Letter to President Cyril Ramaphosa on late payments to suppliers to government

NATIONAL ASSEMBLY

MEMBER OF PARLIAMENT

PO Box 15 Cape Town 8000 Republic of South Africa

Tel: +27 (21) 403-3595/8911, Fax: 086 730 5690

Cell: +27 (0)83 251 5613

e-mail: toby@tobychance.com

www.parliament.gov.za

www.da.org.za

Toby Chance MP

Shadow Minister OF SMall Business Development

Member of Parliament for Soweto west

                                                                                                                                                                           5 March 2018

President Cyril Ramaphosa

Union Buildings

Pretoria

Republic of South Africa

Dear President Ramaphosa

PAYMENT PLAN URGENTLY REQUIRED TO PAY BUSINESS SUPPLIERS TO GOVERNMENT

I would like to congratulate you on your election as President of South Africa and
wish you well in the carrying out of your duties.

As you are aware and expressed in your reply to the state of the nation debate, small business development is critical for economic growth and job creation in our country.

Cash flow makes or breaks a small business. If one does not have the cash to pay expenses and salaries, then one’s business can’t survive. Simply put: no cash equals no business. This is a reality even if a small business has all the customers it wants and talented employees who do their jobs well.

A small business, low on cash, will delay paying its suppliers and employees and often miss tax payment deadlines, so incurring costly penalties. It can’t pay what it doesn’t have. Unfortunately, this leads to more problems that eventually reach a point when there’s no saving the business.

In your reply to the state of the nation debate, you commented on late payments by government departments by stating:

“This is something that I want to see addressed as I visit government departments, because the culture of late payment has gone on for far too long and has caused far too much damage, particularly to emerging black businesses.”

Former Finance Minister, Malusi Gigaba, made a similar commitment during his budget speech when he said government departments and institutions that do not pay suppliers on time will be charged with financial misconduct.

The DA welcomes these commitments. However, our optimism is tempered with caution because government’s previous promises to pay small business owners what is due to them have not been met.

One of the tests in your first 100 days in office will be to ensure that more than 100 000 unpaid invoices, worth over R7.7 billion, much of it to small businesses, are paid out as a matter of urgency. If provincial and local government are included these figures will be much larger. This figure was revealed through responses to Parliamentary Questions the DA put to all national departments. Some of the major culprits include:

•        Transport Department: Passenger Rail Agency of South Africa @ R1.12 billion;

•        Public Works Department: Property Management and Trading Entity @ R1.06 billion;

•        Water and Sanitation Department: R968 million;

•        Transnet @ R788 million and

•        Denel @ R688 million.

It is not acceptable that, at a time when unemployment is at an all-time high and small businesses are struggling to stay afloat due to an underperforming economy, government fails to pay these businesses within the 30 day window period stipulated in the Public Management Finance Act.

It will be impossible for government to achieve its stated aim that 90% of all new jobs be created by small businesses by 2030 as indicated in the National Development Plan, if their cash flow is disrupted due to non-payment by departments who send them from pillar to post with contempt often resulting in them closing their doors.

The DA therefore calls on you to devise and implement a Small Business Suppliers Payment Plan, managed from your office in collaboration with the Treasury, the Department of Planning, Monitoring and Evaluation and the Department of Small Business Development, to end the misery that small business owners have endured for years without recourse.

The DA will be presenting our own set of recommendations and measures to tackle this problem in the coming weeks. In the spirit of collaboration expressed by both DA Leader Mmusi Maimane and yourself in the SONA debate and response, we would welcome an open dialogue to solve this problem which is of grave national importance and can no longer be ignored.

Given the gravity of problem I trust that you will proceed to address it with the urgency it demands. 

Yours Sincerely

Toby Chance MP

Shadow Minister of Small Business Development

Member of Parliament for Soweto West