Retailers, suppliers reach deal to end late payments

Retailers, suppliers reach deal to end late payments

In Summary

  • Players in the expansive retail sector agree to a code of practice to govern working relationship in a view to battle challenges including the chronic late payments to suppliers for goods delivered.
  • Suppliers especially in the small and medium enterprises (SMEs) have been on the receiving end  of delayed payment leading to cash-flow difficulties, a threat to the very existence of their businesses.
  • The constant payment challenges alongside other disruptions have see the retail sector contribution to Gross Domestic Product (GDP) fall to 7.6 percent in 2017 from a record high of 11.2 percent in 2012

A section of retailers and suppliers drawn from Kenya’s expansive retail sub-sector on Thursday signed on a code of practice to facilitate the ethical undertaking of transactions between parties to include the prompt payment of suppliers for delivered goods.

The code provides for a strong linkage between the sector and its network of value chains by including binding agreements to govern operations. The agreements — the Joint Business Plan (JBP) and the Supply Agreement (SA) — include provisions that facilitate swift payments to suppliers while prohibiting retailers from involving suppliers in marketing costs.

The provisions further require both parties to commit to keep trade information confidential and further prohibit retailers from asking handouts from suppliers to better position their goods but for promotional purposes.

Both retailers and suppliers expect the new code to foster transparency in transactions by cracking down on prevalent challenges in the sector.

“The SA’s and JBP’s will create understanding across all transactions creating willing buyers and sellers for the interest of growth to the retail sector,” Chairman to the Retail Traders Association of Kenya (RETRAK) told Citizen Digital.

“All debts incurred now will have a timeline as players have to adhere to the code of ethics. No one player especially supermarkets will have an opportunity to employ their position to oppress the small traders who supplies them,” Association of Kenyan Suppliers (AKS) Kimani Rugendo added to the suppliers voice to the assurances of the code.

Players from the sector signed to the code on a voluntary basis driven by the urgency to address the prevalent challenges in the sector. The code will however go the extra mile by facilitating amendments to the Trade Bill to enhance compliance to ethical standards.

“We are concerned as a committee when suppliers go unpaid by supermarkets. We are however grateful to see parties sign on to the code voluntarily. We are coming up with holistic legislation to further ethical standards in the sector,” Chair to the Parliamentary Committee on Trade Mr. Kanini Kega said.

Late payments to suppliers have been blamed for the regressive growth in the wholesale-retail sector contribution to Gross Domestic Product (GDP) with small and medium enterprises (SMEs) in the supply side of the business suffering from cash crunch issues this is as the manufacturers’ contribution to banks non-performing loans heightens.

The wholesale and retail sector saw its contribution to GDP dip to 7.6 percent in 2017 from a 10-year high of 11.2 percent in 2012 according to statistics from the Kenya National Bureau of Statistics. The sector is among six others singled out in Kenya’s Vision 2030 Agenda to support the economic transformation of the economy to an upper-middle income class.

In spite of the rampant challenges, Kenya’s retail sector is ranked among the fastest growing markets on the continent and is second only to South Africa according a recent report by the Oxford Business Group.

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Story By Kepha Muiruri
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