How State reforms plan will tackle retail sector troubles

Kenya’s retail sector is experiencing a turbulent period that is almost pushing some players over the cliff. Since last year two of the retailers have closed shop in Uganda and Tanzania while others are struggling with heavy debt. The risk of the distressed retailers collapsing has prompted a wide range of suggestions, including calls on the government to step in with rescue packages. But the government is taking a more guarded approach to the threat. Trade Principal Secretary Chris Kiptoo spoke to the Business Daily about the government’s plan for the retail sector. Here are the excerpts.

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We prefer lighter regulation as long as self-regulation remains strong. We will start with the Competition Authority because there is unfair practice in the market and some retailers are dictating terms so much that other players are suffocating in the space. There is room to create some market conduct. We have experienced the current challenges because apart from Uchumi which is a public-listed company, the level of disclosure in this sector is almost nil. Even suppliers would like to know the capacity of the companies they are supplying but the information is hard to come by. So we need regulation to force some levels of financial disclosure, including the opening of branches. We need to standardise buildings that host retail shops. This is a journey and it will take time to sanitise the sector. We also want to see strong business member organisations on both the supply and retail sides so that we sit in the middle.

For Nakumatt, I have said several times that we would like to see it survive because it has employed a number of people and many Kenyans rely on it for shopping. It is also a Kenyan brand and we want to support every effort to keep it afloat. However, there will be no financial support from government. We support interventions like banks restructuring their loans, which can only be done after full disclosure. The banks have indicated that they are willing to support the restructuring. Suppliers too have said they are willing to support Nakumatt as long as they are guaranteed of payments probably through the creation of an escrow account. The option that is available for Nakumatt is to close shop if they cannot meet their obligations. But we believe the situation is not that bad for a wind up.