Internal Debts: Prompt Payment Can Foster Growth
- By Godlove BAINKONG
- 04 nov. 2024 11:24
- 0 Likes
Domestic or call them internal debts, which entail central government debts to local creditors either for services rendered or State bonds subscribed to, can produce diverse results for both parties depending on how and when they are serviced. It is normal for the central governments to contract individuals or corporate bodies for specific works within a precise period. Payments for such works also follow a process known ahead of time by both parties.
In Cameroon, such is done through the procurement process for the supply of various needs in government offices, execution of government contracts or subscription to government bonds in order to raise money for the State. Quite often, the contractor wins a government contract, executes under laid-down rules; usually with personal funds to a certain stage, and waits for the payment when controls are done and efficiency ascertained. Gentlemanly agreement!
Inasmuch as the mechanism in itself oils the public-private sector bond which is absolutely needed to keep the government and governed going, the process and payment duration for some of these services quite often raise some concerns. While government insists that work must be executed at least to a certain level with the contractor’s funding before government pays; obviously after verification, some of the contractors complain of prolonged payment.
This explains why during the first-ever International Conference on Payment Periods held in Yaounde a few days back with the goal to seek ways of reducing the payment period, stakeholders came to a conclusion that the time for servicing internal debts in Cameroon remains long. They hold that the delay in no small way penalises the State creditors, most of whom borrow at sometimes cut-throat interest rates from commercial banks and micro-finance institutions to execute the projects, and by extension the national economy. The Cameroon’s Enterprises Association (GECAM) with whom the Minister Delegate at the Presidency in charge of Public Contracts held that Yaounde conclave indicated that the accumulation of unpaid bills or their late payment causes cash flow tensions.
It even emerged from the forum that a survey carried out in 189 companies revealed that 70 per cent of them believe that longer payment terms have a very negative impact on their health. Small and medium-sized businesses, construction and public works, electricity, hotels and sanitation sectors were reportedly the hardest hit in the survey.
Much disturbing even is the revelation that: “Late payment is the cause of 25% of business failures, and it damages SMEs to the tune of FCFA 3,000 billion worldwide every year. In Cameroon, over the past three years alone, the State has paid FCFA 20 billion in interest moratoriums for late payments.” These are serious revelations that must be handled with care so as to keep the economy afloat.
Government over the years has been stating that the payment period ranges between 60-90 days depending on the activity. But contractors feel that this is still far from being business-friendly. It is said that most contractors have lost the confidence of banks in the country owing to their inability to refund borrowed money in due time. The accused transfer the blame on government for not paying their bills when they are due, thereby prolonging their loans at commercial banks with all it entails in accumulated unpaid interest rates. The delayed bills once paid sometimes wholly go to settle overdue loans and their interests, leaving the contractor to gnash his teeth with little or no profits. Such a scenario kills business and a good portion of the private sector who are indispensable partners with government in job creation and wealth generation.
It must be underlined that government has been redoubling efforts to change the narrative. There is communication around the debts and most, if not all, the State creditors know when they can be paid. For instance, on July 31, 2024, government announced the mobilisation of approximately FCFA 335 billion through a bond issue on international investors. A press release after the closure of the bond issue operation in London from July 29-31 through which the State...
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