11 November 2012

South Africa: Government Destroys Jobs By Failing to Pay 1662 Suppliers

press release

Fourteen national departments and their entities have failed to pay a total of R160 million to 1662 suppliers within the 30-day limit prescribed by the Public Finance Management Act (PFMA)

Overdue payments place enormous pressure on the cash flow management systems of these businesses and can result in them defaulting in the payment of their own creditors. In some cases businesses, like listed company Sanyati, have been forced to close because of late payment.

This information has been provided by government departments in response to DA parliamentary questions. On average the money owed to suppliers had been overdue for nearly 80 days.

The worst offender in this regard was the Department of Water and Environmental Affairs and its entities who had jointly kept 20 service providers waiting for an average of 158 days - nearly four months beyond the 30-day rule.

The department of Rural Development and Land Reform came in second place with 87 service providers who were kept waiting for an average of 122 days beyond the 30-day rule.

The Department of Justice and Constitutional Development and its entities had 766 service providers waiting for an average of 70 days for close to R40 million in outstanding payments.

The Department of Public Works and its entities left 503 suppliers out of pocket to the tune of R19 million for an average of 45 days.

The biggest bad debtor was the Department of Social Development, whose late payments to 43 suppliers totalled over R64 million.

All of the departments reported that they pay no interest on their outstanding debts.

The DA welcomes the announcement by Minister Chabane last week in which he asserted that Treasury would set up a dedicated system next year to check compliance by national and provincial departments with the PFMA. We would like more detail on the structure and roll out plan for the system. I will be submitting parliamentary questions in this regard.

Government's role should be to create an environment which is conducive to doing business and supports job creation and economic growth. It cannot be acceptable for government to actively destroy jobs through late payment of suppliers.

Tim Harris, Shadow Minister of Finance

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