The department of small business development wants the budgets of various national and provincial departments that owe small and medium enterprises (SMEs) huge sums of money to be slashed to allow the Treasury to pay the affected businesses directly.
Small business development minister Khumbudzo Ntshavheni said her department will be engaging with the Treasury “to top-slice” from the budgets of departments that fail to pay small businesses.
While the national development plan — the government’s blueprint for eliminating poverty and reducing inequality — identifies the SME sector as crucial in the drive to tackle the unemployment crisis, late payments continue to hamper small-business owners, with many saying that not being paid on time is their biggest financial challenge. SMEs are more affected by late payments as their cash flows are weaker than those of their larger and more established peers.
In a written reply to a question from the DA in parliament, Ntshavheni highlighted the Treasury’s 2018/2019 annual report that showed the total value of invoices older than 30 days and not paid by national departments at the end of the financial year amounted to R634m. This affected both large and small businesses, she said.
The department of water and sanitation was the worst offender, owing R492m, or 78% of the total amount owed by all national departments. The department of agriculture, forestry and fisheries owed R99m, followed by the SA Police Service (R24m).
The total value of invoices older than 30 days that were not paid by provincial departments for the 2018/2019 financial year amounted to R6.5bn. The Gauteng provincial treasury owed R2.6bn or 40% of the total amount owed by provincial departments. The Eastern Cape provincial treasury owed R2.1bn.
Ntshavheni said her department is working on a database for SMEs that will be linked to the Treasury’s central supplier database. When the systems are integrated, the department will be able to know the exact amount owed to small businesses, she said.
Ntshavheni said late payments had also affected the impairment ratio of the Small Enterprise Finance Agency (Sefa), which is the largest funder of SMEs.
“The department has requested the National Treasury to authorise (a) cession agreement for Sefa, and when the cessions for Sefa and other development finance institutions (DFIs) are implemented the DFIs will support SMMEs to collect invoices owed to them,” the minister said.
Recently, the Small Business Institute (SBI), an advocacy body for SMEs, urged small-business owners to consider claiming interest and debt-recovery costs from companies or government departments that fail to pay for goods or services on time.