Retailers owe banks, suppliers and manufactures over Sh40 billion accrued in the last two years, a new report commissioned by the government on the retail sector has revealed.
A majority of the debt is however owed to supplies, almost crippling their operations because of lack of cash flow. A joint study by manufacturers, retailers and suppliers on Kenya Retail Sector Prompt Payment released on Wednesday by the Ministry of Industry, Trade and Cooperatives reveals the behind-the-scene wars between suppliers and retailers.
According to suppliers and manufacturers, the future of the retail sector in Kenya is at the crossroad due to the late payment culture, which is traced to the past two years.
The significance of this challenge is manifested in the estimated over Sh40 billion outstanding payments for goods delivered, with some payments having been delayed by between 180 and 240 days,reads the report in part.
However, the Retail Trade Association of Kenya asserts that overdue credits amount to less that Sh1billion and observes that Sh40billion entail short and long term financing instruments which are still in service as no defaults have been reported by any financier.
Even so, the government places the amount owed to suppliers at an even higher figure than Sh40billion given disclosures obtained from troubled retailers whom the government engaged on Wednesday in a bid to understand their challenges.
According to the report, retailers owe 22 out of 1,000 suppliers sampled Sh 792.3 million for the period between 30 to above 90 days. Amount owed in less than 30 days amounts to 31 per cent while the rest is above 30 days. Sh199.9 million representing 25 percent is for a period of above 90 days.
Lead retailers in late payment includes the troubled Nakumatt Holdings Limited who owe Association of Kenya Suppliers (AKS) members Sh136.45 million in debts of over 60 days. This accounts for 41 per cent of the total debt owed to suppliers by Retrak members.
Uchumi debt of over 60 days stood at Sh106.75 million accounting for 32 per cent while that of Tuskys and Naivas supermarkets was Sh 30.2 million and Sh25.5 million, accounting for nine and eight per cent of the total debt respectively.
Chandarana Supermarket debt is reported at Sh10.4 million, putting the debt of the five major retailers in the country at Sh309.1 million, accounting for a whopping 92 per cent of the total debt.
The great focus is however put of Nakumatt and Uchumi whose debt owed for 60 days accounts for 72 per cent of the total estimated at Sh335.4 million
Late payment for goods saw Tharaka Honey close business in March this year with Kapari, Seal Diamond, Acinon and Eastern Gas Distributors Limiteds forced to take credit facilities to remain in business. Elsewhere, 37 out of 650 members of KAM who supply retailers in Kenya are demanding Sh1.97 billion in unpaid debts of over 60 days. Only Sh351 million representing a mere 18 per cent is owed in less than 60 days.
The lead supermarkets in terms of debts owed for more than 60 days are Nakumatt Holdings, 34 per cent while Tuskys and Naivas account for 18 and 14 per cent respectively.
Due to this late payment, AKS want payment to be made between 30 and 45 days and 15 days for fresh produce, down from the current 90-120 days window period.
KAM on the other hand want payments for fast moving consumer goods not to exceed 45 days while that of fresh produce not to go beyond seven days.
Aden Mohammed, Cabinet secretary Ministry of Industry, Trade and Cooperatives has promised to set up an independent regulatory body to control trade in the retail sector by to curb future disputes.