KEMSA appeals for Treasury aid as counties default on payments

Barely a year ago, the state medical supplies agency underwent a major management purge following corruption allegations famously known as the "Covid millionaires" scandal.

The new management is now facing financial challenges arising partly from the failure of counties to pay their debts amounting to over 2.8 billion shillings. 

KEMSA CEO Dr. Andrew Mulwa says despite the reforms being implemented, the authority is living from hand to mouth with suppliers piling pressure over the debt burden.

"The Covid-19 issues depleted our capital by close to 4 billion. Beyond depleting the capital by 4 billion, that loss by 4 billion, we have now what I talked about: items that are slow-moving or are not required. You have two billion that cannot be turned to cash."Dr. Andrew Mulwa, CEO, KEMSA says. 

KEMSA appears to be sinking further into financial turmoil. Ninety percent of its business relies on selling medical supplies to county governments. 

But the county governments have not been paying their debts. The 47 counties owe the authority over 2.8 billion shillings. 

Kilifi County tops the list of defaulters with an outstanding debt of 275 million shillings. Nairobi follows with a debt of 243 million shillings. 

Other counties in the top seven defaulters list are Tharaka Nithi, Homa Bay, Kakamega, and Machakos.

"When money goes to the county, let's say the county receives like 2 billion today, they have not paid salaries, they have not paid some other suppliers for critical items like electricity and water. They are likely to prioritize those ones over KEMSA. What we would ask is for the counties to prioritize payment to KEMSA." Dr. Mulwa adds.  

The enormous debt has thrown KEMSA into a cash flow crisis. The medical supplies body now relies on the equally unreliable weekly cash collections.

"I would say we are living from hand to mouth. Whatever collection we get in the week, we prioritize to pay suppliers that week. We get broke again and wait for new funds. We are living from hand to mouth," he added. 

Homa Bay Governor Gladys Wanga, whose account was suspended by KEMSA over bad debt, says governors inherited pending bills from their predecessors and that the challenge comes in when KEMSA deducts funds for fresh supply to cover the outstanding debt.

Gladys Wanga, Governor, Homa Bay: "Every medicine that we have bought within this regime, we have paid for everything. We have also paid partly for the bill we find. Sometimes when you pay KEMSA, they take it for the old debt. For example, Homa Bay paid, and after we had paid, they said we cannot supply you because we have used it to settle your old debts."

Wanga, who is also the Vice Chairperson of the CoG Health Committee, says they will engage with KEMSA on a repayment plan but also called on the authority to improve their order fill rate, which is at 50 percent.

"So long as we can work on repayment plans with KEMSA, we are able to clear in bits what is outstanding. Then KEMSA can use what we pay to raise their refill rate so that we are able to find all the medicines that we require from KEMSA," She said. 

"Our first preference for purchasing commodities is KEMSA, but if the refill rate is low, that is when we go to other suppliers."

KEMSA has appealed to the National Treasury to release 1.5 billion shillings, which was part of the 2 billion shillings allocated to the authority by the National Assembly in the supplementary budget.

 KEMSA has so far received only 500 million shillings, which was used to pay suppliers to restock.

"Once the two billion comes, I can assure you KEMSA's problems will be over because the net deficit will be about 1.3 billion, and that is money reliable in two months."Dr. Mulwa says. 

The KEMSA management is now placing hopes on the implementation of reforms at the authority, which include reducing the number of staff and cutting the cost of transport. 

KEMSA has saved over 500 million shillings in operations. But even then, the 2.8 billion shillings hole remains wide open, further weakening the prospects of a quick turnaround for KEMSA.