EDITORIAL: Stop late payment culture

Kenya has one of the worst records in the region on delayed payments in respect to committed dates. More often that not, payments by both national and county governments are not made on time – thereby frustrating contractors and those down the supply chain.

Local contractors are among those who feel very frustrated at the late payment habit that is rife in this country. Banks too are frustrated and the chain of disappointment stretches all the way to the site, where casual labourers stay all day, toiling for bread and butter.

Contractors are frustrated because the government does not pay them on time, banks are foiled because contractors do not service their loans and construction workers are disappointed because their wages are unreasonably delayed.

Delayed payment by the government to contractors has been cited as the reason why many contractors, especially those involved in road projects, are not able to service their loans.

READ: Loan defaults plague Kenya’s construction industry

This has seen banks shying away from lending to the construction sector in effort to cushion themselves from bad loans provisions.

This is quite unfortunate especially coming at a time when the government is embarking on a massive road construction project that requires heavy funding from commercial banks.

Thankfully, late payment to suppliers will soon be an offence.

Through the Kenya Private Sector Alliance (Kepsa), suppliers have engaged with President Uhuru Kenyatta to push for the enactment of a law that compels public institutions to pay suppliers within 60 days.

Kepsa is seeking to make it a criminal offence for government to delay payments to suppliers beyond two months – calling for the introduction of interest on all pending bills and hefty fines for non-compliance officers.

Prompt payments will help inject liquidity into the economy while boosting survival for SMEs and lower non-performing loans.

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