Payment of pending bills will revamp businesses

Thursday, September 26th, 2019 00:00 |
President Uhuru Kenyatta. Photo/Courtesy

Richard Ngatia

President Uhuru Kenyatta recently signed into law the Division of Revenue Bill, paving way for the disbursement of Sh50 billion to counties.

This will allow devolved units to settle pending bills and, by extension, resuscitate regional economies. 

Small and Medium Enterprises (SMEs) owed by counties have been the hardest hit, occasioning unprecedented level of business closures and loss of jobs.

The reciprocal effect of the disbursement is that there will be more cash flow in the market to boost the economy, revamp tax revenue collection and create jobs.

Also, settling the arrears will restore market liquidity, build investor confidence, enhance private sector activity by unlocking stalled businesses and increase overall spending and business activity in our economy.

With massive market activities, the government revenue will also increase raised from the statutory remittances to the Kenya Revenue Authority thus creating a self-reliant economy. 

In July, the National Treasury released Sh10.4 billion owed to creditors as pending bills by the National government, consequently helping struggling businesses to remain afloat. 

Similarly, on June 1 during celebrations to mark the 56th Madaraka Day, the President directed ministries, State departments and agencies to settle all pending bills that have no audit queries by end of the financial year ended June 30.

The Kenya National Chamber of Commerce and Industry last year’s policy brief dubbed “Enhancing Commitment to Contractual Obligations by Government in Payment of Suppliers”, highlighted that SMEs, which constitute majority of chamber membership, were worst hit by  bulging pending bills, which affected their liquidity, operations and workers job security. 

KNCCI initiated dialogue with the government on how best to address the issue of pending bills and true to its word, the government prioritised the payments.

It is noteworthy, however, to realise the delays had occasioned economic slowdown due to as a result of profit decline and weakened economic growth which is now set to be revamped by the injection of capital. 

According to a World Bank Economic Update released in April, the total value of pending bills is estimated to have grown from 0.9 per cent of Kenya’s GDP in the 2015/16 financial year to 1.6 per cent over the 2017/18 fiscal year.

With Kenya’s GDP estimated at Sh8.59 trillion in 2018, in effect, the value of cash owed to companies rose up to Sh14.33 billion projecting a significant growth compared to 2016 when the GDP was valued at Sh7.19 trillion and pending government bills stood at Sh6.38 billion.

Prompt payment of creditors helps to promote the local industry and enterprise given that the government is the largest single consumer entity of goods and services in the economy. 

Indisputably, this will on the other hand enhance the ease of doing business in the country and at the same time ensure investors’ capital, bulk or otherwise is not locked in non-payment. 

It is the chamber’s commitment to support all efforts aimed improving the business environment to build a formidable economy. The writer is the President of Kenya National Chamber of Commerce and Industry 

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