Why Small Businesses Trading With Govt Are at Risk of Collapsing

Hundreds of small businesses risk closure following reports that 77 per cent of county governments' pending bills owed to suppliers are ineligible for payment due to a lack of supporting documents.

According to a report by the Controller of Budget (CoB), out of the total Ksh139.5 billion, ineligible invoices made up Ksh107.12 billion for both the county assemblies and the county executives.

Only Ksh15.9 billion of the Ksh155.5 billion in outstanding invoices were settled by counties between June 2020 and March 2022, leaving Ksh139.5 billion unpaid.

Governors led by the Council of Governors, Martin Wambora, issue a statement in solidarity with Wajir County Governor Ali Mohamud (far left) on May 28, 2021.

Nation Africa

“County governments are advised to settle the eligible pending bills as a first charge on the budget in line with Regulation 41(2) of the Public Finance Management (County Governments) 2015, which states that ‘debt service payments shall be a first charge on the County Revenue Fund and the Accounting Officer shall ensure this is done to the extent possible that the county government does not default on debt obligations,” the Controller of Budget, Margaret Ntakang'o, stated.

Following complaints on the validity of some supplier contracts, the National Treasury ordered a repeat special examination of county pending invoices in January of last year.

The massive backlog of unapproved pending bills raised concerns on the procurement disasters shaking several devolved entities.

Only Ksh51.2 billion of the counties' outstanding invoices were deemed payable as of June 30, 2018, according to a special audit done by the Office of the Auditor General (OAG) in 2020. 

The remaining Ksh37.7 billion was found to be ineligible due to a lack of supporting documentation.

Nevertheless, a number of county governments wrote to the OAG to contest the legitimacy of a few of the pending bills. This led the National Treasury initiating a second audit.

Small businesses have suffered significantly as a result of the backlog of unpaid debts by county governments and state departments. 

Treasury officials during a meeting in Nairobi ahead of the National Budget reading.

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Some contractors and suppliers have accused the county and national governments of deliberately frustrating their businesses.

In addition to the difficulties already faced by the traders affected by the pandemic, pending government bills have been listed as the reasons for closure of some of the Small and Media Enterprises (SMEs) in Kenya.