Small firms collapse after state fails to pay invoices

THE NINE provincial governments, especially their health departments, are responsible for the closure of many small businesses for failing to pay them for their services.

These damning details are contained in the Public Service Commission’s quarterly report on the non-payment of government suppliers by various organs of the national and provincial governments.

The report was released by Commissioner Mike Selloane in Pretoria yesterday.

The Public Service Commission (PSC) listed Gauteng and Eastern Cape provincial governments as the two major contributors to the collapse of small businesses for their failure to pay them within 30 days.

The national Department of Water and Sanitation, under Minister Lindiwe Sisulu, was third on the list of major defaulters, according to the report.

All three of them individually owe small businesses billions of rand in unpaid services.

Adding to the misery of the affected companies, these billions are a calculation of unpaid invoices dating back to between April and June this year only.

The PSC found that the Gauteng government had a total of 30 713 in unpaid invoices for April alone, amounting to over R2.6 billion.

In May, the unpaid invoices totalled 21 818, amounting to over R1.7bn.

In June, the invoices were reduced to 20 654 worth R1.5bn.

In total, Gauteng owed service providers R5.9bn for the first quarter of 2019.

The Eastern Cape government showed a similar trend, and owed service providers over R4.2bn at the end of June. North West government owes R1.3bn; the Free State R1.2bn; Northern Cape R674 million; Mpumalanga R586m; KwaZulu-Natal R510m; Limpopo R432m; while the Western Cape has the lowest bill of R2.7m.

The national Water and Sanitation Department owes service providers R3.3bn. The SAPS owes service providers almost R80m, while Cooperative Governance has a bill of nearly R50m.

The Presidency has a bill of just over R100 000.

The PSC has found that the situation is dire in the provincial governments; while the nine provincial departments of health were singled out as the worst defaulters.

Selloane said that was due to the fact that the implementation of government programmes largely took place in the health departments.

“The failure by government departments to honour their financial obligations to suppliers has wrought untold damage to the economy with many suppliers having to close down, because of the lack of cash flow.

“This inevitably has resulted in many retrenchments,” Selloane said.

He said defaulting on payments had also impacted on service delivery, as many service providers had withheld their services from government departments.

“Some are avoiding doing business with the government for fear of financial ruin.

“The lack of cash flow on the part of service providers has also resulted in the abandonment of projects aimed at alleviating service delivery backlogs,” Selloane said.

He blamed the escalation of debt on the lack of internal controls.