Government crushing South Africa’s largest employer

The South African government is increasingly failing to pay service providers on time, with severe consequences for small businesses. 

Many of these businesses rely on payments to purchase stock for future sales, pay salaries, or pay back loans. This means that late payment, or in some cases non-payment, can prove fatal. 

The National Treasury’s latest payment data points to a worsening late payment crisis across national and provincial government departments.

At the end of the second quarter of 2025, 95,399 invoices older than 30 days with a combined value of R12.4 billion remained unpaid. 

This represents a regression of almost 17%, or an additional 13,663 unpaid invoices, compared to the end of the first quarter, when 81,736 invoices were outstanding.

Business Partners area manager Lawrance Ramotala said this raises serious concerns about the sustainability of current payment terms for South African small and medium-sized enterprises (SMEs).

The value of unpaid invoices has also worsened over time, with National Treasury data showing the value of invoices older than 30 days rose from R11.7 billion at the end of the first quarter to R12.4 billion by the end of the second quarter. 

This reflects an over 5% deterioration, or R663 million, over a single quarter.

For small businesses, these figures translate into far more than administrative inefficiencies, as they can prove fatal for businesses reliant on payments to purchase stock or pay salaries. 

“Late payments are not just a cash-flow inconvenience for SMEs, they are a direct threat to business continuity,” Ramotala said. 

“Unlike large corporates, most small businesses do not have the balance sheets or reserves to absorb prolonged payment delays.”

The impact is particularly severe for sectors that operate on tight margins and high volumes, such as retail and manufacturing.  

These businesses rely on consistent cash inflows to replenish stock, fund production cycles and meet day-to-day expenses. 

“When payment cycles stretch beyond 30 days, it disrupts the entire operating rhythm of a small business. That uncertainty makes planning almost impossible,” Ramotala said. 

Ripple effects

Ramotala explained that these late payments can have a ripple effect on the broader economy, with the impact being exacerbated as small businesses come under pressure and fold. 

“When SMEs are not paid on time, they are often forced to delay paying their own suppliers, many of whom are also small businesses,” Ramotala explained. 

“This can set off a chain reaction of late payments that spreads across value chains, further weakening already fragile business ecosystems.” 

Late SME payments also lead to salary payments being delayed or staggered. For employees, many of whom are the sole or primary earners in their households, this immediately disrupts their ability to meet essential monthly obligations.

Missed or late salary payments can push families into debt cycles, cause emotional stress, and erode financial stability. Over time, this strain affects productivity, morale, and retention, while placing additional pressure on social support systems.

“What may begin as a single late invoice can therefore escalate into real‑world hardship for households, contributing to wider socio‑economic vulnerability,” Ramotala warned. 

Beyond immediate cash-flow challenges, persistent late payments undermine SMEs’ ability to invest in growth, resulting in significant lost economic activity. 

Businesses are less likely to expand operations, hire additional staff, invest in new equipment or increase inventory levels when income streams are unpredictable. 

Over time, this constrains job creation and limits the contribution that small businesses can make to economic recovery and growth.

“South Africa’s SMEs are resilient, but this resilience has limits. When delayed payments become the norm rather than the exception, even well-run businesses are pushed into survival mode,” Ramotala said. 

“Addressing the late payment crisis is critical to safeguarding the sustainability of the SME sector and the millions of jobs it supports.”