Investigations into Abuse of Buyer Power in the Retail Sector Investigations by the Authority into Abuse of Buyer Power incidences within the retail sector focusing on twenty-five mid and large retailers, and which commenced in late April 2020, determined that four retailers had delayed payments to their local suppliers for a period exceeding ninety days.
In a statement released by the Competition Authority of Kenya (CAK) has noted that three of the four retailers, upon engagements with the Authority, presented payment plans which are being honored as agreed, thereby progressively reducing their debt portfolio as confirmed through compliance checks. Further, the Authority issued Prudential and Reporting Orders to Tusker Mattresses Limited (Tuskys), requiring it to submit records revealing the full extent of debt owed, financial statements and records, sales forecasts, among others.
“The Authority further required Tuskys to submit a debt settlement plan for all debt owed to suppliers over ninety days, and commence honoring its commitments, while prioritizing distressed suppliers and those supplying FMCGs.” The report reads in part.
Over the past 30 days, the Authority has held four meetings with the local retailer, Tuskys, to review the documentation submitted and interrogate its proposed debt settlement plan. Tuskys has provided documents indicating that it made payments to suppliers amounting to Ksh2.77 Billion ($25.7 million) in June 2020 as per the Authority’s order.
Tuskys has gone further to communicate to the Authority that it has negotiated for moratoriums and extensions of its facilities with its lenders and that it was in talks with key suppliers to ensure continuation of supplies.
“In addition, the shareholders of Tuskys have communicated that they are also exploring other funding options, including seeking a strategic investor by July 31, 2020. The Authority took note of these initiatives and has thereof committed that, if the retailer opts to seek a strategic investor, the Authority shall within fourteen days, and in accordance with the provisions of the Competition Act, consider and issue a determination upon submission of a merger/acquisition application.”
In regard to the presented debt settlement plan, and cognizant of the retailer’s prevailing circumstances, the Authority is amenable to the plan presented that will result in all suppliers’ outstanding invoices progressively settled over a period of four months.
The Authority shall conduct compliance checks on a weekly basis to ensure adherence to the presented debt settlement plan. Lastly, as the Authority continues to interrogate the financial statements, and management accounts availed by Tuskys, we call upon suppliers who may be aggrieved, and have not presented their matters to the CAK, to continue doing so.
This will enable the Authority establish Tuskys’ accurate debt portfolio.