Contractors face auction as counties refuse to pay debts

Mr Patrick Miano Kabugi is not looking forward to the end of January like many usually do.

In the pile of voluminous documents he has is a notice and a poster, both of which state that on January 31, the land where six of his relatives are buried will be up for sale because he is unable to pay a loan he secured using its title deed.

His firm, Gikore Contractors, landed a deal to put up classrooms at Mathaithi Secondary School in Mathira seven years ago. He has been chasing the payment of Sh18.3 million for the past five years.

On Wednesday, Mr Miano, who looked disturbed by the turn of events, showed the Nation documents tracing his five-year struggle to recover the debt owed to him by the Ministry of Education and Technology.

The most recent communication is a letter signed by the Mathira sub-county public works officer, a Mr A G Gathara, and addressed to the principal secretary in the Ministry of Education.

Mr Gathara states that the contractor successfully completed the project and his payment should therefore be fast-tracked.

FINANCIAL EMBARRASSMENT

“The contractor is on the verge of suffering financial embarrassment with his creditors,” says Mr Gathara in the December 5 letter. “This office has all the relevant documents to show that the service was rendered and it is my duty to request the payment due to be honoured without further delay.”

Among the letters in his pile of documents is one from the ministry acknowledging receipt of his demand letter, but there has been nothing to suggest that the money will be coming soon.

Mr Miano is among contractors whose work has stopped and businesses put on hold as the national and county governments hold on to their money.

The backlog of payments due to them could cause a crisis in the future, with the Treasury acknowledging the problem but limiting its concern to the devolved governments.

BAD LOANS

In a draft of the Budget Policy Statement published for the public and interested parties to comment, the Treasury says that, based on reports from the Controller of Budget and the Auditor-General, the pending payments are a problem.

“These expenditure arrears have the potential of undermining budget execution in subsequent financial years,” Treasury says in the statement. “Moreover, non-payment of suppliers and contractors adversely affects other sectors of the economy, like the financial sector, by increasing non-performing loans.”

In her latest report on the spending in counties, which was for the 2016/17 financial year, Controller of Budget Agnes Odhiambo lists 43 counties she says have accumulated pending bills of Sh35.84 billion.

PENDING BILLS

Of the remaining four, Machakos, Mandera and Nairobi had not submitted the status of pending bills by the time she put together the report for submission to Parliament.

Mombasa (Sh3.95 billion), Turkana (Sh2.9 billion), Nakuru (Sh2.8 billion) and Kisumu (Sh1.8 billion) at the time had the highest pending bills. Only Kitui County reported nil pending bills as at June last year.

But the Sh35.84 billion counties owed as at June 2017, about seven months ago and close to the time some governors left office, is dwarfed by the Sh60 billion that the Nairobi County Government says it owes.

The amount was revealed in a suit that Governor Mike Sonko has filed, asking the High Court to allow the stoppage of payments until all the bills are audited.