How Government ended up owing SMEs more than R3bn

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Provincial government owes a staggering R3.2 billion to small and medium-sized businesses (SMEs) due to its continued failure to comply with its own policy of paying invoices within 30 days.

This revelation of late payment shows that the government has failed to keep its longstanding pledge to prioritize payments to SMEs.

The biggest culprit is the Eastern Cape, which by the end of December 2020 had failed to pay its SME suppliers more than R2 billion within 30 days of receiving invoices. Next is Gauteng, which owed SMEs more than R389 million.

This was disclosed in an answer to a parliamentary question posed by DA shadow minister of Public Service and Administration, Dr Leon Schreiber.

The situation didn’t improve much in the first three months of 2021.

The information states that by the end of March, only 8% of the amounts in arrears was paid. Of the R3.2 billion in arrears at the end of December, R2.94 billion remained unpaid.

The worst performing provincial departments were health and education. Three provinces – the Northern Cape, Western Cape and Mpumalanga – did not make any payments to the affected SMEs in the first quarter of the year.

Failing to catch up at paying up
Provincial governmentAmount in arrears as at Dec 31, 2020Amount in arrears as at Mar 31, 2021%
Northern CapeR517 636R517 636100%
Western CapeR600 546R600 546100%
MpumalangaR97 788 753R97 788 753100%
Eastern CapeR2 114 327 450R2 025 125 29796%
North WestR351 858 302R327 595 92093%
GautengR389 973 533R342 257 75988%
KwaZulu-NatalR104 363 510R71 235 45168%
LimpopoR28 471 372R18 000 71663%
Free StateR112 778 551R64 549 12957%
R3 200 679 654 R2 947 671 207 92%

National government

At the end of December 2020, national departments had failed to make payments amounting to R417 million to SMEs within 30 days.

The worst offenders were the Department of Water and Sanitation (including the Water Trading Entity), which did not pay SMEs an amount due of R357 million within the 30-day policy, followed by the Department of Public Works and Infrastructure (including the Property Management and Trading Entity), which owed R51 million.

National departments’ failure to pay on time (figures as at December 31, 2020)
Water and Sanitation, including the Water Trading EntityR357 636 505
Public Works and Infrastructure ,including the PMTER51 673 929
Mineral Resources and EnergyR4 311 452
Women, Youth and Persons with DisabilitiesR1 712 016
Statistics South AfricaR832 404
Home AffairsR636 813
PoliceR71 674
Cooperative Governance and Traditional AffairsR17 850
R416 892 642

In 2016, former minister in the presidency Jeff Radebe issued an executive statement expressing the government’s inability to support small businesses and the direct effect this has on the broader economy.

“We have come to discover that many of the small businesses that we wished to advance were actually being placed in financial distress, grave jeopardy, and prolonged hardship by the late payments for goods and services, especially by government,” the statement said.

It added that “small business continues to remain vulnerable and is not realising its full potential to contribute to growth and employment”.

In response to the DA’s questions, National Treasury said: “[We] are in the process of finalising a guideline on payments within 30 days to assist accounting officers with measures to implement [and]to improve the level of compliance and pay invoices on time and also [to]improve their internal control systems in relation to processes and procedures to be followed when effecting payments.”

Treasury added that officials visited certain provinces to ‘encourage’ those transgressing “government departments at various levels to adhere to commitments made on payment of invoices within the stipulated 30-day period as a critical element to support SMMEs who do business with the state”.

Main Image: creditguarantee

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