from the adverse effects of the coronavirus pandemic.
The regulator has also formed a prompt payment committee whose key mandate will be assessing the implementation of the payment agreements.
Members of the committee are the chairs and CEOs of the Retail Trade Association of Kenya (Retrak), Kenya Association of Manufacturers (KAM) and Association of Kenya Suppliers (AKS).
Besides retailers, suppliers are also grappling with mounting pending bills estimated at over Sh346 billion from the national and county governments.
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