Civil servants and company bosses face five years in jail for not paying suppliers within 90 days if a proposed law before Parliament is passed.
The Prompt Payments Bill was passed in the Senate last December and submitted to the National Assembly for concurrence.
The Bill proposes that payments to suppliers must be made on the date when it is due under the terms of any written contract for the supply of goods or services.
The Bill, sponsored by senators Johnson Sakaja (Nairobi) and Farhiya Ali (Nominated), seeks to make it a criminal offence for accounting officers to fail to make payment to suppliers for goods or services rendered within reasonable time.
The lawmakers are proposing that interest should be paid on such payments, in case of a delay, and such accounting officers should be fined Sh5 million if convicted, or face a jail term of five years, or both.
Settlement of bills
The Prompt Payments Bill, 2021, seeks to put in place a legal framework to facilitate quick settlement of bills.
If enacted, the law will apply to payment due for all goods, works, and services procured by the national government, county governments and private entities.
“A procuring entity who fails to pay a supplier by the prescribed payment date shall, unless otherwise agreed to, pay an interest to the supplier on the amount due under the contract for the supply of goods, works, or services,” the Bill states.
The Bill is seen as an attempt by the two lawmakers to address the perennial problem of pending bills that has dogged the two levels of government.
Even though President Kenyatta issued a directive in June 2019 to ministries and government agencies to clear all eligible pending bills amounting to Sh450 billion, little has been achieved and pending bills remain a major challenge to the economy.
The Kenya Institute of Public Policy Research Analysis (Kippra) has in its report on pending bills noted that dealings between the government and private sector is characterised by prevalence of pending bills.
Data from the 2018 World Bank Enterprise Survey shows that the government has many pending bills, with about 12 per cent of the firms surveyed reporting that they had contracts with the government which were late for payment.
Pending bills
The World Bank report on the state of Kenya’s economy indicates that the total value of pending bills had increased exponentially, from 0.9 per cent of GDP in the 2015/16 financial year to 1.6 per cent in the 2017/18 financial year.
Where there is no written contract or the written contract does not provide for the date of payment, the Bill proposes that such payments must be made within 90 days.
A procuring entity which fails to pay a supplier by the prescribed payment date shall pay an interest on the amount due.
The interest shall be calculated for the period beginning on the day after the prescribed payment date and ending on the date on which the payment of the amount due is made.
“An interest shall not be waived by the supplier, and shall be included with the amount due for the supply of goods or services without demand for its payment being made by the supplier,” section 4 of the Bill says.
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