Finance

Government’s R35 billion headache

Cyril Ramaphosa

Government and provincial departments failed to pay R35 billion worth of invoices within thirty days of their receipt – as required by law. 

The National Treasury revealed this in its annual report on noncompliance. The report shows that thousands of invoices have been unpaid for over a month. 

It also showed that national and provincial departments pay fewer invoices within thirty days as their financial health deteriorates. 

The report showed that in the 2023/2024 financial year, 362,068 invoices were unpaid within thirty days by national and provincial departments. 

These invoices were worth R35.1 billion and were settled at the end of the financial year. 

National Treasury said provincial departments were responsible for most of the unpaid invoices, but they paid only 30% within thirty days. 

National departments, on the other hand, improved their financial discipline but still failed to pay their invoices within the timeframe stipulated in the Public Finance Management Act (PFMA). 

The biggest culprit among national departments was the Department of Defence, which had 84,934 invoices unpaid within thirty days with a value of R1.4 billion. 

This was followed by the Department of Agriculture, with 1,164 invoices worth R1.37 billion. 

Finance Minister Enoch Godongwana has previously bemoaned the substantial impact the failure to pay invoices has on businesses that provide the government with goods and services. 

In particular, small businesses suffer as they cannot wait over thirty days to be paid for their goods or services rendered. 

The Public Service Commission (PSC) said national and provincial departments have poor financial controls and a lack of funding, which results in invoice nonpayment. 

The PSC said only 15 of the government’s 40 national departments paid their invoices on time. 

“The most common reasons provided by both the national and provincial departments for the late or nonpayment of invoices are interruptions caused by poor internal controls, internal capacity and budget constraints,” it said. 

Finance Minister Enoch Godongwana

While the late payment of invoices significantly impacts businesses, it has a much larger effect on municipalities. 

National Treasury’s data showed that government departments owed municipalities R22 billion as of the end of 2023. 

Godgongwana called on municipalities to enforce their debt management policies and hold national departments, in particular, accountable. 

Municipalities can also use their bylaws to force other state entities, such as state-owned enterprises, to pay their bills. 

Existing legislation, such as the PFMA and Municipal Finance Management Act, allows municipalities to halt services to state entities if they do not settle their bills within thirty days. 

“Even if the customer questions the accuracy of the bill issued by municipalities, which may be a valid concern, it is not acceptable not to honour the payment for services consumed,” he said.

The National Treasury flagged the nonpayment of invoices in its latest local government revenue and expenditure report as one reason why it is deeply concerned about the financial health of South Africa’s 257 municipalities. 

National Treasury said local government revenue collection remains weak, increasing municipal debt as they cannot manage their cash flow properly. 

It also said that municipalities misuse the funds they receive, preferring to spend it on salaries and consumption rather than investing in infrastructure and service delivery. 

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