Suppliers saddled with debts due to late payment by counties

The delay or failure by county governments to pay their suppliers and contractors on time owing to the cash crunch in government or mismanagement of cash flow has touched off a cry of agony with some businesses being forced to close shop.

The late payment of debts, some dating back to 2013 according to the suppliers, has mostly affected small scale suppliers who are now wary of taking up government tenders.

The arrears, the contractors say, were for works done on construction of roads, hospitals and market sheds, distribution of water, supply of medicines and electrical equipment among others.

In Busia, the county government owes suppliers Sh100 million.

Mr Peter Magero, who chairs the Busia Contractors Association, said that because of the debts, a number of their members were unable to repay loans.

“We want the governor to tell us when we are going to be paid and the procedure to be used. We have families to take care of and loans to service; some of us have been embarrassed by our creditors yet our money is being held by the county government,” he said.

His Vihiga counterpart, Dr Billy Nyonje, said that most of their members have been blacklisted by the Credit Reference Bureau for failing to service their bank loans.

“Auctioneers are knocking on our doors while banks are following us. Many of our members are now suffering from depression and already three have been admitted to hospital,” he said.

However, Governors Moses Akaranga of Vihiga and Sospeter Ojaamong of Busia defended themselves, saying that failure to pay the suppliers was due to the new online procurement system introduced by the national government.

Mr Ojaamong said the system only opens for a few hours, thereby rendering it difficult to use.

Mr Akaranga attributed the delay to budget constraints which came about after three departments overshot their allocations.

AUCTION THREATS

In Taita Taveta, contractors and suppliers say they have withdrawn their services from some county projects because they are no longer sure when they will be paid.

Taita Taveta Contractors Association secretary Jefferson Mwabili said the contractors will only resume work after they receive their dues.

“Some of our members have pending payments for 2013. Two years after the completion of their contracts and they are yet to be paid. Some were issued with certificates of completion eight months ago and until now they have not been paid,” said Mr Mwabili.

He said their members were unable to pay their employees and some were facing “auction” threats from their financiers.

“Most contractors use Local Purchase Orders to finance their projects. Some of them have defaulted on bank loans as they expected to service their loans as soon as the county government paid them,” Mr Mwabili said.

Three weeks ago, the contractors stormed the county assembly and demanded to know why the county assembly had failed to pass the 2015/16 budget that would unlock payment for county projects.

The Assembly, however, shifted the blame to the executive, accusing it of failing to implement projects that were supposed to be executed in the 2014/2015 financial year.

Members of the County Assembly summoned the executive to explain how they used their budgets in the various county departments.

Public Works and Infrastructure county chief officer, Mr Philemon Kachila, told the House that most projects have stalled because the contractors fear that the county government might fail to pay them.

Governor John Mruttu said he will not favour any county officer found to be corrupt. “The officer will be charged in court and immediately fired,” Mr Mruttu told journalists.

The Nakuru County executive for Finance, Ms Ann Njenga, said the county government has not paid contractors and suppliers for about three months.

“We are behind in paying by about three months according to the Controller of Budget but the problem is not our own making. The county pays when the money trickles in from the national government,” she said.

COURSE OF ACTION

In Kilifi, contractors who declined to be named said it was disheartening that sometimes money was disbursed to the county from the Treasury, but suppliers were told that funds were not enough.

The Kilifi Finance executive John Kombe blamed the National Treasury for delays in releasing funds.

“Almost Sh4 billion of the county’s development funds goes to suppliers and contractors,” he said. “As we speak, we are yet to receive more than Sh3 billion from the Treasury.”

Mr Kombe said that he sometimes writes to financial institutions asking them to give contractors more time to repay loans.

Mr Kombe said that apart from the Sh4 billion for development which is allocated to contractors and suppliers, there was also Sh125 million factored in the recurrent expenditure in the health sector towards supply of medicines to the county hospitals.

“There are suppliers who supplied medicines to our hospitals and health centres. They are also waiting for payment,” he said. “In short, we are experiencing a financial crisis.”

In Machakos, the head of the association of suppliers, Mr Barclay Mutinda, said the county owes contractors and suppliers Sh2 billion.

However, the county government says the pending bills are in the region of Sh2 million only.

Mr Mutinda said that even a splinter group of about 15 members which had been promised payment was now bitter about the promise which had not been met and wanted to come back to the original group.

Mr Mutinda said they had petitioned the County Assembly but the assembly was dragging its feet as no motion had been brought to the floor of the Assembly to facilitate payment.

“The situation is bad. Even those who had denounced our association now want to come back and they are bitter because they have been misled,” said Mr Mutinda.

He said the association will hold a meeting next week to decide on the next course of action.

SOURCE: DAILY NATION