Tuskys pays suppliers Sh2.7bn after CAK order

Supermarket chain Tuskys paid suppliers a total of Sh2.7 billion in June as it raced to beat a regulatory deadline to settle its obligations that had remained outstanding for months.

The Competition Authority of Kenya (CAK) had ordered Tuskys to settle supplier debt of Sh1.2 billion by Thursday last week after a group of companies complained to the regulator about the retailer’s default.

“Over the past 30 days, the Authority has held four (4) meetings with Tuskys to review the documentation submitted and interrogate its proposed debt settlement plan,” CAK said in a statement.

“Tuskys has provided documents indicating that it made payments to suppliers amounting to Sh2.77 billion in June 2020 as per the Authority’s order.”

Measures that helped the company pay the debt included negotiations for moratoriums and extensions of credit facilities with lenders.

SCRUTINY

Tuskys became the first major retailer to face the scrutiny of CAK’s Buyer Power Department that was created after former supermarket giant Nakumatt Holdings went under with Sh18.5 billion of supplier debt.

Nakumatt’s total liabilities amounted to Sh35.8 billion including bank loans (Sh6.9 billion) and commercial paper (Sh4.7 billion).

Buyer power means the ability of a purchaser to extract more favourable terms from a supplier on whom it can also impose significant opportunity costs by, for example, delaying payments.

The CAK started looking into Tuskys’ operations in April after reports emerged that it was not paying suppliers on time as provided for in their respective contracts.

Besides the Sh884.3 million supplier debt admitted by Tuskys, the regulator also discovered that the retailer owed an additional Sh400.9 million through an independent investigation.

COMPLIANCE CHECKS

Milk processor New KCC is among the companies that stopped supplying Tuskys owing to the pileup of unpaid debt, causing stockouts of essential items on the retailer’s shelves.

CAK says Tuskys has presented a new plan to settle the remaining supplier debt over the next four months.

“The authority shall conduct compliance checks on a weekly basis to ensure adherence to the presented debt settlement plan,” the regulator said.

“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.”

The fact that the regulator is monitoring Tuskys’ operations is expected to give confidence to suppliers, some whose business with the retailer runs into hundreds of millions of shillings per year.

Paying suppliers on time will see the retailer regain operational freedom from the removal of restrictions imposed by the regulator. Among other things, CAK ordered Tuskys to seek its approval before opening new branches or going into new ventures.