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SUPPLIERS, CONTRACTORS' WORRY

Ministries yet to clear Sh100 billion pending bills

National govt,counties, large corporate entities owed suppliers Sh310bn as of November.

In Summary

• Inquiries by the Star revealed that majority of the state organs are yet to clear pending bills as directed by President Kenyatta on June 1.

• Suppliers and contractors re-suffering, nonperforming loans are rising and banks are closing in and auctioning properties. 

Treasury buildings.
UNPAID BILLS: Treasury buildings.
Image: MONICAH MWANGI

The government owes suppliers and contractors more than Sh90 billion from 2018-19, even as the deadline imposed by President Uhuru Kenyatta to clear pending bills lapsed last Sunday.

President Kenyatta had on June 1, during Madaraka Day celebrations, directed all ministries, departments and state agencies to clear pending bills by June 30.

On June 3, the National Treasury directed all government institutions to categorise all the pending bills into AGPO less than Sh10 million and those more than Sh10 million.

 
 

AGPO facilitates access to government procurement opportunities by youth, women and persons living with a disability.

However, inquiries by the Star have revealed that the majority of state bodies are yet to meet their obligations, as suppliers and contractors face the risk of having to close shop.

Among the companies owed are Isuzu East Africa, which is seeking  Sh980 million after supplying motor vehicles, spares and service.

The company is owed Sh730 million by the national government, mainly state departments, while counties are yet to clear Sh250 million owed to the dealer as of the end of June.

"We have not started seeing the benefits of the presidential directive yet, that is why we have these huge figures," the company told the Star.

Both the national government, counties and large corporate entities owed suppliers about Sh310 billion as of November last year.

Of these, more than Sh100 billion was owed by the national government, according to private sector data showing that only a few million have been settled.

 
 

“A few people have received some payments but we are yet to get detailed reports. However, we are waiting since it was mentioned in the budget,” Kenya Private Sector Alliance (Kepsa) CEO Carol Kariuki said on the phone on Friday.

“Parliament is deliberating the budget so all we can do is wait,” she said.

During his 2019-20 budget presentation last month, Treasury CS Henry Rotich said the ministry had reviewed pending bills as directed by the President, giving priority to Sh10.9 billion verified pending bills. They were to be paid by June 30.

A source within Treasury on Friday told The Star it is not clear how much of the pending bills have been cleared by ministries, while the private sector says little has been done

“Ministries are currently closing their books. Each ministry is paying their own pending bills, then they make a report which is yet to reach Treasury,” the source explained.

Stanbic Bank has said, however, that PMI recovered to a 10-month high in June, reflecting the upbeat sentiment from private sector firms "mainly due to the government releasing payments owed to both contractors and suppliers as well VAT refunds".

The commitment to clear private sector arrears in the FY 2019-20 outlined in the budget speech should underpin economic activity if implemented in the second half of 2019.
Stanbic economist  Jibran Qureishi

Delayed payments have given auctioneers a field day in recent times as they close on loan defaulters, who had borrowed millions from banks and other lending institutions to meet their supplying obligations.

This comes as the value of non-performing loans hit a record Sh345 billion as of March this year.

Central Bank of Kenya Governor Patrick Njoroge said one per cent of these NPLs is linked supply-related businesses.

The Independent Electoral and Boundaries Commission is among those that have come out to clarify the pending bill situation in their books.

In a statement by Chairman Wafula Wabukati, the commission indicated its total pending bills stood at Sh3.8 billion as of June, with an allocation of Sh703 million to clear some of the monies owed.

The IEBC has blamed the Treasury for reversing part of the funds meant to clear its bills.

“The National Treasury reversed all the allocations to AGPO and Non-AGPO and reallocated all the Sh500 million to legal pending bills. The implication is that the commission will not have complied with the Presidential directive,” Chebukati said in a statement dated July 1.

Atop the list of debtors is the State Department for Coordination of National Government (Sh4.52 billion), the Devolution ministry (Sh2.55 billion), the Department for Planning (Sh2.55 billion) and the Interior ministry (Sh1.8 billion).

Nairobi tops the list of counties with highest pending bills, Sh64.8 billion as of December last year, followed by Mombasa with Sh3.7 billion debts.

Others are Kisumu  (Sh2.05bn), Wajir (Sh2.6bn), Nakuru (Sh2.3bn), Meru (Sh2bn), Kwale (1.8bn), Narok (Sh1.7bn), Nyeri (Sh1.4bn), Nandi (Sh1.39bn) and Nyamira (Sh1.34bn).

Gatundu South MP Moses Kuria is pushing a bill to compel the government to pay suppliers within 30 days, move manufacturers have supported.

"It is a good idea. It will instil discipline in government payment to suppliers and improve circulation of money in the economy," Kenya Association of Manufacturers Chief Executive Phyllis Wakiaga said. 

Meanwhile, CS Rotich has affirmed the government's commitment to clearing pending bills, especially for SMEs.

We have listened carefully to their concerns which include limited access to credit, entrepreneurial skills and markets, as well as a cumbersome regulatory and working environment," he said.

The capping of interest remains a thorn in the flesh of most SMEs that continue to struggle with limited access to credit.

NPLs in the banks from the private sector totalled Sh234.5 billion in 2017, which was a 54.3 per cent increase from 2016 (which was Sh191.2 billion).

The pending bills have caused suffering to contractors and suppliers, who are threatened by auctioneers as banks seize their assets to recover loans.

"Delayed payments have substantially contributed to the high level of NPLs we have in the industry," said Jared Osoro, director research and policy at the Kenya Bankers Association.


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