The Ministry of Industry and Trade has proposed rules set to benefit supermarket suppliers through relieving them the burden of delayed payments and defaults by retailers.
According to the proposed rules, retail chains will have to pay suppliers their dues within a period of 30 days, from the current 180 to 240 days.
The move comes in the wake of mounting retail sector debts that topped 40 billion shillings at the end of last year amid industry turbulence that has left some supermarkets on the verge of collapse.
If the proposed rules become law, supermarkets will pay suppliers of fresh produce within 15 days of their weekly statement.
Penalties for non-compliance include accumulation of interest charges on any pending payments at the prevailing market rates until paid in full.
Interest on overdue payment shall commence accumulating from the first date of default until settlement of the disputed amount is made in full.
Besides, suppliers will refer cases involving retailers who fail to pay interest on amounts due within one month to the Retail Trade Dispute Settlement Committee for determination.
For a very long period of time, suppliers have been forced to wait for long before supermarket chains paid their dues.
Suppliers had complained that supermarkets delayed their payments on the pretense that suppliers did have efficient payment plans thus making it difficult to reconcile invoices.
In addition, suppliers further disclosed that whenever payment is due, retailers go to the extent of issuing post-dated cheques thus forcing them to wait even longer and some of the cheques could even end up bouncing, further hurting the suppliers’ relations with their respective banks.
A large number of small and medium-sized businesses end up operating in arrears due to delayed payments as they struggle to make their businesses remain afloat.