Private sector is not happy. It’s because it has supplied the government with services, but the government does not want to pay. Some in the private sector are complaining that they are yet to receive payments for services rendered way back in 2014. That’s five years ago. And this is why that hurts:
As a private business man or women, you apply for a government tender. You win. You spend shs 1 million to provide the service. Money you did not have in the first place. Where did you get it from? LPO financing. That comes with a huge interest. But you don’t really mind as the quotation includes decent margin that will take care of the bank’s interest demand.
The bank loans you the money, you deliver the service, and after 30 days, or 60, the bank wants its money back. You don’t have any money to give the bank, reason? The government is yet to pay you. Since you do not want to be in the bank’s bad books, you figure out a way to pay the bank it’s shs 1.2 million, making you broke. By paying the bank, you drain all your cash reserves, get into family debt. Maybe a friend or two who sympathise with your situation also become your creditor. Months pass by with no signs of you ever getting paid. In the meantime, your business is going down – fast. At some point you close shop, retreat to your rural home if you have one, lonely, and depressed.
The situation described above is something many in the private sector who have done business with the government since 2013 have gone through. Those hit the hardest are the ones who have done business with the county governments. I personally know a friend who had to right off a shs 5 million debt Kericho County owed him. This tweet and replies therein speaks of someone who delivered services to the government in 2014 and is yet to be paid.
I don't understand how Uhuru Kenyatta and William Ruto wake up every day and preach "The Big Four" when their own governments do not pay in time for services they go procuring from SMEs around the country. You invest up to 50% of the LPO to provide service and they don't pay.
— The Sauce Daddy (@mwabilimwagodi) October 8, 2019
In his June 1st 2019 Madaraka Day speech, President Uhuru Kenyatta issued a directive that all ministries and county government pay all pending bills that had run into billions of shillings – actually over shs 400 billion in pending bills. This directive was not fully honored, mostly because at the time of issuing the directive, the government was already broke. The government was so broke that to start off the 2019/2020 financial year, it had to borrow shs 80 billion through T-Bills in order to finance the first month’s operations. Hardly four months after the directive was issued, we are at a situation where the majority in the private sector are again complaining of the government not being able to pay them for services already delivered.
Why is the government always slow in paying its bills? Most of the time forcing it to accumulate bills after bills to a point it is practically unable to pay them? Is it because it is slow in tax collection? Does it even realise that the more it doesn’t pay those bills the more it squeezes revenue flows in the private sector, hence further hampering its ability to collect taxes?
Of course at the treasury we have well read well informed finance experts, economists, accountants, and generally those who excelled in commerce education. The very people who can’t figure out the best way to honor private sector bills, most definitely it is because they condone corruption. A number of county governments do not want to pay their pending bills because the contractors did not include a cut for the governor and his henchmen. At the national level the story is replicated. What’s the solution?
I suggest the Private Sector through Private Sector Alliance to call for a go slow where they boycott doing business with the government, and they should start by refusing to deliver services to State House.
See also: Healthy Government Spending and Stable Private Sector to dictate GDP growth to 6.3%
