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How huge pending bills are slowing economy

Pending bills is a monkey that has refused to get off the back of Kenya’s economy. It is shocking that counties owe suppliers more than Sh99 billion. To say that something has gone awry is to be mild.

What do the bills represent? These are goods and services delivered to county governments and for which they have not been paid for over a year. There are two outcomes — the knock-on effects, which the economy is now suffering, and the multiplier effects that the economy has been unable to generate.

First the knock-on effects. The pending bills have caused huge stress to the entire economy. Businesses have huge cashflow problems.

As a result, they are unable to pay their workers, suppliers, pay rent, and other expenses. The economy continues to suffer a cashflow crunch. Simply, there is no cash in the economy. Many businesses have, consequently, closed down.

The Kenya Revenue Authority (KRA) has seen its collections tumble as business are unable to pay their dues. Banks have been forced to auction businesses to recover their money, even as the bad and doubtful debt portfolio grows on the back of the failure by county governments to pay their suppliers.

The worst hit businesses are small and medium enterprises (SMEs), who are poorly capitalised and have little breathing space. The biggest irony is that the national government has emphasized that SMEs are the future of the economy. How can they ever be that future if they don’t get paid for the goods and services they deliver?

The government needs to deal with this matter as a national crisis, not simply criticise counties as a disinterested bystander. Further, the government must accept that it is part of the problem.

When it delays allocations to counties, the counties are justified when they argue that they cannot pay because they lack funds. The country continues to suffer adversely as long as this money is not paid.

The economy should be reaping the multiplier effects of the money. When the suppliers are paid, they pay their fellow suppliers, pay rent, employ more people etc. The owners of these businesses are also consumers who make personal purchases whether of vehicles, clothes, schools fees, travel etc.

Picture the explosion of money moving all over the economy as businesses in the country receive Sh99 billion! Most counties have decided to adopt a defeatist stance of blaming their predecessors for “the mess”.

This is disingenuous. Counties are going concerns, and the new governors must know that they inherited the assets as well as the liabilities. Indeed, their residents voted them into office to sort out just these messes. They cannot now fold their arms and point their fingers at their predecessors as an excuse to refuse to pay pending bills.

Strange, even those who were re-elected are offering the same excuses as their new colleagues. Some counties have already moved to address pending bills. Nairobi county seems to have made the most determined step to deal with the problem.

Governor Mike Sonko has constituted an independent verification committee to deal with all pending bills. Indeed, the exercise might see pending bills slashed by a huge margin as those whose claims are suspect might not want to push their case through a committee that does not have the benefit of the original “deal”.

The committee is already at work and completes receiving claims at the end of April. On a more positive note, some claims are said to have been verified by the committee and settled!

The other counties might want to borrow a leaf from this approach. They must because bills are not going to go away, and the counties will be fighting a battle of attrition every day with furious suppliers.

These suppliers are fighting for their very lives, make no mistake! The issue of pending bills must be dealt with as a governance and financial management crisis in Kenya. First, streamline procurement so that suspicious tenders are not awarded.

Tenders should not be awarded when they are not covered by funding. Secondly, streamline payments. Once the goods and services delivered have been certified and the invoice received, the process should then be automatic.

This will remove all human interaction, which springs up all manner of delays as accountants frustrate business owners as a means of motivating inducements, as well as make the process time-bound and predictable. Suppliers inflate costs when supplying to governments to factor in financing costs of the long payment delays.

All other government services have gone digital. Why are government payments services still being handled manually? Finally, whatever happened to the bill that was supposed to be introduced to Parliament to provide for interest on delayed payments?

This needs to be passed into law, and the person who is found responsible for such delays to be surcharged. This will remove the shenanigans that have paralysed payments both at national and county governments. [email protected]

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