Suppliers want State to pay interest on delayed payments

Suppliers want to charge the Government to pay interest for delayed payments after delivery of goods and services, broadly known as pending bills.

President Uhuru Kenyatta chats with Vimal Shah (left) CEO of Bidco after the 4th Kepsa meeting of Presidential roundtable on Thursday at State House. [PHOTO: EDWARD KIPLIMO/STANDARD]

Kenya Private Sector Alliance chairman Dennis Awori presented a memorandum on late settlements after procurement by the Government to President Uhuru Kenyatta on Thursday. Levying interest on late payments would cushion suppliers against the high cost of funds, Kepsa said, especially where the capital utilised by the suppliers is money borrowed from commercial banks.

"We should have in place regulations that spell out how public sector clients are made to pay for delayed payments to suppliers, specifically how interest could be charged on delays in settlements," Ambassador Awori said to cheers from his fellow business leaders.

He is a former envoy to Japan and South Korea, and now the chairman of Kenya Airways and Toyota Kenya, two of the biggest players in Kenya's transport sector.

It is the first time that private sector suppliers are mulling over charging the government interest on pending bills, some running over into subsequent financial years. At the close of the last financial year, for instance, suppliers were collectively owed Sh112 billion by the State for goods and services already delivered.

It is also in the same year when the construction of several roads in and out of Nairobi was delayed, with the contractors citing that they had not been paid for work already done. Most of the suppliers were in the road infrastructure development, a factor that would cascade into several other sectors from labour through unpaid wages, cement manufacturers and even petroleum products.

So high were the pending bills then that the Controller of Budget Agnes Odhiambo warned that private businesses were suffering from the soaring debts. The high pending bills will negatively affect businesses and implementation of planned activities, Ms Odhiambo told the National Assembly in her report that highlights the levels of public indebtedness to the private sector.

In the meeting attended by over 500 business leaders, it became clear that the problem of delayed payments extended beyond the public sector with new proposals that would make it costly among hesitant creditors. Awori asked for the intervention of the President in creating a regulatory environment that would make late payments costly within the law.

"...that the Competition Authority of Kenya be empowered to help deal with private businesses that delay payments to their suppliers," Mr Awori said after the close-door round-table.

Mr Kenyatta taunted the private sector players to start with clean up and promptly settle payments among themselves, through a their own framework before asking the State to pay interest on delayed debt settlements.

Among the other requests presented by Kepsa at the meeting was further simplification of the taxation process which the umbrella body claimed was impossible to be in compliance with. "To comply (with taxation matters) seems to be an impossible task," the lobby said.

Several firms are locked in a fierce battle with the Kenya Revenue Authority over what should be the fair corporate taxes, prompting wrangles that have often played out in the judicial system for years.

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