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- Fifty companies have committed to paying small and medium enterprises within 30 days.
- Small businesses have been struggling with late payments and cash flow issues, risking bankruptcy.
- The business bodies expect 10% to 15% of small businesses to fail next year.
In a bid to keep small and medium-sized enterprises afloat amid the economic crisis, business bodies have launched a campaign to ensure payment within 30 days so that entrepreneurs can avoid bankruptcy.
The campaign, #PayIn30 was launched by Business for South Africa, Business Leadership South Africa and the SA SME Fund. It is also supported by Business Unity South Africa, the Small Business Institute and the Black Business Council.
According to a joint statement issued by the business bodies on Tuesday, 50 large companies formally committed to paying SME suppliers within 30 days. "Corporate South Africa recognises that paying their SME suppliers in 30 days is one of the key levers for an SME's sustainability," the statement read.
The initiative comes given the negative impacts of the Covid-19 pandemic on the SA economy. The economy is set to contract anywhere between 7% and 13% this year- the worst economic performance in 90 years. South Africa's jobless total 6.5 million, and consumer demand remains subdued.
Referring to data from TransUnion, the business bodies highlighted that 6.4% of formal SMEs have gone into bankruptcy this year. This translates into 260 000 jobs lost, and another 240 000 at risk.
A number of relief measures in place to help businesses and individuals are drawing to a close – this includes the Temporary Employer/Employee Relief Scheme. Payment holidays from banks are also coming to an end, the statement indicated. The business bodies estimated 10% to 15% of small businesses could fail next year – risking millions more jobs.
Before the Covid-19 crisis hit, small businesses were already struggling with late payments impacting cashflow. "Xero Accounting's survey in December 2019 found that 91% of SMEs are owed money outside of their payment terms and 47% cite cash flow issues and late payments as two of the main obstacles to their growth." The limited cashflow in turn impacts the ability of businesses to pay staff and their suppliers.
Busi Mavuso, CEO of BLSA, commented that the #PayIn30 initiative would institutionalise a culture of early payments to SMEs. "Over 50 companies have committed to this campaign, and we expect this number to increase in the months to come."
Among the 50 companies which have committed include financial services providers Allan Gray, FNB and Alexander Forbes, mining companies Sibanye Stillwater, Gold Fields, Implats, chemicals and energy company Sasol, BP and Total as well as hospital groups Mediclinic and Netcare.
"If there's no money coming into an SME from its customers, there's no money with which to pay their employees, lenders or their own suppliers. The knock-on effect of late payments reverberates across the economy. That's why early payment terms for SMEs are critical," said Aspen Pharmacare senior executive Stavros Nicoloau.
