BY KIPRONO KITTONY
As the Kenya National Chamber of Commerce and Industry (KNCCI), we have noted with great concern that the issue of delayed and disputed payments is presently one of the foremost risks for businesses operating in Kenya. This is highly unfortunate and must be addressed.
An estimated Sh400 billion is owed to suppliers in delayed and disputed payments by the government and private sector, according to the Association of Kenya Suppliers.
Delays in payments have left many businesses grappling with acute cash flow shortages, especially SMEs. It has also negatively impacted their credit rating.
Many businesses took loans from banks to supply goods and services on the presumption that they would service these loans upon timely receipt of payments. They are now unable to service their debt due to delayed payments, putting them at the mercy of auctioneers.
Others have also been blacklisted by commercial banks and are now compelled to get capital from the murky informal lending markets.
As a Chamber, it is our prerogative to flag issues that affect the business community and propose suitable interventions. In this respect, the prevailing poor payment culture can be corrected in two ways.
First, by increasing awareness among businesses about the legal steps they can take to retrieve their payments.
Second, by pressuring the political class to take this issue seriously, particularly now that they are keen on securing the support of the business community in the lead up to the August 8 elections.
Businesses need to make use of the Small Claims Court to settle issues of disputed and delayed payments. These courts were introduced to not only expedite the whole litigation process for civil cases such as contract enforcement, but also make litigation more affordable and accessible.
One of the main challenges in getting justice in the conventional courts is the delay occasioned by the backlog of cases. The Small Claims Court allows businesses seeking redress for delayed or disputed payments to get timely assistance.
Getting a lawyer for the conventional court, as is the legal requirement, is also costly, particularly for a business facing a cash crunch due to delayed or disputed payments.
The Small Claims Court allow for self-representation, eliminating the need for hefty legal fees associated with lawyers.
As a Chamber, we therefore appeal to our members and the broader business community to consider the Smalls Claims Court as an avenue for retrieving delayed and disputed payments.
At the same time, we would also like to remind the political leadership that they have an instrumental role to play in putting an end to the country’s poor payments culture.
Leaders seeking the support of the business community need to present a compelling case that outlines the steps they will take to ensure that suppliers are paid on time.
We need a change in procurement law in order to shorten the credit periods in private sector and public sector from the current 45 days and 90 days, respectively. Similarly, penalties need to be introduced for late payments.
It is imperative to understand that addressing this issue will benefit not just the economy, but the society as a whole. Delayed and disputed payments are presently one of the greatest enablers of corruption in private and public sector.
Because of desperation and mounting loans, some suppliers sometimes feel pressured to give kickbacks to corruptible elements in government and private sector in order to get their payments on time.
Shadowy cartels that peddle influence in procurement offices to “facilitate” suppliers’ payment in exchange for a fee are also having a field day. This is unfortunate in light of the debilitating impact of corruption on the social fabric of this country.
The direct correlation between the poor payments culture and corruption ought to act as an added incentive for the political class to take this issue seriously. As the business community, we will keenly monitor how this issue is articulated in the lead up to the polls.
We should also bear in mind that the businesses that suffer the most from delayed and disputed payments are SMEs.
This is because they generally have lower cash flows and harder access to credit than their larger counterparts. Consequently, a delay in payment can easily cripple an SME’s day to day operations.
This is unacceptable as SMEs contribute 45 per cent to GDP and employ up to 80 per cent of the work force.