The Communication Authority of Kenya (CAK) has recovered Ksh.38 million owed to 25 motor vehicle suppliers for services offered to 18 local insurance companies.
The cash was owed to 20 motor vehicle repairers and five motor vehicle assessors only for the said insurance companies to renege on making payments. In some instances, the services were rendered and completed five years ago.
According to the CAK, its intervention has salvaged the livelihoods of approximately 1,000 Kenyans and enabled this key sub-sector to remain competitive during the COVID-19 pandemic period.
These overdue invoices, CAK adds, forced the SMEs to take up expensive loans, downsize, or increase the cost of their services in order to meet their business overheads, including paying salaries. Others were forced to shut down.
“Large business undertakings sometimes fail to honor agreement terms with their suppliers, who are often SMEs, under the misguided belief that the suppliers do not have legal recourse,” said Ms. Priscilla Njako, Manager, Buyer Power Department said.
“Such actions place thousands of livelihoods at risk since their sources of income come under unbearable and unjustifiable financial strain. Big businesses are therefore reminded of their obligation to abide by the Competition Act and honor their supply agreements.
In addition to the interventions in the insurance industry, the Authority has, since July 2021, secured the release of Ksh.5 Million in overdue payments to SMEs in the telecommunications and agro-processing sectors.
The Competition Act provides a non-exhaustive list of conduct that manifests Abuse of Buyer Power (ABP) in the marketplace.
These include delayed payments by a buyer, unilateral termination (or threat of termination) of a commercial agreement, and a buyer’s refusal to receive or return goods without justifiable reasons in breach of contractual terms.
ABP also manifests when buyers transfer costs (such as marketing expenses) or risks to suppliers, demand preferential terms that are unfavorable to suppliers or direct suppliers to limit products sold to competitors.
Harrison Ikunda, the Chief Executive Officer of Kenya Motor Repairers Association (KEMRA), noted that payment delays have drained relationships between its members and their landlords, staff and suppliers, among others.
“We approached the Authority when our members complained about payment delays by different insurance companies. The funds released to us has facilitated the survival and growth of our businesses,” said Mr. Ikunda.
The Authority also advises businesses to enhance their record-keeping practices in order to facilitate easy retrieval of evidentiary information.
“Further, suppliers and buyers should cultivate a culture of conducting business while referencing written contracts in order to minimize conflicts. To facilitate this, the Authority has developed Model contracts for use by contracting parties in the insurance and retail sectors,” said CAK.