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Billions in delayed suppliers' pay killing SMEs - Kittony

The chamber has proposed a set of measures to cushion suppliers from negative effects of late payments.

In Summary

• At least 500,000 people and small businesses in the country have poor credit rating

• Endemic culture of late payments especially by the national government

KNCCI Chair Kiprono Kitonny told the Star that national government, counties and large corporate players owe SMEs in excess of Sh310 billion, with government leading at close to Sh250 billion (80 per cent).

Small and Medium Enterprises are struggling to stay afloat and risk running out of business following delayed payment by public and private institutions running into hundreds of billions of shillings.

Yesterday, KNCCI Chair Kiprono Kittony told the Star that national government, counties and large corporate players owe SMEs in excess of Sh310 billion, with government leading at close to Sh250 billion (80 per cent).

"A study by the chamber has found out an endemic cultural issue about late payments in the country especially by the national government, shrinking capital for SMEs. This must be addressed to support SME growth that contributes heavily to job and economic generation.’’ Kittony said.

 

He also pointed an emerging trend where sitting county governors are reneging on obligations of their predecessors, putting suppliers in a tight financial position.

He warned that late payments to SMEs coupled by interest cap law that has muzzled lending to the sector could see businesses close , leading to loss of jobs, negatively impacting on the country’s social economic fabric.

To remedy this, the chamber has proposed a set of measures to cushion suppliers from negative effects of late payments.

The business body now wants legislation put in place to charge a fee on late payments equal to prevailing bank interest rates. It also governors declining to honor debt incurred by previous regimes be reprimanded.

"There is a need for transitional arrangement in counties where obligations by previous regimes are carried forward unconditionally," Kittony said.

Furthermore, the trade body is proposing a mechanism where victims of delayed payment are spared from poor credit rating.

KNCCI estimates that at least 500,000 people, including small businesses have a poor credit rating, blocking them from accessing credit to grow business. This has led to fall of many businesses, unemployment and birthed social ills.

 

Additionally, the chamber has proposed a set of tax measures to cushion businesses suffering from late payment. For instance, it wants the government to wave penalty on unpaid taxes by victims of delayed payment.

Others include a set off mechanism where the government net taxes for businesses it owe. This, according to the business body will shield businesses from sinking into tax default hence higher penalties.  

KNCCI’s recommendations are coming hot on the heels of a proposed amendment to the procurement law by Gatundu South MP Moses Kuria to compel the government to pay tenders for women, youth and persons living with disabilities within 30 days.

In his proposal, Kuria also wants payments for other categories to be made in 90 days after receiving invoices and certificates for procurement.

If the proposed amendments are passed, accounting officers will face criminal proceedings in their personal capacity for professional negligence and misconduct in case they fail to pay within the stipulated time.

The KNCCI chairman said the business community is in support of the proposed amendment, saying it is important to seal payment issues in law to ward off those who intentionally delay payment to the businesses.

Kittony’s six year tenure at KNCCI is expected to come to end mid this year.

Already, several candidates including vice chair James Mureu, Nairobi chapter leader Richard Ngatia and businessman Gor Semelang'o have declared intentions to succeed him.

Yesterday, Kittony asked those jostling for the position to be ready to work selflessly without pay to further raise the chamber’s profile internationally.

Chairman (KNCCI) Kiprono Kittony addressing the media a day before the re-launch Kenya National Chamber of Commerce and Industry (KNCCI) in Nairobi yesterday. Photo Enos Teche
Chairman (KNCCI) Kiprono Kittony addressing the media a day before the re-launch Kenya National Chamber of Commerce and Industry (KNCCI) in Nairobi yesterday. Photo Enos Teche