3 more retailers on Gov’t watch as Tuskys stays mute on buyer power abuse


3 more retailers on Gov't watch as Tuskys stays mute on buyer power abuse
File image of Tuskys Supermarket. PHOTO| COURTESY

In Summary

  • The competition’s watchdog probe comes as dark clouds gather on leading retail store Tuskys which has previous made admission to delays in supplier compensation.
  • Violations of supplier payments by Tuskys has seen a resurfacing of jitters on a potential collapse of the top tier supermarket chain even as the management of the retailer keeps its silence on matters arising.
  • The CAK argues none of the retailers ongoing woes are pinned to the Covid-19 pandemic as balances predate the advent of the global health crisis.

The Competition Authority of Kenya (CAK) says three more retailers are under its watch for delaying payments to suppliers as it rounds off investigations into potential buyer power abuses.

The regulator has not however disclosed the identity of the other three retail chains even as it confirms the vast majority of players have complied to prompt payment rules.

“Out of the 25 retailers, only four retailers were found to have delayed payments exceeding 90 days. Three of the four retailers presented payment plans and have continuously reduced their debt portfolio, aiming to settle the outstanding amounts within the next 60 days. The Authority will conduct compliance checks after this period lapses,” noted CAK Director General Wang’ombe Kariuki.

“Further, the Authority has issued prudential and reporting orders to one retailer who, after several requests and extensions, failed to present a payment plan or evidence of negotiations with the affected suppliers.”

The competition’s watchdog probe comes as dark clouds gather on leading retail store Tuksys which has previous made admission to delays in supplier compensation.

Like Nakumatt?

Violations of supplier payments by Tuskys has seen a resurfacing of jitters on a potential collapse of the top tier supermarket chain even as the management of the retailer keeps its silence on matters arising.

An attempt by Citizen Digital to reach Tuskys management bore no fruits as emails and calls to Chief Executive Officer Daniel Githua remained unanswered.

However, in a letter to the Kenya Association of Manufacturers (KAM), the Tuskys boss made the admission of late payments as it blamed the ensuing Covid-19 pandemic for its woes.

“We apologize for the restructured payments of some suppliers with respect to their trade terms which started in April as a result of Covid-19,” he said.

“However we have continued with repayments scheduled in April progressively and have progressively released them in May and will continue the same in June. All these were impacted by Covid-19 that took a toll on the foot-fall of the retail sector across the board.”

The CAK has however argued that none of the retailers have pinned ongoing woes to the pandemic as balances predate the advent of the global health crisis.

“No retailer has tendered any document to the Authority indicating that their current status has been occasioned by the Covid-19 pandemic. However, the documents under the custody of the Authority indicate that most of the outstanding payments date back pre Covid-19,” added Wang’ombe Kariuki.

It is findings that draw a sense of dejavu to suppliers whose losses to the tune of billions from now defunct Nakumatt still haunt their operations today.

“Certainly we wouldn’t want to see harm come to them (Tuskys). At the same time, we would want to stop another Nakumatt from happening given suppliers are usually the last to receive settlement in the event of liquidation,” said the CEO to the Suppliers Association of Kenya Ishmael Bett.

This is as Nakumatt’s collapse was preceded by a haunting-gross violation of supplier payments ahead of its total collapse which saw local enterprises lose in excess of Ksh.18 billion in unpaid bills.

Strategic investor

Cracks inside Tuskys supermarket have however preceded the present un-paid supplier bills.

In April, the retailer said it had temporarily closed three stores in Nairobi’s Central Business District (CBD), Kitale and Mombasa sighting a low footfall and the need to implement social distancing and personal hygiene measures under Covid-19 restrictions.

Much earlier in February, Tuskys declared an undisclosed number of redundancies in what it termed as a major re-organisation of the firns strategy that saw the restructuring of various departments.

Moreover, in August last year, Tuskys indicated it was out to shop for a strategic investor as it sort to better its capital structure ahead of a potential listing on the Nairobi Security Exchange (NSE) bourse.

According to Dan Githua, the strategic investor was expected to guide the company’s expansion strategy into the region to incorporate additional capital injection and the development of an employee-ownership plan.

“The first thing would be to improve our internal governance structure. We would need to ensure that our structure can withstand public scrutiny upon listing. Our goal would be to present a well-capitalized company to investors as we wouldn’t want to be confronted by the suggestion that we are only listing for money,” he said.

The retailer has however consequently remained silent on the progress of tapping the new investor as details on cash-flow hitches now unravel.

The supermarket, which has humble beginnings in the present day Nakuru County, has grown from a standalone entity in the small town of Rongai to incorporate 65 branches in both Kenya and Uganda with a staff stock of over 6000 employees and nearly 800 independent suppliers.

The family-owned supermarket has however been the subject of heated internal wrangles tainting the stability of the firm’s management in the most recent as five heirs to the business faced off for the control of the company.

Tuskys management however ceded the daily operations of the supermarket away from family ties in the aftermath with seven general managers currently overseeing the day to day running of the business.

Code of conduct

Tuskys woes have led no new calls to review the voluntary memorandum of understanding (MOU) signed between suppliers and retailers in the enforcement of prompt payments in January 2019.

According to Trade Cabinet Secretary Betty Maina, the government is reviewing the efficiency of the codes implementation as questions are raised on government’s checks and balances in the retail sector.

“We are looking at the efficacy of that code as there is a view on the need to pursue a much stronger and more enforceable pact,” she said.

Retail Trade Association of Kenya (RETRAK) CEO Wambui Mbarire however warns the rot in any one retailer must not be viewed as an industry wide issue as she calls for individual responsibilities in the management of the sector.

“If there are people not paying up, we should look to identify them. We might have a few ailing but this is not a representation of the entire sector,” she said.

The health status of Kenya’s retail sector is expected to be laid bare by the CAK when the regulator publishes its findings from the probe to buyer abuses.

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Story By Kepha Muiruri
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