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More than 50 large companies in South Africa have formally committed to pay their small and medium-sized business (SME) suppliers within 30 days, as part of an effort to ensure that SMEs survive the economic crisis.
The initiative is spearheaded by Business for South Africa (B4SA), the SA SME Fund and Business Leadership South Africa (BLSA), and is supported by, among others, Business Unity South Africa (BUSA), the Small Business Institute (SBI ) and the Black Business Council (BBC).
Large companies participating in the initiative include: Sasol, Massmart, Allan Gray, Aspen Pharmacare, AngloGold Ashanti, BP Southern Africa, FNB, Gold Fields, Liberty Holdings, OUTsurance, Remgro and Sanlam, among others.
The recession and the pandemic have had a devastating impact on the approximately 2.5 million SMEs representing 10.8 million jobs.
Data from Transunion suggest that 6.4% of formal SMEs go bankrupt (50% more than last year), with 260,000 jobs lost and another 240,000 at risk.
With a tight economy, bank pay vacation benefits coming to an end and the liquidation of the Temporary Employer / Employee Assistance Plan (TERS), is expected to increase to 10-15% of small businesses starting business. failure next year, with nearly a 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 out of their payment terms and 47% cite delinquency cash flow problems as two of the main obstacles to their growth.
This has a ripple effect: more than 20% had trouble paying their staff and vendors, and were denied access to finance due to poor cash flow.
The Covid-19 pandemic has exacerbated the problem. Some companies have taken advantage of the crisis to extend payment terms and have asked SME providers to lower fees. This is simply not sustainable for smaller companies. Corporate South Africa recognizes that paying its SME suppliers in 30 days is one of the key levers for the sustainability of an SME.
Busi Mavuso, CEO of BLSA, said the initiative aims to institutionalize a culture of prepayment for SMEs. “More than 50 companies have committed to this campaign and we expect this number to increase in the coming months. I am proud that our members recognize that we are all in this together and, as corporate leaders, we must do our part to help our economy grow. “
Adrian Gore, CEO of Discovery Group and Chairman of the SA SME Fund, said: “Paying our SME suppliers in advance is a clear demonstration of a shared value approach to business. As a society, we must begin to take bold action to grow our economy and preserve and create jobs. I believe that entrepreneurs are a powerful force and an integral part of this rebuilding. We need to support them. Therefore, I ask my fellow CEOs to join us in this important initiative. “
Allan Gray, CEO of Rob Formby, said: “The SME sector employs around 47% of South Africa’s workforce and accounts for 20% of GDP and has the potential to play a critical role in economic recovery and growth. future growth of our country.
“Cash flow is key, and these small businesses rely heavily on getting paid for their services so that they, in turn, can pay their staff and replenish supplies. Large corporations like us can make a big difference just by paying on time; a relatively small thing. I encourage others to do so to help this industry survive and prosper. “
BP Southern Africa, CEO of Taelo Mojapelo, said: “We continually foster a responsible payment culture within BP Southern Africa. Therefore, we are committed to working towards adopting a 30-day payment term as a standard for SMEs. This is particularly important in this challenging time of Covid-19, where businesses, especially SMEs, are experiencing cash flow challenges, and some are on the brink of collapse.
“I believe that as a large company we have a responsibility to help small businesses recover from the impact of Covid-19, and responsible payment terms and processes for services provided will be critical. We are passionately driving this within BP SA and constantly engage our service providers in complying with BP’s billing and billing procedure to avoid late payments. “
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