Manufacturers want firms to declare supplier debts
Manufacturers want laws enacted to compel companies to periodically declare debt to suppliers and service providers or risk severe penalties.
The Kenya Association of Manufacturers (KAM) said retail chain operators and other firms must provide the information on withheld payments and their due dates to enable suppliers to make informed decisions when conducting business with them.
“Private bodies that receive vast amounts of funds from public entities and citizens should be required to have higher accountability measures to safeguard the other sectors of the economy,” said a memorandum forwarded to the Senate Committee on Tourism Trade and Industry.
The KAM observed that Nakumatt and Uchumi supermarkets, which confessed having supplier debts of Sh26.4 billion and Sh3.6 billion respectively in 2016, showed a need for stricter scrutiny and safeguards.
“The banking sector regulation on capitalisation requirements remains a critical solution to address financial and governance constraints. To date, supermarkets are not required to demonstrate proof of ability to hold funds on unsecured terms and this has contributed to the financial woes retailers continue to face,” it said.
The KAM called for dedicated prompt payment regulations to address late payment where severe penalties will be put in place to cushion “victims” of delayed payments.
The collapse of the once regional retail leader Nakumatt adversely affected the liquidity of many firms with some forced to go under after auctioneers seized their properties to settle delayed payments.