This archive report was first published on 19 June 2020.
June 19, 2020
The Competition Authority of Kenya (CAK) has intervened in the debt crisis of Tuskys, a major supermarket chain in Kenya, by imposing conditions on the company to settle its Sh1.2 billion supplier debt.
According to the regulator, Tuskys' debt has risen to Sh1.2 billion, raising questions about the retailer's ability to pay its suppliers. The CAK has ordered the company to focus on settling its current obligations, with the company's default resulting in cash flow challenges for suppliers and consumers missing essential goods on the retailer's shelves.
The regulator has also launched a wide-ranging investigation into the retailer to establish the circumstances that led to the default. The company has been ordered to furnish the regulator with its monthly bank statements for the past year for all bank accounts relating to its retail business.
CAK's move marks an unprecedented interference in a supermarket's management and offers insight into the kind of regulatory actions struggling retailers can expect in the future. The regulator has imposed a prohibition on Tuskys from declaring or paying bonuses, fees, and other discretionary compensation to directors.
“Tusker Mattresses Limited from the date of this order must obtain written concurrence of the authority as a pre-condition for expansion,” CAK wrote to the company in a letter seen by the Business Daily.
The regulator's actions have made urgent the need for Tuskys to raise funds from lenders or shareholders to maintain its footing in the highly competitive supermarket business. One of Tuskys' top rivals is Naivas, which recently moved to raise more than Sh1.5 billion from the International Finance Corporation (IFC) and other investors.
