In an effort to ensure small and medium sized businesses (SMEs) in South Africa survive the economic crisis, exacerbated by the Covid-19 pandemic, more than 50 large companies have formally committed to paying their SME suppliers in 30 days.
The initiative, called #PayIn30, is spearheaded by Business for South Africa (B4SA), the SA SME Fund, and Business Leadership South Africa (BLSA), and supported by, amongst others, Business Unity South Africa (BUSA), the Small Business Institute (SBI) and the Black Business Council (BBC).
The recession and pandemic have had a devastating impact on the approximately 2,5-million SMMEs accounting for 10,8-million jobs.
Transunion data points to 6,4% of formal SMEs going into bankruptcy (up 50% from last year), with 260 000 jobs lost and another 240 000 at risk.
With a tightening economy, the benefits of the banks’ payment holidays coming to an end, and the winding down of the Temporary Employer/Employee Relief Scheme (TERS), this is expected to rise to 10% to 15% of small businesses going into business failure next year, with almost 1-million jobs lost and at risk.
Even before the crisis, one of the key pressure points for SMEs was access to working capital and cash flow: Xero Accounting’s survey in December 2019 found that 91% of SMEs are owed money outside of their payment terms and 47% cite cash flow issues and late payments as two of the main obstacles to their growth. This has a domino effect: more than 20% struggled to pay their staff and suppliers, and were denied access to finance because of poor cash flow.
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. 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, says: “#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. I am proud that our members recognise that we’re all in this together, and as corporate leaders, we need to do our part to help our economy grow.”
Adrian Gore, CEO of Discovery Group and chairperson of the SA SME Fund, comments: “Paying our SME suppliers early is a clear demonstration of a shared value approach to business. As a society, we need to start implementing bold actions to grow our economy and preserve and create jobs. I believe entrepreneurs are a powerful force and an integral part of this rebuilding. We need to support them. Hence I’m calling on my fellow CEOs to join us in this significant initiative.”
Jomo Khomo, CEO of Kele Mining and a 2019 CEO Circle Entrepreneur, adds: “This is a wonderful campaign that will have a major impact on small businesses like ourselves who service large corporates. We don’t have the luxury of a ready supply of working capital or extended credit facilities, so cash flow management sits at the heart of our ability to succeed. Without this, we can’t retain a healthy credit rating, or pay our own creditors and employees on time. It’s really great to see so many CEOs standing up for smaller businesses. This is the type of ethical leadership we need in a crisis.”
by IT-Online – https://it-online.co.za/2020/11/17/ceos-commit-to-paying-sme-suppliers-within-30-days/