MPs would do the country a great service were they to pass laws that enhance prompt payment to suppliers. Some of the laws were mooted in the past but were never brought before the House.
The laws should specify the length of time a private company or any arm of government should take before settling its debt with a supplier or contractor.
The passage of this legislation would save many struggling firms, especially those in the Small and Medium Size category that are routinely driven out of business by bigger companies when they delay or refuse to pay their debts.
This reality was underscored when the collapse of Nakumatt — the country’s erstshile leading retail chain — left most of its small suppliers holding the short end of the stick.
The collapse pushed the suppliers who did not have deep pockets out of business.
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The financial troubles that have become the norm at Uchumi Supermarket have also contributed to the number of SMEs that have bitten the dust over the recent past.
Dominant positions
The tragedy for the SMEs is that the supermarkets offer them a vital outlet that they need to get a foothold on the competitive consumer market.
On paper, the supermarkets — and even some hotel chains offer attractive terms. But unknown to the small firms, the retail and hotel chains routinely abuse their dominant positions in the contracts whose terms they breach or abandon while aware there are many suppliers waiting in the wings.
This is in the event the one they are dealing with refuses to supply more goods on credit. It is inexplicable, however, why these mega-businesses fail to pay up in time when they themselves are paid cash for the goods and services they sell to their customers.
The only logical conclusion is that their owners either use the money they should have paid suppliers to buy things unrelated to their current businesses or stash the loot in their foreign bank accounts.
The law should also compel the national and county governments to pay their debts within a specified period.
The damage caused by the failure or refusal to pay their suppliers and contractors is all too evident to be allowed to continue much longer.
Indeed, the effect of President Uhuru Kenyatta’s Madaraka Day directive to have government pay off its debts was immediate, although only about 25 per cent of the amount owed was paid.
The payments led to such an unexpected surge in orders placed with local manufacturers that some of them were unable to meet them.
Unfortunately, the State seems to have slipped right back to its old ways of ordering and receiving goods without paying for them on time.
Where does the money allocated for the purpose go?
