I have seen firsthand how late payments can cripple businesses due to cash flow issues. In South Africa, many businesses have been forced to close their doors because of financial challenges exacerbated by delayed payments. Statistics show that a significant number of small businesses fold each year, with cash flow problems being a major contributing factor.
The Minister of Small Business Development, Stella Ndabeni Abrahams, highlighted the Annual Report for the 2023/2024 financial year on Late Payment of Supplier’s Invoices by National Treasury. The report reveals alarming levels of non-compliance with Treasury Regulation 8.2.3 under the Public Finance Management Act (PFMA), 1999 (Act No. 1 of 1999). Particularly troubling is the non-compliance among Provincial Governments, with the Eastern Cape and Gauteng emerging as the worst offenders, owing over R4.5 billion and R2.7 billion respectively to suppliers within the stipulated period. Additionally, several National Departments consistently fail to submit monthly exception reports as per Treasury Instruction Number 34 issued in 2021, with poor performance notably from the Department of Public Works and the Department of Employment and Labour.
Late payments by government departments are deeply concerning as they severely impact the cash flows of small businesses. The economy relies on a vibrant small business sector to supply both government and private sectors, fostering economic growth and job creation. Delays in payments not only threaten the existence of these businesses but also perpetuate economic inequality.
It’s essential for the government to create a conducive environment for small businesses to thrive. Timely payment for services rendered is crucial. As someone passionate about championing small businesses, I find this situation extremely troubling. We are actively engaging with these non-compliant departments to find solutions. Moreover, we are committed to setting an example by ensuring all invoices are settled within 30 days of receipt, aligning with the Department of Small Business Development’s performance standards.
This year, we are introducing the Office of the Small Enterprise Ombud Service, empowered through amendments to the National Small Enterprise Act. With parliamentary approval and pending presidential assent, this Ombud Service will serve as an impartial mediator in disputes, offering small businesses a cost-effective alternative to lengthy litigation processes. We are optimistic that this initiative will address the issue of non-payment by both public and private sectors.