Government fails businesses in South Africa

Several government departments have defaulted on the payments of thousands of invoices for services from businesses, which severely impacted the finances of those businesses.

The Public Service Commission (PSC) said that in the third quarter of 2022 – 1 October 2022 to 31 December 2022 – over 3,000 invoices were not paid to businesses that provided services within thirty days.

Although the PSC usually looks at payments for the whole quarter, most of the information it provided was in relation to non-compliance in December alone.

In December, numerous government departments were responsible for the non-payment of over R90 million to service providers.

PSC Commissioner Anele Gxoyiya said that the 1.6% expansion of the economy in the third quarter of 2022 would have been greater if government departments paid service providers on time, who could then pay their employees.

He added that several smaller companies have collapsed due to the lack of payment, as SMMEs could not meet their overhead costs, resulting in job losses.

He commended the departments of Defence, Water and Sanitation, and Social Development, which did not owe any of their service providers in December.

However, most government suppliers were not paid within the thirty-day limit.

The departments of Agriculture, Land Reform and Rural Development, Health, Home Affairs, Tourism, Public Works and Infrastructure and Stats SA were the worst-performing departments.

The Health Department was the worst offender and owed more than R55 million to businesses in roughly 2,000 invoices by the year’s end.

The situation worsens when looking at the non-compliance of provincial departments.

Gxoyiya noted that in the nation’s nine provinces, there are non-compliant departments, accounting for the non-payment of over R5 billion. 

The Eastern Cape and Gauteng were the worst offenders and owed R2 billion and R1.6 billion, respectively.

The Western Cape was the best-performing province and only owed roughly R200,000.

Gxoyiya said that provinces have regressed by 31.6% in payments compared to the previous quarter – adding that all progress made in the second quarter has been eliminated.

“The lack of consequence management is the main cause of the departments continuing as if everything is normal when service providers are suffering the pain of their businesses collapsing.”

“The intervention by the Portfolio Committee of the Public Service and Administration is yielding some positive results, albeit those results are at a slower pace,” he said.

He said that accounting officers must ensure that there are consequences for the non-payment of service providers, as this will ensure that these businesses do not collapse.

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