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Friday, 11 May 2018
Media statement - DA proposes establishment of an SME Ombudsman to save jobs
Date: 11 May 2018
Today, DA Leader, Mmusi Maimane MP, DA Shadow Minister of Small Business Development, Toby Chance MP and the DA Gauteng Shadow MEC for Provincial Treasury and e-Government, Adrianna Randall MPL, presented a Private Members Bill(PMB), to be presented in Parliament, that will see the establishment of a Small and Medium Enterprises (SMEs) Ombud service to mediate disputes and resolve late payment issues between SMEs and government in order to save jobs.
In a country with almost 10 million unemployed people we should be focusing on SME's as the drivers of job creation and we need to find ways to support them to do so. However, national government is notorious for late and non-payments to SME's who do business with the state. Government departments have as much as R7 billion in outstanding invoices to date. This threatens SMEs survival and their ability to create jobs.
To address this, the DA's proposed SME Ombudsman will specifically be tasked with resolving disputes between an SME and clients such as government departments, non-government entities such as corporates, who are the biggest offenders in the private sector. The dispute resolution function of the Ombudsman will focus on contractual agreements, late or non-payment of amounts owed and payable within the 30 day window period.
The DA's proposal for an SME Ombudsman, is informed by a party discussion documentwhich showed that national government remained the worst offender on late and non-payment to SMEs which conduct business with the state. This bad culture has seen government departments sitting on more than R7 billion in unpaid invoices to SMEs, threatening their survival and ability to create jobs.
While SME's generate half of South Africa gross domestic Product (GDP) and nearly 60% of employment in the country, the sector has seen many businesses close shop or retrench workers due to the failure by government to pay for services rendered within the 30-day window period.
In addition to the establishment of an SME Ombudsman to deal with the problem of late payments, the DA discussion document also proposes the following solutions from the private sector:
• business assistance services to help SMEs improve internal administrative capacity including the production of appropriate invoices as well as the management and delivery of said invoices to clients. • optimisation of cash flow through supply chain finance that allows businesses to lengthen their payment terms to their suppliers while providing the option for their large and SME suppliers to get paid early. • voluntary commitments such as the Prompt Payment Code, which the National Small Business Chamber (NSBC) has championed, strive to improve payments to SME suppliers within 30 days.
In presenting the proposal, the DA was joined by the CEO of the National Small Business Chamber (NSBC), Mike Anderson. The NSBC, a non-profit membership organisation for small business that is currently running the 'Prompt Payment Code' campaign, expressed its full support for the DA's proposal for an SME Ombudsman.
The explanatory memo for our PMB was published in the Government Gazette 41623 on the 10 May 2018 (see here) and we call for all South Africans to consider the contents of the notice and to submit their comments and input.
The success of President Cyril Ramaphosa's investment drive will only be determined by his commitment to a sustainable SME sector that is well supported through growth enablers such as an SME Ombudsman.