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Pay school suppliers promptly for quick economic recovery

SCHOOLDESK

School desks on Outering Road in Nairobi. FILE PHOTO | NMG

Summary

  • Public primary and secondary schools, colleges, universities and polytechnics form part of the class C procuring entities in the country.
  • A recent directive by President Uhuru Kenyatta to public institutions to clear bills owed to suppliers should be binding to all the procuring entities including the county governments.

Today it’s easy to blame everything on the Covid-19 pandemic. However, it’s worthy to remember that even before being affected by the coronavirus, the world’s economy had decelerated. Advanced economies like the US, France and Germany were estimated to have expanded by 1.2 per cent in 2019 compared to a growth of 2.2 per cent in 2018. In Kenya, the real GDP is estimated to have expanded by 5.4 per cent in 2019 compared to 6.3 per cent in 2018. The growth was more pronounced in service-oriented sectors.

Public primary and secondary schools, colleges, universities and polytechnics form part of the class C procuring entities in the country. A recent directive by President Uhuru Kenyatta to public institutions to clear bills owed to suppliers should be binding to all the procuring entities including the county governments.

But today, suppliers across the country have not been paid since the onset of the corona pandemic. There are reports of blatant defiance to the President’s directive, especially within the schools, colleges and universities.

Cash flow is the lifeblood of any business. Businesses need cash to buy supplies, pay government taxes, rents for premises, employees, service debt and invest in equipment and training. This cash usually comes from receipts for sales.

Late payment threatens the survival of small and medium sized enterprise (SMEs) and start-ups, majority of which are owned by youths. From a macroeconomic perspective, it is both of detrimental and potentially destabilising to businesses, even the big companies and the economy at large.

According to Association of Chartered Certified Accountants, late payment has a wide range of consequences for companies, including higher costs of financing working capital, forgone interest on cash reserves, administrative costs, idle time, distraction for staff, time wasted on debt recoveries, deferring investment and inno­vation plans, inability to access finance and discouraging trading internationally, all of which act as a drag on economic and productivity growth.

A report debated in the British Parliament in 2012 on the effects of late payment of bills to the economy indicated that the delay stifles ambitions of SMEs. These companies increasingly become embroiled in a vicious cycle of late payment.

They are paid late, pay their creditors and suppliers late and in turn pay their taxes and other obligations late, hence withhold billions of pounds from the economy.

The Prompt Payment Bill, 2020 proposed in the BBI report, which provides a legal framework for the prompt payment of invoices for goods and services procured by public entities and mechanisms for settling disputes over invoices could be the only saviour.

The provision of quality education is important in generating the opportunities and benefits of social and economic development as envisaged in Vision 2030.

Educational needs have increased since introduction of free primary and subsidised secondary education in 2003 and the increased transition rate.

This requires that the government commits more resources towards secondary education. But rather than increase, during the last disbursement of Free Day Secondary Education Fund the government halved the Sh6,000 allocated to each student for operations. This amount is suppose to buy books, pay suppliers, pay board of management teachers, purchase laboratory apparatus and put up infrastructure

Implementation of the Competency-Based Curriculum will only succeed with all stakeholders involved including suppliers of learning materials. As a mitigation measure for post Covid-19 recovery strategy, government institutions including public schools, universities and colleges must consider prompt payment to suppliers for economic growth to be realised.

The writer is a procurement & supply chain management consultant lecturer and researcher, JKUAT