Is the government a bad customer?

Tenders are losing the appeal they had to traders due to endless debt

In Summary

• Dealing with government has left a trail of business closures, misery and suicide

Central Bank of Kenya headquarters building along Haile Selassie avenue in Nairobi.
Central Bank of Kenya headquarters building along Haile Selassie avenue in Nairobi.
Image: FILE

With the national and county governments taking rather long to pay suppliers and contractors, entrepreneurs across the country are wondering whether bidding for government tenders is worth the trouble.

The problem of late payments afflicts state corporations, universities, hospitals and other government bodies. Business persons who have dealt with these entities say payment takes years to come and, in some cases, procurement officers demand bribes before approving payment. Suppliers lament that the bribes can plunge their businesses into losses even when payments are finally received.

In November 2023, President William Ruto admitted that the national government owed small and medium-sized enterprises at least Sh600 billion. Paying businesses on time, the President said, will stimulate economic revival.

In 2022, Auditor-General Nancy Gathungu reprimanded the heads of ministries, departments and state corporations for committing their organisations to procurement contracts without the money to pay for them. The Auditor-General termed the non-payment of pending bills a crime.

So big is the problem that it comes up in everyday conversation among the business class. There are lots of stories of previously successful businesses closing down because of not getting paid for delivering goods or services to the government. There are tragic stories of entrepreneurs who cannot afford medical treatment because they are yet to be paid for work done. A few cases of suicide have been reported.

The government is the largest single employer and the biggest source of demand for goods and services. It is natural for any business to desire such a big customer, but with fears of not getting paid, will government tenders attract credible enterprises in future?

Some of the more common pieces of advice these days include:

“Do business with government at your own risk!”

“Don’t take loans to carry out government contracts.”

“Invest only the money you can afford to lose just in case you don’t get paid.”

Pundits blame the delayed payments on the lack of a legally mandated deadline within which suppliers must be paid. Accounting officers do not get penalised for delaying contractor payments.

On the other hand, accounting officers must ensure they are paying genuine suppliers, and verifying procurement documents takes a lot of time. Paying fraudsters for fake deliveries could result in criminal charges on whoever authorised the payments.

The time may very well come when the only bidders for government tenders will be the so-called tenderpreneurs. These are people within or outside government who abuse their political connections to secure tenders at the expense of better-qualified suppliers.

Tenderpreneurship is characterised by poor service delivery and shoddy work on publicly funded projects. The rising dominance of tenderpreneurs harms the economy because tenderpreneurship locks out legitimate businesses from government procurement opportunities.

What next for the business community? Is it worth the trouble bidding for national and county government tenders? There is no right or wrong answer. As many experienced business people have advised, don’t put all your money into the venture, and neither should you take expensive loans to execute a tender.

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