Monday, 30 July 2018

Letter to Business Day on why business should prioritise late payments

Yesterday's editorial in Business Day asked the question, is lip service paid to the SME sector? The answer is a resounding YES, for all sorts of reasons the editorial refers to. You can read it here.

This prompted me to write to the Editor to highlight one of the biggest burdens small businesses have to bear - late payments by customers.  You can read my letter here or below.

At the SBI Indaba last week Chairman of BLSA and the CEO Initiative Jabu Mabuza said late payments is an issue big business has to deal with. My question to him and new BUSA chair, Sipho Pityana is: when and how? If they don't give a clear direction on this issue soon I will be requesting the Portfolio Committee on Small Business Development to summon them to account in Parliament in our next term beginning in August.

Dealing effectively with late payments is the flip side of introducing a small business ombudsman, contained in a bill I tabled in Parliament in May. We have to deal with the source of the problem - putting our payments house in order - but also have a back-stop mechanism that deters offenders from repeatedly abusing their suppliers in the first place.

Dear Sir

Your editorial 'Lip services paid to SME sector' 30th July refers.

I commend the Small Business Institute (SBI) for its initiative in commissioning a baseline study of SA's SME sector. It is long overdue, and should have been a top priority for the newly created Department of Small Business Development in 2014.

As with the recently released FinFind Access to Finance survey, SBI reported that late payment of invoices and terms longer than 30 days are a small business killer. Government is a notoriously bad payer, mainly due to inefficiency and incompetence, but big business is not innocent either.

Business sits on an estimated R350 billion in payables. If just the overdue portion of that was injected into the economy it would have an enormous effect on the cash flow of small business owners, who would be able to invest, grow their businesses and create jobs.

The CEO Initiative makes much of its R1,6 billion SA SME Fund, but the potential positive outcomes of this pale into insignificance when compared to the negative consequences of delayed payments to suppliers. The 2017 Sage survey of late payments reported that small businesses write off more than 8% of their invoices by value due to non-payment. This can make the difference between profit and loss.

I urge the newly appointed Chairman of BUSA, Sipho Pityana, and Chairman of Business Leadership SA and the CEO Initiative, Jabu Mabuza, to take the bull by the horns and commit big business to finally address this matter. It would be the biggest single act they could take in easing the burdens small business owners face today.

Toby Chance MP
Shadow Minister Small Business Development

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