Suppliers' hopes dashed as State breaks pending bills promise

pending bills postponed yellow card

The Association of Public Sector General Suppliers says that there are yet to see the results of the audit process that President William Ruto's administration ordered in November 2023.

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Suppliers of goods and services are entering the New Year with dashed hopes after the State failed to clear pending bills running into billions of shillings despite a year-long audit process.

The Association of Public Sector General Suppliers, an entity that brings together over 4,000 suppliers to national and county governments, says they are yet to see the results of an audit process that President William Ruto's administration ordered in November 2023.

Instead, pending bills have continued to pile up, triggering agony, debt defaults, and auctions for many suppliers who had tapped bank loans to supply government.

Treasury data showed the national government’s pending bills stood at Sh528.4 billion at the end of September 2024, marking an uptick from Sh486.9 billion at the end of March this year.

The rise points to the sticky problem of settling the bills despite the pending bills verification committee that the State inaugurated in November last year to audit debts accrued between 2005 and 2022. The State was then supposed to settle the verified amount.

The State had promised to allocate money in the supplementary budget to clear pending bills but reneged on this, even after the first phase of audit verified Sh110 billion for the State to pay.

However, the year has closed with pending bills bulging, an indication of defaults in newer suppliers to the State.

'Running away from poor budgeting processes'

Simon Gichuki, Secretary-General of the Association of Public Sector General Suppliers, told Business Daily that the association believes the State is only using the committee to run away from the poor budgeting and procurement process. He reckons that for as long as there is non-liability on the accounting officers in charge of procurement, the problem will persist.

“The big problem at hand is over-budgeting and lack of legal liability on the officers in charge of procurement. These officers can fail to honor LSOs (local service order) and get away with it.  We need to stop hiding behind the government of Kenya when dealing with pending bills,” said Mr Gichuki.

“After the pending bills audit, the next big question is will they pay? And for as long as we don’t see that allocation in the budget, the answer is obvious. What really is the end goal of auditing?”

He said the same problem extends to counties where governors have been forming pending bills verification committees to audit debts.

Pending bills are part of the reason loan defaults in the banking sector are soaring, making lenders reluctant to cut interest rates in such an environment. Mr Gichuki says he fully understands the banks’ situation.

“Defaults are high because LSO should be a respected document. A lot of businesses rely on loans so once we are not able to pay on time because our LSOs have not been respected, defaults rise. Banks are losing on two fronts because they not only give us loans but also give us bid bonds,” said Mr Gichuki.

A bid bond guarantees compensation to the bond owner if the bidder fails to begin a project. Mr Gichuki explains that delayed payment often means the loan is not enough to honor the next project and that hits banks with compensation claims.

He said, that even with piling pending bills, most suppliers are caught in a catch-22 situation given that the government is the single biggest and consistent customer.

“Government is the biggest buyer of many private sector institutions in Kenya. So as private institutions, we can’t say we will stop supplying to the government, because who else will we supply consistently?” said Mr Gichuki. 


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