Kenya's government remiss in paying contractors

The Kenyan government has been remiss in paying many contractors on time, according to that country's The Star newspaper. Suppliers say they are frustrated by the government’s failure to pay overdue bills with interest.

Under Kenyan law (the Public Procurement and Asset Disposal Act of 2015) entities which delay payments to suppliers will incur additional charges for each day defaulted.

Reuters has identified the problem as corruption, which has led to insufficient funds in government accounts that could otherwise be used to pay suppliers.

The alleged link between corruption and non-payment of government invoices was made explicit in May, when dozens of officials and business people were charged with involvement in the theft of nearly US$100 million of public funds. They are accused of using doctored invoices to bill fake suppliers.

Supplies and Contractors Welfare Association chairman Peter Towett said national and county governments have not been honouring payment to suppliers since the 2013/14 financial year.

A government report shows the government owes local suppliers KSH 32.5 billion (US$321.4 million) as at November last year but suppliers say the amount owed is in excess of KSH 250 billion (US$2.47 billion).

The biggest defaulters, according to the report, are the Ministry of Defence, Ministry of Health, and the State Department of Interior. Besides the government, large corporations owe small businesses about KSH 60 billion (US$593 million).

According to Reuters, former anti-graft chief Philip Kinisu said in 2016 that Kenya was losing a third of its state budget to corruption every year. The government denied the figure.

The lack of payments has led to local businesses being wary of supplying to the government. Many Kenyan SMEs bid for government contracts because the state is the biggest spender in the country.

Some businesses that have contracts with the government have ended up being blacklisted by credit reference bureau after falling behind on loan repayments or defaulting.

The financial sector is also hit by the late payments. Non-performing loans have jumped this year to their highest level in more than a decade.