In both the public and private sectors, the non-payment of suppliers has emerged as a chronic issue undermining economic sustainability, business development, and the delivery of services. This problem is especially acute for small, medium, and micro enterprises (SMMEs), which often lack the financial resilience to withstand delayed payments. In South Africa and many other emerging economies, late or non-payment by government departments, state-owned enterprises, and large corporations is crippling entrepreneurial activity and compromising service delivery. Nasiphi Ndevu delves into the scope, causes, and impact of non-payment of suppliers, examines its legal and economic implications, and proposes systemic reforms to address this widespread issue.
Non-payment or late payment to suppliers is a global problem, but its magnitude varies significantly. In South Africa, the National Treasury mandates that government departments and entities must pay suppliers within 30 days of receiving an invoice, as per the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA). However, the Auditor-General (AGSA) has repeatedly flagged the non-compliance with this requirement in audit reports. The same trend persists in provincial and municipal governments. According to the AGSA 2024 report, billions of rands in supplier invoices remain unpaid past due dates. This not only contravenes financial regulations but also sabotages government credibility and service delivery goals. Small businesses are disproportionately affected by late or non-payment. These entities often operate on thin margins and rely on prompt payments to pay employees, purchase materials, service debts, and grow operations.
The Department of Small Business Development has previously noted that late payments are a key cause of SMME failure in South Africa. For startups and emerging black-owned businesses, non-payment represents not just a delay but a possible death sentence. Delayed payments in sectors such as healthcare, education, infrastructure development, and agriculture can halt critical services. For example, when suppliers of medical equipment or school materials aren’t paid, the knock-on effect is service interruption that affects citizens directly.
South Africa has strong legislative frameworks in place to prevent non-payment. These include Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA): These require payment within 30 days. Treasury Regulations: Enforce administrative accountability. Broad-Based Black Economic Empowerment (B-BBEE): Encourages inclusion of black-owned suppliers who are often the worst affected by late payments. Despite these regulations, enforcement remains weak. Many government departments fail to meet the 30-day rule, and repercussions are minimal.
There are many reasons that can lead to non-payment and one of the most cited reasons for late payment is poor financial administration, many departments still use manual systems, increasing the risk of error, and delaying processing times. In some cases, non-payment is linked to corruption. Certain officials may delay payments deliberately to extract bribes or favour certain suppliers. Some service providers, especially those with political connections, are paid on time while others are sidelined. Government entities may not have sufficient cash flow to meet their obligations due to poor budgeting, misallocation of funds, or overspending. Administrative inefficiencies, including excessive documentation requirements, long approval chains, and staff shortages contribute to processing delays. Even when departments are in clear violation of payment regulations, consequences are rare. The lack of disciplinary measures for defaulting officials perpetuates the problem.
Delayed or withheld payments directly contribute to insolvencies, especially among SMMEs. According to estimates by Business Unity South Africa (BUSA), thousands of jobs have been lost due to non-payment by public and private entities. When businesses cannot meet their payroll due to delayed payments, employees suffer. This undermines national employment goals and exacerbates poverty and inequality. Entrepreneurs lose confidence in formal systems when they are not paid for work done. This discourages business participation, especially among youth, women, and previously disadvantaged communities. Suppliers who are not paid cannot deliver goods and services. This disrupts healthcare delivery, infrastructure projects, school programmes, and basic services like waste management or public transport.
In recent years, the Gauteng Department of Health has faced backlash over unpaid invoices totalling over R1 billion to service providers. This led to shortages of medical supplies, delays in maintenance of hospital equipment, and mass protests by suppliers. Infrastructure projects across South Africa have stalled due to non-payment. In many instances, emerging contractors working on school renovations or road upgrades abandon projects mid-way due to cash flow constraints, leaving communities stranded. According to the 2023 AGSA report, 91 municipalities were found to be in material breach of the 30-day payment rule. Many owed suppliers for over six months, severely impacting local economic activity.
In his 2021 State of the Nation Address, President Cyril Ramaphosa acknowledged the issue and committed to resolving it. National Treasury introduced measures to fast-track payments and penalise non-compliant departments. The CSD was intended to streamline supplier vetting and payment processes. While a good initiative, it has not fully addressed systemic payment delays. Several provinces have established task teams to monitor and enforce payment compliance. In some cases, this has led to improvements, but results remain inconsistent. Efforts have been made to encourage whistleblowing on payment delays, though uptake remains low due to fear of victimisation.
This can be corrected by making sure that there are automatic consequences for departments and officials that do not comply with the 30-day rule. These could include withholding of budget allocations, disciplinary action and public blacklisting of defaulting departments. Electronic invoicing systems would reduce manual errors, speed up approval processes, and improve transparency. A national Supplier Ombud office could be tasked with receiving complaints, auditing delays, and compelling payments. This independent body would serve as a watchdog with enforcement powers. Departments must invest in training and hiring competent financial administrators. Many delays stem from under-staffing or lack of skills. Budget lines for supplier payments should be protected to prevent diversion of funds to other projects. Departments should be required to publicly disclose their monthly payment statistics. Transparency increases accountability.
While public entities are the main culprits, large corporations also delay payments—especially to small suppliers. The King IV Report on Corporate Governance encourages timely payments as part of ethical business conduct. Private sector players should adopt payment performance targets, and business chambers can play a role in naming and shaming defaulting corporations. The issue of non-payment of suppliers is not merely a bureaucratic challenge—it is an economic emergency. Without systemic reform, non-payment will continue to stunt economic growth, deepen unemployment, and undermine transformation efforts. Government must lead by example, honour its obligations, and rebuild trust with suppliers. Simultaneously, the private sector must uphold ethical standards and support supplier development by paying on time.
For South Africa and other countries to build inclusive and resilient economies, prompt payment of suppliers must become non-negotiable. Only then can entrepreneurship thrive, jobs be created, and services delivered efficiently to the people. The non-payment of suppliers is a multi-faceted problem that demands a coordinated response. Strong laws already exist—but their impact is blunted by poor enforcement, lack of accountability, and administrative inefficiency. It is essential that both the public and private sectors adopt a zero-tolerance approach to payment delays. At stake is not only the survival of small businesses, but the broader goal of sustainable development and economic justice. The future of thousands of businesses, jobs, and livelihoods depends on it.
