This archive report was first published on 12 November 2019.
Passing laws that enhance prompt payment to suppliers would greatly benefit the country. Such legislation should specify the time frame within which private companies or government entities must settle their debts with suppliers or contractors. This would prevent many struggling firms, especially small and medium-sized enterprises, from being driven out of business by bigger companies that delay or refuse to pay their debts.
The collapse of Nakumatt, the country's former leading retail chain, left its small suppliers in a difficult position. The financial troubles at Uchumi Supermarket have also contributed to the decline of several small and medium-sized enterprises in recent years.
Supermarkets offer a vital outlet for small firms to gain a foothold in the competitive consumer market. However, these retail and hotel chains often abuse their dominant positions in contracts, breaching or abandoning terms while knowing there are many suppliers waiting in the wings.
It is inexplicable why these mega-businesses fail to pay their suppliers on time, despite being paid cash for the goods and services they sell to their customers. The law should also compel the national and county governments to pay their debts within a specified period.
President Uhuru Kenyatta's Madaraka Day directive to have the government pay off its debts had an immediate effect, although only about 25% of the amount owed was paid. The payments led to a surge in orders placed with local manufacturers, but unfortunately, the State has slipped back into its old ways of ordering and receiving goods without paying for them on time.
