The Public Service Commission has warned national and provincial governments that non-payment of service providers could lead to costly litigation against them.
PSC Commissioner Anele Gxoyiya issued the warning while delivering the Pulse of the PSC quarterly report from October 1 until December 31, 2021 in Pretoria on Wednesday.
Gxoyiya said government departments were required to settle all contractual obligations and pay all monies owed, including intergovernmental claims, within the prescribed 30 days from receipt of an invoice or, in the case of civil claims, the date of settlement or court judgment. He said late or non-payment of invoices imposes dire consequences on the financial health of businesses, such as liquidation.
“Late and non-payment of suppliers can expose departments to costly litigation for non-payment, including being ordered to pay interest on late payments resulting in the already scarce financial resources being diverted from priority areas.
“A case in point is the revelation in a written response to questions in the Gauteng Legislature by the MEC for Health (Nomathemba Mokgethi) that the Provincial Department of Health in 2020/21 paid R5 642 301 of interest on late payments while still owing a further R 91.8 million for penalty interest 1,” Gxoyiya said.
Detailing national and provincial departments not complying with the 30-day payment provision, Gxoyiya said there was an improvement in the payment of suppliers by the national departments during the third quarter, despite the late submission of information to the National Treasury.
The Department of Water and Sanitation, excluding its trading entity, still owes a significant number of invoices, which shows 199 invoices at a cost of R266 729 456 compared to 169 invoices at a cost of R351 373 606 at the end of September 2021.
For the Department of Mineral Resources and Energy the number of invoices seems relatively low, but of concern is the related cost at the end of December 2021 at R1 221 793 for 6 outstanding invoices.
Noteworthy is the significant increase in the number of invoices at the Department of Public Works and Infrastructure (DPWI) Trading Entity (PMTE), which recorded 356 invoices despite the lower cost as at the end of December 2021, compared to 23 at the end of September 2021 at a cost of R4 343 261.
Gxoyiya said the PSC remained concerned regarding the persistent late or non-submission of exception reports to the National Treasury, such as the Civilian Secretariat for the Police Service, Government Communications and Information Systems, International Relations and Co-operation, Basic Education, Higher Education and Training, Health, Agriculture, Land Reform and Rural Development, Employment and Labour, and Transport for the quarter under review.
On provincial governments, Gxoyiya said as at end of December 2021, the Eastern Cape had 24 887 outstanding invoices at a cost of R2 585 641 280 compared to 4 648 invoices at a cost of R2 280 024 142 at end of September 2021.
Gauteng recorded 5 550 invoices at a cost of R1 061 561 902 at the end of December
2021 compared to 4 855 invoices at a cost of R1 044 398 803 at the end of September 2021.
In the case of North West, a total of 5 296 outstanding invoices were recorded at a cost of R416 519 583 at the end of December 2021 compared to 4 340 invoices at a cost of R266 912 565 at the end of September 2021.
“Similar to the national departments, certain provinces submitted the exception reports late to the National Treasury. For the quarter under review, these are Mpumalanga for the end of October 2021 and North West for the end of December 2021.
“The PSC has made several recommendations taking into consideration the reasons provided by national and provincial departments, such as misfiled, misplaced or unrecorded invoices that are rooted in the lack of internal controls measures, which refer to not only the systemic issues but also human resources shortcomings,” he said.
Gxoyiya said the PSC supports the decision taken by the president as stated in the 2022 State of the Nation address that the appointment of the current chairperson of the Small Business Institute to head a unit in the presidency to “identify priority reforms for the year ahead, including mechanisms to ensure government departments pay suppliers within the required 30 days” as a response to the plight of small businesses in South Africa.
Political Bureau