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JOHANNESBURG - S outh African small and medium enterprises (SMEs) are considered engines of economic growth and job creation, but a recent report shows that the country’s SMEs are owed billions of rand as a result of late payments.

Global small business platform, Xero this week released new research that reveals South Africa’s SMEs were each owed R99 800 in late payments at any given time.

The new "State of Late Payments" report surveyed more than 500 SME owners in South Africa.

It reveals that 91 percent of small businesses are owed money outside of their payment terms.

SMEs account for roughly 47 percent of South Africa’s workforce and contribute more than 20 percent to the country’s gross domestic product (GDP).

The National Development Plan states that by 2030, SMEs could contribute 60-80 percent to GDP increase and generate 90 percent of the 11 million new jobs here.

Given there are an estimated 2.5 million SMEs in South Africa, this means the national scale of late payments could equate to a staggering R249.5 billion.

Big corporates and government departments are often guilty of not processing payments speedily due to intricate and bureaucratic payment processes and systems.

Xero South Africa’s general country manager, Colin Timmis, said it was not just the impact on financials and growth that was the issue, late payments impacted personal wellbeing too.

“It’s not right, or fair that SMEs have to deal with late payments. They live or die by their cash flow – and if they’re not paid, they can't survive,” Timmis said.

“Just think what they could do with an extra R99800, it could contribute towards a salary or pay for some new technology.”

This issue of paying SMEs late was also raised by Business Partners Limited as far back as 2015.

David Morobe, the executive general manager for impact investment at Business Partners, said on Friday, "This is an issue we have raised repeatedly, us as a company and other business bodies. Late payment is responsible for many small business demise, and responsible for lack of cash flow. It restricts the opportunity to grow and expand," Morobe said.

"It's like someone receiving half of their salary or no salary at all. I think it must be attended to from policy perspective. The National Treasury has been looking at penalties for those who are paying SMEs late, or automatic interest for lapsed period of time. It's a good initiative, but it should apply also to big corporations,  not only to government. Some big companies use SMEs as their credit facility and it is killing them (SMEs)."

Timmis said  National Treasury's recently released an economic policy paper stating that small businesses should be able to charge government interest over late payments often associated with public procurement, was a step in the right direction.

But Timmis said more needed to be done to effect real change for small businesses as innovations, such as accounting software, were already helping SMEs to reduce the burden.

The "State of Late Payments" report also states that on average, SMEs waste 89.5 working hours per year - the equivalent of two working weeks - chasing late payments.

The research found that 47 percent of respondents listed cash flow and late payments as one of the main threats to their long-term growth aspirations as a business today.

More than a fifth of respondents that had invoices paid late said they struggled to pay their suppliers on time, and 20 percent said they struggled to pay their staff.

BUSINESS REPORT