State owes SMEs an economic stimulus

Research by the World Bank suggests that pending bills owedto government contractors amount to about 1.6 per cent of total output (GDP) in the 2017/18 fiscal year. That was an increase of 0.7 percentage points (or some Sh60 billion) from the previous year. In other words, the government of Kenya, is limiting the potential multiplier effect of public expenditures. This is a travesty.

The government’s deliberate effort to strangle contractors should also be understood in the context of the rate cap law, which has shrunk bank lending to small and medium enterprises (SMEs). In other words, businesses have been hit by the problem of a government that seldom pays on time, and a banking sector that would rather lend to the government and larger firms than take risk with entrepreneurs.