GOVERNMENT departments are to be closely monitored to ensure they pay suppliers within 30 days, Minister in the Presidency for Performance Monitoring and Evaluation Collins Chabane said on Thursday.
Failure to abide by this requirement of the Public Finance Management Act has previously caused severe liquidity problems for small businesses, with some having to shed jobs and close down.
Civil engineering company Sanyati went into liquidation earlier this year after a business rescue plan was terminated. It blamed its financial woes on the Free State government’s prolonged nonpayment for work it had done for the province.
Several service providers to the Gauteng health department have been under severe financial distress as a result of unpaid claims worth millions of rand.
President Jacob Zuma has raised the issue several times in response to widespread complaints by small businesses that nonpayment was "killing" their businesses.
The practice undermines government’s strategy to use its procurement muscle to promote the small business sector and as a means to achieve black economic empowerment and promote job creation.
The small business sector is commonly acknowledged worldwide as the engine of job creation, and delayed payment by departments acts as a brake on this process.
Mr Chabane said at a post-Cabinet media briefing on Thursday that the Treasury would set up a dedicated system to check compliance by national and provincial departments with the rule.
Mr Chabane said the system would be up and running next year and would allow the Treasury to identify when the 30-day rule was not being adhered to by any given department at any particular time and to seek explanations.
Late payments were sometimes due to disputes between government and its suppliers.
Earlier this month the Treasury’s chief director for supply chain management, Henry Malinga, expressed concern that many departments saw the full 30 days as the target.
He did not see any reason why service providers could not be paid within days after an invoice had been certified as a true reflection of the work that was meant to be done.
Interest on late payments to service providers was fruitless and wasteful expenditure for which officials should be disciplined and held personally accountable.
The Cabinet also approved recommendations to strengthen and align public procurement to the national industrial programme.
"The recommendations will streamline the public procurement that is currently done within national Treasury regulations and the provisions of broad-based black empowerment and the national industry participation programme," Mr Chabane said.
"The streamlined procurement will enable better monitoring of the overall implementation of both the national industrial framework and New Growth Path programmes."
Mr Chabane said the Cabinet was also briefed on progress in preparing for the Brics (Brazil, Russia, India, China and South Africa) summit which South Africa will host in March next year.