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Dear Mr President, When Are You Charging Govt Employees Who Pay Suppliers Late With Financial Misconduct?

By Pinky Khoabane

Dear Mr President

I listened to parts of your answers in the Question & Answer session in the National Assembly the other day and among the issues you touched upon was the critical role played by small and medium enterprises and the need to empower them.

You spoke eloquently about the Competition Commission and the various institutions which are meant to open economic opportunities for the small and medium enterprises. You spoke passionately of the various instruments in place which are meant to unlock economic development and transform this sector.  They include the competition amendment bill which you said would address the blockages faced by SMMEs more so in sectors where a few players dominated – monopoly capitalists in other words.

While the questions posed by your colleagues in the opposition dealt with issues of the impact of mergers on SMMEs, imports, and so on, none that I heard dealt with the very important issue of the economic sabotage being perpetrated by employees in government departments and state owned entities (SOEs). These are the inefficient employees who don’s pay suppliers on time.

It is not a secret or anything new that government departments and SOEs, through incompetent employees, pay suppliers three or four months late, and in some cases even a year after the service has been provided. There’s ample reading material to show how critical services including healthcare to citizens, have been compromised because government departments had not paid suppliers.

The story of the small business entrepreneur who provides services to government departments and SOEs and spends the next few months chasing the payment abound. Having had to pitch their services at a much lower rate against their white and well-established competitors just so they can get the deal, they ultimately make no profit having spent several months thereafter begging to be paid. Some SMMEs, and there are many cases to attest to this, face closure due to non-payment.

The sad reality is that black entrepreneurs rely on government to procure their services because the private sector and white businesses largely circulate their money among themselves.

Mr President, you correctly stated that small and medium enterprises are an important part of the South African economy. You said they support more than 60% of employment in our country and are engines for growth and transformation. You spoke of the need to open economic opportunities for these small businesses if we are to achieve the necessary radical economic transformation that has been a policy of the ANC for several years but isnt bearing fruit.

A businessman is owed almost R24million by one of the municipalities and has been waiting for a year. Another consultant nearly lost her house having been owed for almost 4 months by one of the SOEs. These are not stories from years ago. I heard them last week. The only reason I can’t mention these people is because they may not get paid if their identities were known. It is sheer criminality that they should operate in such an environment. There are many entrepreneurs whose lives have been destroyed by late payment by government and SOEs.

Payment of suppliers on time is regulated by the PFMA and MFMA. In his 2018 Budget Speech, the then Minister of Finance Malusi Gigaba promised that the week after the Budget Speech, “the Director-General of National Treasury will issue a directive to all government departments and public institutions, instructing them to pay suppliers on time, or be charged with financial misconduct. This must be monitored by accounting officers, and National Treasury will strengthen oversight mechanisms in this regard”.

Having heard nothing of the economic sabotage by government employees during the Q&A, my question to you is simply this Mr President: How far are we with this process?

There’s a lot of good work being done – not enough of course, but I recognise that work is being done to provide crucial support to small businesses. It is broad and some mechanisms included a fund with an allocation of R2.1 billion to benefit small and medium enterprises during the early start-up phase, the business hubs around several cities, and as mentioned above, amendments to laws which should assist small businesses.  

The government’s commitment to stabilising and revitalising SOEs is critical as these institutions provide critical services to the country and are an important economic growth potential. Black business depends on government and SOE procurement as this is the one area that government has direct ability to leverage procurement to support Black business. The hundreds and billions in government procurement spend could change the economic game plan and empower Blacks. But alas, much of this money goes to white businesses, fronting companies and smmes are paid when its often too late.

Government needs to recognise late payments as economic sabotage in the same way it recognises fronting and illicit flows of money out of the country as forms of obstructing government’s commitment to economic and social transformation. Just as there are mechanisms monitoring fronting, illicit flows and other forms of economic sabotage, so too should the conduct of employees who pay suppliers late, some even deliberately. There are many stories where government employees ask the supplier to pay them a kick-back if they want to be paid. This is criminal conduct. But the small businessman or woman trading with government have their hands tied – unlike in normal business where paying late has a negative impact on the relationship and future terms of payment – there are no repercussions for the government employee.

The entire supply chain management system is fraught with corruption but that is a discussion for another day.

What I’m telling you Mr President is something you already know. You can provide all the support in the world for small business. They can access financial support, get help from the business hubs, produce goods and even be given preference in providing services to government and the private sector, but it wont matter one bit if they will only be paid for those services a year later. Your example that you and a colleague from the labour movement were wearing caps made in China at a rally and your suggestion that those caps could have been made here at home, will only be to the detriment of that supplier if they are not paid.

All I’m saying Mr President is that you can change laws and regulations, you can provide small businesses with all the support and they can be equipped to provide all the services in the world, but it wont make any difference to all the efforts of an inclusive economy, if having provided all those services they are not paid and are instead led to bankruptcy.

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3 Comments

    1. Thanks Emjay, let’s all work together to demand accountability from the pubic sector. It is the only way small businesses will grow. So I look forward to the next weeks when people can come up and give us their stories.

      Kindest

      PK

  1. I had the same terrible experience with the Department of Housing after having completed a tender of theirs. My final payment was meant to be R128,000 odd and they ended up paying less than R50,000 saying the balance was for Batho Pele (whatever that means). This pittance barely paid the last of the suppliers but I had to make loans to cover the final materials to complete the job and till today have not been able to repay the loans that have escalated something ridiculous. I have their stamped agreement on the invoice that they would pay and despite fighting for my money for more than 5 years it availed to absolutely nothing but more expenses and losses.

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