Tuskys Supermarkets is delaying and reducing payments to suppliers, banks and landlords, citing constrained cash flows due to the impact of coronavirus on its business.
The retailer has written to suppliers, informing them that even recently renegotiated payment terms may not be honoured on the agreed timeline.
Tuskys has blamed measures taken to control the spread of the coronavirus such as social distancing and reduced operating hours for lower traffic in its stores. The retailer has shut some branches and merged others in a bid to stem losses at the individual store level.
The retail chain has also pushed for a cut on rent for its stores and deferred payment, highlighting the effects of the virus on businesses.
"Despite these efforts, some supplier obligations may be deferred and therefore some of your members have been impacted," Tuskys chief executive Dan Githua wrote to Kimani Rugendo, chairman of Association of Kenya Suppliers, in an April 30, 2020 letter.
"We have communicated individually to these suppliers that their payments will be delayed."
The company added that it is committed to protecting the interests of all suppliers who have been delivering sufficient stocks since the first case of the virus was reported in the country in mid-March.
The Competition Authority of Kenya is expected to wade into retailers’ move to delay payments to suppliers by confirming their financial distress.
The regulator in late 2018 established a special Buyer Power Department to curb potential abuses by retailers, including unnecessary delays in settling supplier claims.
The creation of the unit was informed by the collapse of former supermarket giants Nakumatt Holdings and Uchumi Supermarket that left billions of shillings of supplier debt unpaid.
Nakumatt, for instance, owed suppliers Sh18 billion, which could not be recouped from the liquidation of the company's assets.