Struggling South African SMMEs Undermined By Billions Owed By Gov’t

In April, South Africa’s President Cyril Ramaphosa was lauded for putting Small, Medium, and Micro Enterprises (SMMEs) at the heart of a ZAR 500 Bn stimulus package. This was to provide economic and social support for small businesses rocked by the impact of the pandemic.

However, the credibility of the entire stimulus package is now being thrown in doubt as recent revelations paint the idea of government supposedly going all out for small businesses as mere lip service.

At the moment, not even considering the palliatives promised, SMMEs in South Africa are being owed billions of rand for services genuinely rendered to the government.

A report compiled by the Public Service Commission (PSC) has revealed that national and provincial government departments are currently owing SMMEs huge sums, jeopardizing their very existence despite being well aware of their struggles due to the pandemic.

As the PSC report highlighted, with regards to provinces, at the end of March, the Eastern Cape had with 23,795 outstanding invoices amounting to ZAR 2.4 Bn, followed by North West with ZAR 603.5 Mn, Gauteng with ZAR 548.2 Mn, Northern Cape with ZAR 399.2 Mn, the Free State with ZAR 265.1 Mn, KwaZulu-Natal with ZAR 101.2 Mn, Limpopo with ZAR 1.01 Mn, and the Western Cape with ZAR 358.7 K. Mpumalanga did not submit its report for end-March, but by February it had ZAR 2.4 Mn in unpaid invoices.

Despite a law which stipulates that valid invoices and claims should be paid within the stipulated 30-day period, government departments still appear to be sitting on a huge amount of payments to suppliers for unfounded reasons.

As local media reported, the PSC, which promotes constitutional values and principles governing public administration, expressed concern about the non-payment of suppliers by departments on Wednesday.

PSC commissioner, Michael Seloane, said SMMEs were already struggling to stay up when the coronavirus pandemic struck. These businesses are now “under further pressure due to the non-payment of invoices by government”.

Seloane made this known during the PSC’s virtual launch of its quarterly bulletin, The Pulse of the Public Service, in Pretoria on Wednesday. The bulletin beams the searchlight on the non-payment of invoices by state departments, service delivery during the lockdown, and complaints and grievances handled by the PSC, during the period January 1 to March 31, 2020.

As contained in the PSC report, at the end of the fourth quarter of the 2019/2020 financial year on March 31, the departments of public works and infrastructure, and water and sanitation, had defaulted with 173 and 137 invoices, amounting to ZAR 19.2 Mn and ZAR 505.7 Mn, respectively.

While Seloane noted that these departments had previously lodged complaints about struggling with historic debt and have since engaged the National Treasury, he maintained that “the PSC cannot over-emphasise the impact this non-compliance has on the operations of SMMEs, especially in the current economic climate”.

Seloane added: “With the government’s dedicated efforts to stimulate and support SMMEs, departments must do their part and ensure that suppliers are paid on time, the failure of which may be detrimental to their survival and negate government’s job creation measures.”

The unemployment rate in South Africa is currently over 30 percent and rising, and many businesses have been disrupted by the pandemic. With government departments faltering on payments actually earned by SMMEs, concerns over the stimulus package and the fate of businesses are rife.

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