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Supermarkets face heavy penalties under new rules

Fred Aminga @faminga

Retailers will now be required to pay suppliers within a specific number of days with those who fail to do so facing penalties following the official launch of a Retail Code of Practice. Self-regulation of the retail industry is meant to ensure the cash crunch that often affect the value chain will be a thing of the past and the sector stays vibrant and steady.

Trade Principal Secretary Chris Kiptoo said the purpose of this code of practice is to encourage self-regulation and harmonise how retailers and suppliers engage with each other.

He said alternative to proper self-regulation is devastation to the country’s business ecosystem, impacting on profitability, productivity and trust among various players in the economy. The launch of the code of practice was witnessed by a technical committee comprising Retail Traders Association of Kenya (Retrak), Association of Kenya Suppliers, Kenya Association of Manufacturers  and other private sector players.

Retailers, manufacturers, suppliers as well as the government have agreed to implement the code. Kiptoo said the rules are expected to safeguard businesses from any practices that may disadvantage them and reduce their capacity to be competitive.

“This move is expected to remedy any potential squeeze on cash flow to allow business thrive,” he said. The launch of the code comes after Kenya witnessed a biting cash crunch following delayed payments by various retailers in a move that threatened various sectors of the economy.

This not only hurt suppliers but also affected manufacturers and producers of raw material, forcing all to  resort to loans for sustenance.

Suppliers, especially, small and medium enterprises (SMEs) have been at the mercy of supermarkets when it comes to payment for goods supplied. Suppliers of fresh produce and processed products said in October 2016 that the supermarkets owed them an estimated Sh40 billion, straining their cash flows and even pushing some of them into bankruptcy

Also affected by lack of payment were small-scale farmers in villages supplying fresh produce such as fruits, vegetables, millet, sorghum, amaranth and honey.

Prompt payments

A report on prompt payments prepared during the cash crush quotes a small-scale producer who had stopped production and is still struggling to pay loans owed to various banks. The code says suppliers should be paid within the stipulated period and that any anomalies be notified in seven days or within 24 hours in case of perishable products.

“Disputes to be resolved by retail trade dispute settlement committee (Section 18),” the retail code of practice reads in part. In order to monitor the effectiveness of the code, there is need to put a mechanism in place to know whether implementation is working or not.

There will be quarterly meetings for stakeholders convened by the State Department for Trade to evaluate the adherence of the code of practice by the private sector.

These regulations will be anchored on Trade Development Act whose process of enactment is at an advanced stage.

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