Kenyan suppliers are blacklisting supermarkets that default on payments for deliveries © Getty Images
Kenyan suppliers are blacklisting supermarkets that default on payments for deliveries © Getty Images

Large firms commit to pay SME suppliers in 30 days

19 November 2020

More than 50 large companies in South Africa have formally committed to paying SME suppliers in 30 days to help small suppliers survive the economic crisis caused by the Covid-19 pandemic.

The #PayIn30 initiative has been spearheaded by Business for South Africa (B4SA), the SA SME Fund, and Business Leadership South Africa (BLSA).

In a joint statement the organisations said the recession and pandemic had “had a devastating impact on the approximately 2.5m SMMEs accounting for 10.8m jobs”.

The statement cited data from American consumer credit reporting agency Transunion showing 6.4% of SMEs in South Africa went into bankruptcy this year –up 50% from last year – and that 260,000 jobs had been lost, with another 240,000 at risk.

South Africa’s economy is continuing to suffer from the pandemic: banks’ payment holidays are coming to an end and a scheme to support businesses, the Temporary Employer/Employee Relief Scheme, is due to finish.

A combination of these factors is expected to result in the proportion of SMEs going out of business rising to between 10% and 15%, with almost a million jobs lost and at risk.

The organisations said access to capital was a key pressure point for SMEs pre-crisis and a decision to streamline payment terms could provide a lifeline for small suppliers.

They said a Xero Accounting survey in December 2019 found 91% of SMEs were owed money outside of their payment terms.

Half (47%) said cash flow issues and late payments were two of the main obstacles to their growth, with more than 20% struggling to pay staff and suppliers.

“Covid-19 has made this problem worse. Some companies have used the crisis to extend payment terms and have asked SME suppliers to reduce fees,” said the statement.

“This is simply not sustainable for smaller businesses. Corporate South Africa recognises that paying their SME suppliers in 30 days is one of the key levers for an SME’s sustainability.”

Busi Mavuso, CEO of BLSA and steerco member of B4SA, added: “#PayIn30 is aimed at institutionalising a culture of early payments of SMEs.

“Over 50 companies have committed to this campaign, and we expect this number to increase in the months to come.”

Meanwhile in Kenya manufacturers and suppliers aim to blacklist supermarkets that default on payment for deliveries after recently suffering losses due to the collapse of three giant retailers, the Business Daily newspaper reported.

Nakumatt, Uchumi and Tuskys owed considerable sums to suppliers when they collapsed, pushing some SME suppliers to the brink of collapse.

The Kenya Association of Manufacturers (KAM) said a new credit information-sharing mechanism between factories and suppliers, organised by the Industry Credit Group, could stop retailers rapidly cycling between vendors after defaulting on payments to others.

“We found, overtime, that there are notorious bad payers who will take [stock] from one manufacturer, spoil that credit then move to another and repeat the same, and because of competition pressures people keep giving merchandise,” KAM chairman Mucai Kunyiha said.

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