KNCCI PUSHES FOR REVIEW OF PUBLIC FINANCE MANAGEMENT ACT 2015 TO UNLOCK SUPPLIER PAYMENTS

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KNCCI PUSHES FOR REVIEW OF PUBLIC FINANCE MANAGEMENT ACT 2015 TO UNLOCK SUPPLIER PAYMENTS

The Kenya National Chamber of Commerce and Industry has today held a Public Private dialogue forum in Nairobi with the aim of addressing its advocacy agenda which looks into two main issues including: delayed payments to suppliers and inter-county multiple licenses in counties.

Speaking at the event KNCCI President Kiprono Kittony asked treasury to quickly review the Public Finance Management Act 2015 and Public Procurement and Disposal Act, 2015 so as to unlock pending payments owed to small businesses by the county and national governments.

“Small businesses continue to suffer under the heavy weight of non-payment or delayed payment that has seen numerous enterprises suffer immense cash flow problems that have led to businesses collapsing, family breakups and general hopelessness amongst small enterprises” Said Mr. Kiprono Kittony, President Kenya National Chamber of Commerce and Industry.

The Chamber has requested the Treasury a review to the PFM Act 2015 and PPD Act 2015 so as to allow:

  • Prompt payment of the full contractual sum upon satisfactory supply of goods and services and invoicing within 30 days or maximum 60 days. In addition, the Act should provide for interest payable upon the expiration of the due date;
  • Make it a mandatory requirement for government for provision of payment of suppliers in the cash flow plans and quarterly transfers/disbursement from National Treasury in each quarter during the financial year.
  • Provide for the national treasury to establish a taskforce to audit and review all pending bills at national and county level. The taskforce should be mandated to also recommend short and medium-term measures for reducing the pending bills and completion of all payments pending for more than two years before end of 2019.

“Under section 146 and 147 of the Public Procurement and Disposal Act, advance payment is only permitted under exceptional circumstances. This limits the government agencies ability to pay suppliers commitment fees, which is capped at not more than 20% of the contract sum. Non-payment of advance payment reduces business’s cash flow and working capital where government delays payment of the contract sum upon completion of the contract.  Therefore, most businesses rely on banks to finance delivery of the contracts,” Kittony added.

Speaking at the same event Principal Secretary Ministry of Trade Industry and Cooperatives, State Department of Industrialization Betty Maina acknowledged that the two issues highlighted by the Chamber continued to be a major Impediment to doing business especially for SMEs. Ms Betty said the government has been working on requisite policy that will not only allow for faster payments for SMEs from both national and county governments but also from large corporates and non-governmental organizations.

“On the issue of multiple licenses the national treasury remains the main reference for county governments and laws should not in any way be a barrier to trade. This said we are aware that many counties have laws that go against this directive,” said PS Betty Maina.

Nonpayment by government to suppliers of goods and services has impeded business operations and growth among the suppliers. This has also had ripple effects such as increasing nonperforming bank loan portfolio as well as business closures. By adopting the proposed policy measures, the government will enhance business to government business relationship and increase private sector participation in supplying goods and services to government.

Additional notes

As at 30th June 2018, both the national and county governments owed suppliers Ksh. 128.88 billion. This has led to among other things the rise in non-performing loans portfolio from Ksh. 191.2 billion to Ksh. 234.5 billion in 2017 a factor that the Central bank is attributing to Delayed payments or non-payment of suppliers by both public and private sectors.

High pending bills are a main contributor to slow growth in the GDP, which was 4.90% as at 2017.  the total pending bill of Ksh. 128.88 billion, is 2.86% of the real GDP prices (which is estimated to be Ksh. 4.510 trillion. This implies that Ksh. 128.88 billion is not being utilized into productive economic activities by business since government holds that amount of money.

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