Long delays in paying suppliers pose a major threat to economy

As the Kenya National Chamber of Commerce and Industry, we are greatly concerned about the impact of delayed and disputed payments on businesses.

This is highly unfortunate and must be addressed.

Nearly Sh400 billion is owed to suppliers by the government and the private sector, according to the Association of Kenya Suppliers.

Delays in payments have left many businesses grappling with acute cash flow shortages, especially SMEs.

It has also negatively impacted their credit rating.

BANK LOANS
Many businesses have borrowed from banks to supply goods and services on the presumption that they will service these loans upon timely receipt of payments.

They are now unable to service their debts, putting them at the mercy of auctioneers.

Others have also been blacklisted by banks and are now compelled to get capital from the murky informal lenders.

It is our prerogative as the chamber to flag issues that affect the business community and seek suitable interventions.

SOLUTIONS

The poor payment culture can be corrected in two ways.

Firstly, by increasing awareness among businesses about the legal steps they can take.

Secondly, by pressurising the political class to take this issue seriously, particularly now that they are keen on securing the support of the business community in the August 8 elections.

Businesses need to make use of the Small Claims Court (SCC) to settle disputed and delayed payments.

ADDRESSING DISPUTES

These courts were introduced to not only expedite litigation for civil cases such as contract enforcement, but also to make it more affordable and accessible.

One of the main challenges in getting justice in the conventional courts is the delay occasioned by the backlog of cases.

The SCC enables businesses seeking redress to get assistance.

Getting a lawyer for the conventional court is also costly, particularly for a business facing a cash crunch due to delayed or disputed payments.

LEGAL FEES
The SCC allows self-representation, eliminating the need for hefty legal fees.

We appeal to our members and the broader business community to consider the SCC as an avenue for retrieving payments.

The political leadership has a key role to play in ending the poor payments culture.

Leaders seeking the support of the business community need to present a compelling case that outlines the steps they will take to ensure that suppliers are paid on time.

PROCUREMENT LAW

We need a change in procurement law to shorten the credit periods in private and public sectors from the current 45 days and 90 days, respectively.

Similarly, penalties need to be introduced for late payments.

Addressing this issue will benefit the economy and the society.

Delayed and disputed payments are one of the greatest enablers of corruption.

CORRUPTION

Because of desperation and mounting loans, suppliers sometimes give kickbacks to corrupt people in government and the private sector in order to get their payments.

Cartels that peddle influence in procurement offices to “facilitate” suppliers’ payment in exchange for a fee are also having a field day.

This is unfortunate in light of the debilitating impact of corruption.

The direct correlation between the poor payments culture and corruption ought to act as an added incentive for the political class to take this issue seriously.

EMPLOYMENT

As the business community, we will keenly monitor how this issue is articulated in the lead-up to the elections.

We should not forget that the businesses that suffer the most from delayed and disputed payments are SMEs.

This is because they generally have lower cash flows and harder access to credit than their larger counterparts.

A delay in payment can easily cripple an SME’s operations.

This is unacceptable, as SMEs contribute 45 per cent to the GDP and employ up to 80 per cent of the work force.

Mr Kittony is the national chairman of the Kenya National Chamber of Commerce and Industry. [email protected]