Late payment ‘killing businesses’
Small enterprises fail because they cannot get their money out of the Department of Health
THE Eastern Cape Department of Health has been accused of having a stranglehold on small business owners in the province after it emerged that it owed 6 577 suppliers a total of R431-million.
These figures were contained in a written answer provided by the MEC for Finance, Sakhumzi Somyo, in the provincial legislature this week. According to Somyo, the bulk of the payments have been outstanding for between 30 and 60 days, with 551 overdue for between two and three months.
There are 181 invoices that have remained unpaid for the past six months.
The unpaid debts by the Department of Health are 30 times more than the second highest outstanding amount, R14.4 -million, owed by the Department of Social Development.
The health department’s reasons for the non-payment of invoices within 30 days, supplied to Somyo, included contractors changing their banking details, the late submission of invoices, incorrect billing by suppliers, a dispute about rates and budget shifting requests.
He said in the past 30 days the department had paid 7 059 invoices, totalling R261 656 022.
Leader of the DA in the Eastern Cape Legislature Bobby Stevenson, who requested the written answer from Somyo, said the provincial government was killing small businesses by not paying them within 30 days.
“Small businesses are the backbone of growing the economy and have the potential to create 90% of new jobs. The slow payments to businesses that supply the Eastern Cape government departments are extremely detrimental to the economy as they result in the failure of businesses as well as having a neg- ative impact on their credit ratings.
“These slow payments are one of the reasons why the Eastern Cape has the highest unemployment rate in South Africa at 35.1%.”
Secretary for the Nelson Mandela Branch of the National African Federation Chamber of Commerce (Nafcoc) Mandla Msizi said the health department was the biggest offender when it came to paying small businesses late.
“Many small and medium businesses doing business with the provincial government face legal action because they are not paid in time.
“Business owners even lose their personal property when it is repossessed but none of the departments takes responsibility. It is a major reason why small and medium businesses shut down.”
He said they did not believe the reasons advanced by the Department of Health for non-payment.
“I think officials from the health department should get training in how to pay their service providers on time. All government departments have the same invoicing requirements but we only experience the problem on this scale with the Department of Health.”
Nolokhulo Sayis, a small business owner in Nelson Mandela Bay who supplies appliances to the Department of Health, said the department’s habit of paying late affected her business negatively.
“As a black small business owner I do not have capital. I am trying whatever I can to get money to create a supply.
“If the Department of Health does not pay me in time I have to borrow money. My profit then goes into paying interest.
“I also can’t pay those who are helping me in the business. At the moment I have been waiting for a payment from Dora Nginza Hospital for more than a month.
“When I ask them they say Bisho didn’t approve my payment.
“To me it seems that they are selecting who is to be paid. I am sure this is retarding every supplier’s progress to succeed and grow.
“We end up closing our businesses because of these delays in our payments because it becomes impossible to run a business without money,” Sayis said.
Health spokesman Sizwe Kupelo said the department’s goods and services budget was very tight as they took cash to settle medico-legal claims from this budget.
“We are currently engaged with the provincial treasury to find a solution,” he added.