This archive report was first published on 27 January 2020.
Kenya's devolution in 2013 was expected to boost the economy, particularly for small and medium enterprises (SMEs) doing business with counties.
However, many SMEs faced a cash crunch when counties delayed payments to suppliers, leading to increased costs and risks of doing business with public bodies.
By June 2019, counties owed contractors and suppliers Ksh 100 billion, equivalent to 10% of the annual national budget.
President Kenyatta's directive to clear pending bills worth Ksh 450 billion was a welcome lifeline for thousands of SMEs.
While the response was initially slow, many ministries and state agencies have since cleared their bills.
As of January 14, 70% of pending bills had been paid, with the President attributing the delay to counties that had not settled supplier invoices in full.
Only 15 counties had cleared most or all eligible pending invoices by December, but Treasury has since announced it will release Ksh 24 billion to counties that have settled their bills or are about to do so.
The directive has saved thousands of jobs, injected a new lease of life into SMEs facing collapse, and reasserted fiscal discipline and accountability in public financial management.
It has also improved investor confidence, enhanced the credit profile of SMEs, and ensured their long-term sustainability.
Furthermore, clearing the pending bills backlog will unlock funds for business expansion and job creation, stimulating public spending and economic recovery.
