Delayed pay hurts efforts to build youth enterprises

Unemployment, especially among the youth, is one of the toughest challenges that Kenya faces in its attempt to cut the levels of poverty. A number of strategies has been rolled out in a bid to address this seemingly intractable problem.

Some of the plans include creating the Youth Enterprise Development Fund (YEDF) and setting aside 30 per cent of government tenders for the youth, women and the disabled.

While experts say these initiatives can go a long way in addressing the challenge of unemployment among young people, a look at the performance of these plans leave a lot to be desired.

Take for instance the 30 per cent tender rule. One of the fundamental challenges encountered by the youth who embraced the idea is delayed and disputed payments. These impediments have ended up compounding the plight of startups.

Some youth businesses are currently in dire financial straits while some have been compelled to close down altogether because of unpaid bills running into millions of shillings. “I tried working with few parastatals but the indefinite turnaround time of payments affected my liquidity, compelling me to close shop,” said an entrepreneur who sought anonymity for fear of jeopardising his future deals with government institutions.

The 28-year-old IT entrepreneur had to wait for up to four months before getting paid for his consultancy services.

He said in some instances, he was asked to supply the services even before the contract was drawn. When a formal contract failedo materialise, he had to use the letter of the tender award to make claims for payments. This posed plenty of difficulties in his pursuit for his dues, he said.

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The entrepreneur said his story is similar to that of other youth who have dealt with tenders from the national government and county governments.

The problem of unpaid bills apparently runs deep in businesses across the country. Recently a group of contractors instituted civil proceedings against the Nairobi County Government demanding payments for their services. The proceedings were however dropped after the county asked for more time to scrutinise the validty of some of the claims.

In January, Controller of Budget Agnes Odhiambo revealed that Nairobi County accounted for 62 per cent of the Sh96.4 billion worth of debts that the 47 devolved units had accumulated in the 2016/2017 financial year.

She told Parliament that the pending bills had grown in the current financial year to reach Sh99.2 billion, adding that there was need for an audit on the swelling pending bills by county governments.

A share of these pending bills belongs to the youth who had sought to take advantage of the government initiatives to better their standard of living.

Gideon Keter, the youth representative in the National Assembly, notes that while the government has come up with initiatives to encourage the youth to venture into business, a lot remains to be done in terms of implementation.

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“Some of the complaints that come to my office touch on unfriendly government policies and regulation. For instance the requirement of security and title deeds for those who want youth fund to start or expand their businesses is a setback,” he said.

Between July 2017 and April 2018, the YEDF gave out Sh485 million, bringing to Sh12.4 billion the total worth of  loans disbursed since its inception in 2006.

In a bid to facilitate the youth take advantage of the government tenders, the Fund introduced trade financing.

“Youth who have been awarded tenders by government agencies and other reputable procuring entities not owned by the government can be able to access Bid Bonds and LPO/LSO financing of up to Sh5 million,” said YEDF chief executive Josiah Moriasi.

But even after getting funding to service government tenders, youthful contractors have to contend with delayed payments, which has threatened to negate all the good intentions of the State plans.

That the issue of delayed pay is a huge problem in efforts to promote a business-friendly environment is highlighted by the tiff between industrialists and economists on how to address the issue. Industrialists and business people have called for a mechanism that will force firms and State agencies to compensate suppliers for delayed payments. While the Kenya Association of Manufacturers (KAM) insists regulations will form an East African Community code of payment, the Institute of Economic Affairs (IEA) maintains the regulations will take away freedom of people to negotiate supply agreements and payment mechanisms with each other.

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The face-off emanates from a  long standing campaign by the Trade ministry to draft the Retail Trade Sector Prompt Payment Regulation that imposes interest on payments that remain outstanding for more than 60 days.

Mr Keter notes that the solution lies in ensuring that the policies geared towards helping the youth to penetrate the entrepreneurial landscape are anchored in law.

“The 30 per cent tender rule is just a dormant policy that has not been adhered to both by the government and the private sector since it has not been legalised. There are no penalties emanating from breaching business agreements and that is where the problem is,” he said.

The legislator has forwarded recommendations to the National Treasury and Ministry of Public Service Youth and Gender Affairs to put in place policies that favour the youth and ensure nothing that touches on their enterprises is concluded without their input.

The Jubilee MP has also tabled a Bill in Parliament seeking amendment to the 30 per cent tender rule so that at least 70 per cent of the shares of firms that benefit from it are owned by the youth. He said some of the firms currently enjoying the benefits of the policy are majority-owned by people who are not young.

TheFounder Magazine

Made Of Founders

TheFounder Magazine is an online business magazine that focuses on starting, running and growing a business in Kenya today

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