Treasury cuts suppliers’ debt by Sh133bn in bid to save SMEs from auctions

The Treasury Wednesday announced it had reduced pending bills by nearly 90 percent, offering relief to suppliers and contractors that have been the target of auctioneers.

Treasury Secretary Ukur Yatani said the pending bills had dropped from Sh152 billion to Sh18.71 billion over the past 18 months in a speedy payment scheme aimed at improving the fortunes of small businesses and easing a cash crunch across all sectors.

Frequent delays in those payments have been blamed for the financial troubles of small businesses and job losses.

The late payments were in turn hitting the financial sector, where non-performing loans in 2018 had jumped to their highest level in more than a decade.

Of the Sh152 billion pending bills, about Sh87.3 billion were categorised as suspect and lacked evidence to show goods and services offered to government, leaving the ministries and counties to settle Sh46 billion.

“The amount of eligible pending bills paid as at March 6, 2020 is Sh32.9 billion, leaving an outstanding balance of Sh18.34 billion,” said Mr Yatani in reference to unpaid bills by the counties.

“Of the eligible bills amounting to Sh13.5 billion, a total of sh13.1 billion has been paid by various ministries, departments and agencies. The national government departments are in the process of settling the remaining Sh370 million.”

Pending bill claims worth about Sh49.6 billion, linked to counties, were considered fake or backed with doctored invoices while the authenticity of supplies estimated at Sh37.7 billion to the national government were questionable.

Many small and medium-sized businesses in Kenya bid for government contracts because the State is the biggest spender in the country. But some have found the financial pain that comes with delayed payments on everything from PR campaigns to supplies of construction materials too much to bear. A number of business people who have contracts with the national government and county governments have found themselves blacklisted by credit reference bureaux after falling behind on loan repayments or defaulting.

Central Bank of Kenya (CBK) Governor Patrick Njoroge had earlier indicated that delayed payments to suppliers, the bulk contracted by the government, made up 10 percent of the total volume of bad loans.

The government has backed new regulations requiring payments be made within 60 days of goods or services being supplied

Mr Yatani said 17 county governments had cleared their pending bills. This came after the Treasury last year issued an order to stop releasing funds to scores of counties until they started paying billions of shillings owed to their suppliers.

Speedy payments of the pending bills is part of a multi-billion shilling economic stimulus package to jump-start the economy and shore up the amount of cash in Kenyans’ pockets that had late year dropped to a five-year low.