Proposals to amend the law and impose a fine of up to Sh10 million on public and private firms that failed to pay suppliers within agreed timelines are proper and could save many businesses from financial distress.
According to the proposed changes to the Competition Act 2010, the heads of the defaulting firms could also be committed to a maximum jail term of five years if found guilty, in addition to paying the steep fine.
These proposals are timely coming at a time when suppliers across the country are increasingly being subjected to delayed payments for their goods and services.
Some of the payments for pending bills won’t come through for months or even years, which is bad for business because it locks up capital for suppliers, pushing them into untold financial distress.
The situation is further aggravated by an impeded access to credit by suppliers following the enforcement of ceilings on loan charges.
This situation has crippled cash flow for many businesses, with many small ones going burst.
It is only proper that firms pay for supplies made to them for the sake of business continuity and growth of the overall economy. A persistent rise in pending bills chokes the economy by limiting liquidity flow and profitability of firms doing business with the State or private sector.
The value of the pending bills isn’t small as reflected by the agony facing businesses. According to the Controller of the Budget (CoB) data, the 47 counties alone had by end of the last financial year, in June 2018, accumulated Sh108.41 billion claims from contractors and suppliers, which was a sharp rise from the previous year’s Sh35.84 billion.
Regrettably, some of the delayed payments stemmed from corruption by phony officers who used it as a bait to squeeze bribes from desperate suppliers.
The bribery tales coming from some of the counties are especially painful in that small suppliers ended up without profit because of kickbacks paid to some accounting officers.
This kind of rot must stop. Any firm that orders for supplies should pay up on time as per the contract terms. Any variations to the payment schedule must justified and endorsed by both parties.