Three years ago three business organisations — Business Unity SA, Business Leadership SA and the Small Business Institute — ran a successful campaign aimed at encouraging large businesses to settle invoices owed to small business suppliers in a timely manner. The call was also endorsed by the CEO Initiative.
The campaign, launched in the middle of the Covid-19 pandemic, resulted in an unprecedented public pledge by more than 50 JSE-listed companies to pay small business suppliers within 30 days, in line with decades-long government policy.
During the campaign it emerged that many large companies were routinely exceeding the 30-day time frame, while a dozen or so reported that they were settling invoices within seven days of submission. A handful were even prepared to make advance payments to ease the cash flow of small business suppliers.
Other big companies reported having contracted experts to assist small business suppliers to get onto their complex supply chains as part of enterprise and supplier development programmes.
Unfortunately, despite many attempts by the three business bodies to get the government — organs of state, national and provincial departments and state-owned enterprises (SOEs) — to join the campaign, the government did not take the bait.
However, since Thabo Mbeki’s administration, which ended abruptly in 2008, it has been government policy that suppliers of goods and services ought to be paid within 30 days after invoicing and delivery of goods.
Yet for all of the years since, all too many SOEs and state departments have continued to pay hundreds of small businesses late or not at all. This cruel treatment of small businesses forces their owners to borrow to fulfil orders, while the minority who can afford litigation and end up suing the state whittled down their profit margins.
Internal procurement ombudsmen services within SOEs are proving ineffectual. On the contrary, small business owners complain that they are asked to pay bribes to have their invoices honoured. Many simply opt to walk away from doing business with the state. It is a real pity.
This issue of nonpayment of small businesses, a silent killer of small firms and livelihoods, has dominated discussions in President Cyril Ramaphosa’s red tape reduction office. It has also been on the radar of the National Treasury — the custodian of public procurement — and the Public Service Commission (PSC).
Several years ago the Treasury and PSC, the watchdog of the civil service, began monitoring and reporting this maladministration. Its latest report unfortunately shows such malpractice is alive and kicking.
More concerning though, is that throughout the last five ANC national administrations no-one has been fired for compromising small businesses
The report for the last quarter of the financial year ended in March, which does not distinguish between affected firms on the basis of size, shows a mere 2% improvement in the number of invoices that were paid late compared to the previous fiscal year.
The Treasury has reported that the number of invoices paid after 30 days by national departments amounted to 108, 917, translating to a rand value of R4,6bn during the last financial year.
The biggest offender — with a whopping 84,934 invoices paid after 30 days, totalling R1.4bn — is the defence department, whose former political head, Nosiviwe Mapisa-Nqakula, was charged with bribery and corruption two months ago.
The same report indicates that invoices that were older than 30 days and still not paid by national departments amounted to 1 ,427 or R53m.
Out of the 42 departments in the sixth administration — that is before the current government of national unity, which came into being after the May 29 general elections — only 11 complied with the government policy of timely payment of invoices by suppliers of goods and services.
Departments that have bothered to follow policy include small business development; women, youth & people with disabilities; co-operative governance & traditional affairs; planning, monitoring & evaluation; public service & administration; communications & digital technologies; sports, arts & culture; the PSC; national school of government; higher education & training; and trade, industry & competition. It is not hard to see why these departments should shine. Their budgets are minuscule compared to the serial offenders.
Commendably, the Treasury also requires departments to self-report on noncompliance with the policy. Justice tops this list with 1, 375 unpaid invoices to the value of R42.7m. Reasons for the breach of policy are curious. They include misfiling, misplacing invoices and inadequate internal control.
More concerning though, is that throughout the last five ANC national administrations no-one has been fired for compromising small businesses by not paying them or paying them late, or by chipping away at their profits by forcing them to undertake costly litigation.
There are many ways to avoid this malfeasance. Technology is the foremost solution. Unlike humans, technology does not commit many errors. Removing judgment from decision-making can go a long way towards expediting payments.
Centralising procurement is another way of resolving this bugbear. Once suppliers are loaded onto the central supplier database it is hard to imagine why it should take long to pay them.
The professionalisation of the civil service should also help improve compliance with the 30-day payment policy. The new broom at the Treasury is an opportunity for government to clean up its act.
However, good intentions and policies alone will not help slay this silent business killer. Naming and shaming continues to play a critical role. But actions such as a public rebuke from the presidency could help send the right signal.
• Dludlu, a former editor of The Sowetan, is CEO of the Small Business Institute.
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