Government is pushing suppliers to the willing clutches of shylocks

The best thing that can come out of the 12th Parliament is to approve the amendment to the Public Procurement and Asset Disposal Act sponsored by Gatundu South MP Moses Kuria.

The amendment seeks to ensure that the youth, women and people living with disabilities who are government suppliers are paid within 30 days of delivering. For the rest, the amendment puts a 90-day payment cap.

VIRTUOUS CYCLE

If the MPs pass this amendment – and most people of goodwill hope they do – I will forgive them all their past, present and future sins.

Indeed, I will cut them some slack for their remaining tenure. As someone who had joined the MPs-are-greedy bandwagon, I will publicly disavow the sentiments of those who have called them all manner of names in the past, such as layabouts, ne’er do wells, leeches and such.

As for Mr Kuria, the coming into effect of this amendment will reinvent him as the man we all knew before he ventured into politics: An economist with a good grasp of what turns the wheels of the economy and, indeed knows that when we talk of trickle-down economics, the government holds the ace in ensuring that the people’s welfare is well taken off.

This Bill will put the country back on a recovery path. It will ensure that money gets back into circulation. People will have more money to spend, pushing demand for goods and services, leading to more job creation – and the virtuous cycle continues.

My only wish is that this Amendment is extended to the private sector as well since some are silent accomplices in this. The private sector has argued – and convincingly so – that when the government, being the largest consumer by far, delays payments, it affects everybody in the country.

POST-DATED CHEQUES

Delaying payments to suppliers chokes the very life out of them. The government is pushing suppliers to the jaws of poverty and into the willing clutches of shylocks.

Whenever these small and medium enterprises get their miserable post-dated cheques, they immediately cash them at usurious rates with shylocks and other downtown unregulated financial institutions that are worse than armed gangsters. It is a disaster that this amendment will deal with in one fell swoop.

No less a figure than the Comptroller of Budget Agnes Odhiambo has pointed out that county governments owe suppliers Shs108 billion. Yes, that’s right, Shs108 billion. This is completely unacceptable.

Many suppliers to government – both county and central – source whatever they supply from other suppliers. They need to settle their dues to these suppliers. They have workers to pay. They have bills to pay. They have taxes to pay, some of which, like VAT, are payable in advance as long as an invoice has been issued, whether payment has been received or not. Therefore, a delayed payment means that the domino effect devastates multiple people and leads to a general slowdown in the economy.

It might sound like some fishy economics but basic permutation dictates that the delayed payment quoted by the Comptroller, at Sh180 million, might as well have a real impact of half a trillion shillings, or more.

NATIONAL CRISIS

Add the hundreds of billions that some private sector players are guilty of delaying and we have in our hands a national crisis.

I know someone whose payment has not been processed for the last five years by a leading, national institution. The effect on his business is now showing: banks are shying away from extending credit to him; suppliers too are keeping a wide berth. And this is someone who employs close to 200 people.

This is a business that is on the brink of closure, leading to a loss of employment of more than 200 souls. It is an established fact that for every Kenyan who is employed, he or she has at least five dependents. We are facing a crisis of unemployment and poverty of unprecedented proportions. For every business closed, the impact extends far beyond what we can see.

These payment delays have also spawned an unexpected problem: Government suppliers are factoring in the expected delays by substantially increasing the price of whatever they are supplying, sometimes as much as double the market price.

At a time when the government should be worrying about cutting expenditure to manage the ballooning public debt, paying suppliers on time is a low hanging fruit: It will lead to a massive drop in prices of goods and services supplied to it.

All government Local Supply Orders are supposed to be backed up by Treasury allocation. You can’t supply something that has not been budgeted for and funds set aside for it. Tragically, this is not the case in reality.

Mr Mureithi is a communications consultant; [email protected]