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National and County Governments Owe SMEs Over 250 Billion Shillings

BY Soko Directory Team · June 4, 2019 06:06 am

Small and Medium Enterprises (SMEs) across the country are hurting and the majority of them are struggling to stay afloat due to pending payments by, large corporations, the national and county governments running into more than 310 billion shillings.

According to a report by the National Assembly’s Committee on Implementation, the National government’s pending payments to local traders stood at 32.5 billion shillings in November 2018.

However, suppliers claim that the amount owed by the government is way over 250 billion shillings.

Suppliers and SMEs say they are frustrated by the government’s failure to pay overdue bills with interest as required by law under the Public Procurement and Asset Disposal Act (2015).

The law requires that each entity that delays payment to suppliers shall incur additional charges for each day defaulted.

These cases of payment default run back to the financial year 2013/2014 when devolution was finally implemented.

According to Peter Towett, Supplies and Contractors Welfare Association chairman, the issue of pending bills became worse when county governments were introduced into the picture because they incorporated structures that were not up to date.

It has been noted that some of the biggest payment defaulters include the Ministries of Defence that owes 8.93 billion shillings, Health with 7.1 billion shillings, State Department of Interior 5.4 billion shillings, and State Department for Broadcasting and Telecommunications whose debt to local traders stands at 3.2 billion shillings.

If the amount owed by large corporate players to SMEs is factored in, that is a total of about 60 billion shillings, the cumulative amount owed to small businesses across the country adds to more than 310 billion shillings.

With lenders currently preferring to loan the government other than SMEs, the state owes suppliers an interest of more than 32.5 billion shillings.

The private sector is also frustrating the SMEs. It owes them about 67.8 billion shillings plus interest. This means that the total overdue bills are more than 350 billion shillings.

So, what does this mean for SMEs? It means no growth. Frustration and hurt. The government isn’t paying on time, the banking sector prefers large corporates and the state, while the local trader is left to fend for himself.

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It is a shame that the government remains indifferent to the plight of SMEs, yet they proudly present them as the biggest drivers of economic growth.

Apparently, all the government does is act like a media house that only reports things. It is all about discussions that are never implemented. Any promise made to the SMEs dies the same day.

Nothing is being done. The cost of production is of the roof due to inflation and power charges. Financial policies do not seem to favor the SMEs and the infrastructure is a mess!

People cry foul of unemployment, the government is ‘doing the best it can to create jobs’, both of which have amounted to no progress at all. How the government is taking the SMEs for a ride is no way to run an economy.

Job creation will only be achieved if the government addresses the majority of issues that the SMEs are facing. This would be smart policy. A policy that is dictated on where the people are, which for Kenya, is in SMEs or agriculture.

The Ministries of Finance, Trade and Industrialization, Agriculture, Energy, and Infrastructure should focus on the two areas if they want the economy to grow. It doesn’t take a fool to know that the road to the growth of a country’s GDP passes through the SMEs.

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SMEs grow, and they will attract more investors as well as capital from other payers who will, in turn, better the sector.

It all begins with supporting the SMEs and their manufacturing activities. Promoting local products and financing their brands will ensure that the value generated in various sub-sectors remain in the country, otherwise, Kenya’s GDP is bound to remain stagnant or rise marginally for many years to come.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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