Inside Politics

Competition regulator faces acid test in Tuskys troubles

Friday, July 17th, 2020 00:00 |
Tuskys supermarket. Photo/Courtesy

Lewis Njoka @LewisNjoka

The liquidity crunch facing Tuskys Supermarkets could turn out to be a litmus test on how effective the Competition Authority is in curbing buyer power abuse among retailers.

It also underscores the need for Kenya to have a prompt payment law, a bill currently in Parliament, made prominent by the collapsed Nakumatt retail chain.

In the recent past, Tuskys Supermarkets, which is among Kenya’s largest retailer after the collapse of Nakumatt, has faced a litany of challenges, a situation that has seen it placed under the competition regulator’s watch list.

Concerns abound that if the retailer’s situation is not arrested it could hit the retail sector hard on the back of the Covid-19 pandemic.

Suppliers fear that the retailer could go down with money owed to suppliers like it happened with Nakumatt where the former giant retailer collapsed with Sh38 billion owed to suppliers and creditors.

The instability has seen some suppliers halt delivering their products to Tuskys while others have reduced the amounts they supply fueling the speculation that retailer could be headed for tough times ahead.

On Wednesday, New KCC said it had stopped supplying milk to the Supermarket over non-payment of deliveries worth millions.

“We are at the moment in discussion with the firm to agree the way forward after we stopped supplies of milk to the retailer,” said New KCC Managing Director, Nixon Sigey.

Customers have been complaining of frequent stock-outs at the supermarket stores with near-bare shelves in several sections.

“I have been unable to buy my favourite brand of yoghurt from Tuskys Moi Avenue for several days now. It’s always out of stock.

I have visited three other branches in Nairobi and the situation is the same,” says Kariuki Mwangi, a Nairobi resident.

“At Greenspan Mall store, the shelves have only one row of products with the rest of shelf-space empty,” says another customer identified only as Fred.

In May, the Competition Authority of Kenya announced it was closely monitoring the retailer after it delayed payment to suppliers past the 60 day period prescribed by the Completion Act.

Manufacturers told Business Hub they are currently in discussions with the retailer on delayed payments with Tuskys said to having proposed long term strategies to address its financial challenges.

“These include equity raising measures to finance its business coupled with direct system for payment of supplies where direct sales are channelled to pay manufacturers, among other suppliers,” said Phyllis Wakiaga KAM chief executive.

The lobby said Tuskys is yet to share proposals to address payment of outstanding debts, which continue to affect manufacturers’ liquidity, particularly during this period.

“Manufacturers are calling on the government to put in place long-term measures to ensure that retailers’ financial challenges do not affect suppliers,” Wakiaga said.

Consumer Federation of Kenya (Cofek) Secretary General, Stephen Mutoro, called for enactment of a law to specifically protect suppliers saying they are vulnerable.

“We don’t have any one-stop law on retail management and those kind of issues. We have left the suppliers at the mercy of briefcase retailers.

The suppliers have no security. You just supply hoping that the store is not going to collapse.

Once suppliers are affected, everybody else is affected. The entire economy is affected,” he said.

He said the 2018 amendment mandating CAK to handle abuse of buyer power issues did not address the crust of the matter saying it is more reactive than pro-active.

However, Tuskys has attributed challenges facing it to the adverse effects Covid-19 pandemic in addition to normal operational challenges such as fraud, expansion-fuelled debt and increasing competition.

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