Kenyan government urged to set up fund to pay SMEs

The Kenya National Chamber of Commerce and Industry has urged the government to set up a Sh10 billion (about US$98.2 million) fund to pay small- and medium-sized suppliers that have been waiting years for payment.

The association of businesses said: “We should have forward moving policies that govern how the government deals with its suppliers. Owing to the current high pending bills, the national economy is suffering collapse of entrepreneurship, employment opportunities and depressed cash flows.”

They propose the account should be a joint project of the Treasury, Controller of Budget and Auditor General, to bring together pending bills under one monitoring platform. The account should also ensure funds to pay suppliers are available immediately, once audit processes have been completed. The association also wants an overhaul of the government's pending bills policy to reduce delayed payments.

The association made this suggestion after President Uhuru Kenyatta said in his Independence Day speech that counties and agencies in the country should clear all their outstanding bills by the end of June. The speech revealed some businesses have waited seven years for payment for goods and services.

As of the beginning of June, counties and government agencies owed suppliers over Sh300 billion (about US$2.95 billion). The amount of debt has been grown over the seven years the system has been in place. It excludes interest, even as the SME suppliers are probably accruing interest charged by banks on the capital they borrowed.

President Kenyatta said in his speech that delayed payments negatively impacts the country's private sector and when suppliers are owed months of payments the economy suffers down to the grassroots. Delayed payments lead to slower GDP growth, which was 4.9% as at the end of 2018, almost unchanged from 4.8% in 2017, declining from 2013 to 2016, when it registered growth of more than 5% annually.

There is also discussion to make it a criminal offence for the government to delay payments to suppliers beyond 60 days. This came about after a recent roundtable between President Kenyatta and Kenya Private Sector Alliance (Kepsa) representatives, although nothing concrete has been put in place yet.