The “Pay in 30 Days” initiative has the power to save many small and medium-sized businesses in South Africa!
Johannesburg, South Africa (01 December 2020) – South African businesses have signed a public agreement to pay small and medium enterprise (SME) suppliers within 30 days!
In an effort to ensure 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 “Pay In 30”, 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 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 10-15% of small businesses going into business failure next year, with almost a million jobs lost and at risk.
“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,” says Adrian Gore, CEO of Discovery Group and Chairperson of the SA SME Fund.
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.
“Pay In 30 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,” says BLSA CEO Busi Mavuso, who is also a member of the B4SA steering committee.
“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,” she adds.
South African business owners are excited about the initiative and are hoping this will change historical payment challenges they have faced.
“This initiative is incredible!!! As a small business owner, we have suffered for years at the hands of big corporates – and funny enough two of the brands that have signed up, kept us waiting for payment for over 8 months! Hopefully, they are not just joining for publicity and will stick to their new promise.” – South African Business owner who wishes to stay anonymous.