SMD

Annual Report 2023/2024

Matters raised by the Portfolio Committee Department’s response The late and/or non-payment of invoices has a major negative impact on the financial health of suppliers, sefa has a Purchase Order Funding product and this is successful where firstly the SMME is willing to sign a cession agreement between the SMME, sefa and the State-Owned Entity (SOE), and secondly where the SOE is willing to sign an MOU with sefa committing to honour the cession agreements with sefa . These MOUs are necessary, given the history of some SOEs not honouring the cession agreements with sefa . who are frequently forced to borrow money in order to stay afloat financially and satisfy their contractual responsibilities with the State entities. Despite the fact the Department has done well in terms of paying its creditors within 30 days, achieving 100 percent during the year under review, its approach however, is internally focused or inward-looking. As the guardian of small business growth, the Department must establish an indicator for implementation in collaboration with National Treasury to track delinquent invoices. Where state organs are failing to pay uncontested invoices within 30 days, sefa must be on standby to pick up the tab through cession arrangements. This indicator must be included in the upcoming MTSF and APPs.

The DSBD, following consultations with National Treasury and the Department of Planning, Monitoring and Evaluation (DPME) made recommendations to the Standing Committee on Appropriations and Appropriation Bill, to strengthen the enforcement of compliance to the 30-day payment obligation to ensure that all organs of state will pay invoices to small enterprises within the required timeframe of 30 days.

The Department is also working with National Treasury to strengthen regulations on the reporting requirements for the late payment of legitimate supplier invoices to differentiate between small enterprise suppliers and large enterprise suppliers. This will enable the Department to specifically follow-up on the late payment of legitimate small enterprise suppliers.

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Department of Small Business Development • GOVERNANCE • Part C