THE government is mulling drastic measures that would push departments to pay small and medium-sized service providers on time, or at least within a month, to minimise the risk of these businesses failing because of late payments, President Jacob Zuma said at a Black Management Forum gala dinner on Friday.

The measures would be incorporated into the performance contracts of senior government officials. Those who failed to pay small businesses on time would face disciplinary action, Mr Zuma said.

Sanyati, the black-empowered civil engineering company, recently announced it was facing a liquidity crunch due to the government's inability to pay it on time. It asked the JSE in June to suspend trading in its shares temporarily as it tried to secure funding, saying its operations had been materially affected by "significant" unpaid bills of up to R80m owed by certain government clients.

The company then applied for bankruptcy protection under chapter six of the new Companies Act, which aims to create a debtor-friendly environment in which creditors can co-operate with a rescue practitioner to commit to a rescue plan for the company.

"We are considering these drastic measures because we want to promote small-business development in our country in order to boost job creation. Failure to pay them on time is tantamount to sabotaging government objectives," Mr Zuma said.

The president also said the government was proposing stiff sanctions against companies fronting as black economic empowerment businesses. The sanctions are contained in the Broad-Based Black Economic Empowerment Amendment Bill, which makes provision for penalties such as imprisonment of up to 10 years or a fine amounting to 10% of a guilty company's turnover.

Touching on South Africa's large-scale infrastructure build plans, estimated to top R3,2-trillion over the next two decades, Mr Zuma said the programme would be used to build competitive supplier industries that would create more employment. He added that black construction companies had to be brought into various parts of the supply chain, and not as minority shareholders.

"We want to see one or more of the big five construction companies being run and owned by black entrepreneurs, who must develop skills as construction people, cement makers or steel producers," Mr Zuma said.

ndzalemap@bdfm.co.za