Small and Medium-sized enterprises (SMEs) that have been going through financial tribulations as a result of delayed payments from those they supply their goods and services to will soon have a reason to smile if the proposed Procurement and Disposal Act 2015 is passed and enacted.
The Act will require all entities that delay payments to suppliers to incur additional charges for each day that is defaulted.
This implies that companies that have been known to delay payments to their suppliers, will be liable to stiff commercial interest rate on the overdue amounts. This is in the new procurement law that is being prepared by the National Treasury.
Most suppliers of goods and services to most of the entities are the SMEs who have had to endure the endless suffering of having to operate without money due to delayed payments. Some SMEs have had to close down for lack of capital to operate as a result of this. This is, however, prone to be a thing of the past as the team at the treasury prepares fresh regulations that will define the penalties as well as timeframe within which the payments must be made.
According the Section 140 of the Act, the procuring entity shall pay interest on the overdue amounts…the interest and liquidated damages to be paid shall be in accordance with the prevailing mean commercial lending rate as determined by Central Bank of Kenya….
In February 2011, 28 members of the European Union Bloc adopted a directive that provided that public agencies to pay for goods and services within 30 days and private enterprises to pay within 60 days failure of which attracts interests that are pegged at eight percent above the European Central Bank’s reference rate and Kenya is following closely.
Article by Juma Fred.