Govt's late payment cause 10% of SMEs to shut down or downscale

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LatePayment.jpgA survey by the South African Chamber of Commerce and Industry (Sacci) in September found that late payment, in effect, later than 30 days, by government entities, temporarily constrained the revenue stream and operations of about 60% of the small businesses surveyed, said Sacci CEO Neren Rau.

While a lower-than-expected number of small businesses were impacted by late government payments, they were being severely impaired.

The survey, which was undertaken among Sacci members, in response to government’s efforts to curb late payments, found that 60% of small businesses regularly supplied goods or services to government, while less than 10% relied solely on business from the State.

Less than 30% of those surveyed said that the late payments had no impact on their businesses.

Rau stated that less than 10% had to permanently downscale its scope of operations and that none of the respondents had reduced its employee base, closed a division or shut down entire business operations owing to late payments.

He pointed out, however, that liquidated or closed businesses would not have responded to the survey. Further, Rau said that many of the companies surveyed had emerged from the global economic crisis and had already downscaled its labour structure.

While no respondent said that government always paid on time and about 30% felt that the majority of bills were paid within 30 days, 65% of the Sacci members surveyed said that the majority of government’s payments were paid after the 30-day period. About 5% said the State never paid on time.

The survey found that, in response to late payments by government, 35% of the companies preferred to hold back on the provision of services or goods until the payment of the previous invoice has been completed. Less than 15% would opt for a deposit before services or goods supply, while 23% would offer discounts for early payments and penalties for late payments. The remainder would resort to friendly payment reminders.

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