Government drafting guidelines to deal with defaulting retail chains
Kampala, Uganda | JULIUS BUSINGE | Supermarkets in Uganda have made it a habit not to pay or delay payments to suppliers of goods and services in time but that will soon come to an end once the government’s proposed measures are implemented.
Speaking to The Independent in an exclusive on Sept.20, the Permanent Secretary in the Ministry of Trade Industry and Cooperatives, Julius Onen, said the government is concerned with the increasing number of complaints from supermarket suppliers of either non-payment or delayed payment.
For that, Onen said, the trade ministry is drafting a number of measures dubbed Supermarket Guidelines under the Trade Licensing Act of Uganda to aid suppliers with legal basis to demand payments.
“Our plan is to have them submitted to Cabinet for approval in December this year…and shared with the public,” he said.
One key highlight of the regulations, Onen, said is that suppliers would be paid in 30 days for some goods supplied and services rendered especially food and related items and for others (goods) are paid in 60 days.
This, he said, is to create a favorable business environment for supermarkets and suppliers of goods and services to transact business in a way that enhance their growth but also that of their suppliers.
This planned measure comes on the back of regional supermarkets – Nakumatt and Uchumi – owing billions of shillings to Ugandan suppliers and with no clear indication on whether the debts will be paid.
For instance, Uchumi Supermarket, exited the Ugandan market in 2015 and it is yet to clear about Shs10bn debt it owes to the local suppliers, according to the trade ministry.
A similar situation appear to be catching up with the suppliers of Nakumatt Supermarket as the retail chain seem to be exiting the local market without paying suppliers billions of shillings.
So far, the Kenyan-based retail chain, which started operations in Uganda in June 2009, has shutdown various stores including Acacia Mall, Village Mall, Bugolobi, Victoria Mall and Katwe out of the nine retail chains it had in the country citing hardships in financial flows.
Uganda Revenue Authority (URA) recently auctioned perishable goods for Nakumatt Oasis Mall outlet as one way of collecting part of about Shs 300 million in tax arrears.
Vincent Seruma, URA’s assistant commissioner for corporate affairs told The Independent on Sept. 22 that they welcome the proposed measures adding that it is one way of creating confidence in parties involved in retail chain business.
He, however, said URA has halted auctioning of non-perishable goods for Nakumatt Holdings until that time they realise that ongoing discussions with the company officials are not yielding anything.
“…It is not always our intention to auction or sell taxpayers property to get taxes,” he said, “We engage and engage; selling is always the last option.”
But this challenge is not only happening in Uganda as similar issues are being held in the neighbouring Kenya.
Recently, the Kenyan government unveiled The National Trade Policy which aims at introducing regulations to police the retail sector, including giving guidelines on access to trade information and unfair competition.
Kenyan trade officials say that dominance of big retailers has created an unfair competition to smaller suppliers and worsened the debt burden for major retailers such as Nakumatt and Uchumi that is recorded in the region of Ksh 48 billion.
In their policy, the ad hoc committee set up by the Industrialisation Ministry to look into the issue of delayed payments last year recommended the setting up of a regulatory body to protect suppliers from exploitative retailers.
It would also support smaller retailers who have suffered under the dominance of larger players who give price advantages and undercut them, especially in small towns.