1. Progress Report on Payment of Suppliers
06 June 2018
Ms Mpumi Mpofu
Director-General

2. Purpose
To provide an update to the President’s Coordinating Council (PCC) on the progress on payment of suppliers within 30 days.
To appraise the PCC on measures being taken to address continuing challenges on payment of suppliers.

3. Background and Context
Government has identified the small business sector as an important area to grow the economy and reduce unemployment, hence the establishment of the Department of Small Business Development.
One of the challenges faced by the sector has been the late or non-payment of suppliers.
The establishment of a unit on payment of suppliers gives evidence to government’s unwavering resolve to address this challenge.

4. Background and Context
Following a Cabinet decision in 2015, the DPME has been attending to cases of unpaid invoices. To this end, the department has facilitated payments of over R300m to service providers.
This presentation and the accompanying report seek to provide progress on government efforts to address the problem.
Progress is measured in two main areas:
Number and Rand Value of invoices paid after 30 days.
Number and Rand Value of invoices older than 30 days and not paid.
The report is sourced from the information submitted by departments and provinces to the National Treasury on a monthly basis as part of the requirements of Instruction Note 34 of 2011.

5. PERFORMANCE OF NATIONAL DEPARTMENTS

6. Performance of National Departments – Invoices Paid after 30 Days Trend Analysis: Quarter 1 to Quarter 4
Number and Rand Value of Invoices Paid after 30 Days by National Departments
Number of Invoices
Value of Invoices Q1
58 510
R 1,5 billion Q2
36 253
R 1,7 billion Q3
47 390
R 1,3 billion Q4
54 306
Comment: Increase in number of invoices between Quarter 3 and Quarter 4.

7. National Departments that Paid all their Invoices on time during the Fourth Quarter of 2017/18
1. Planning, Monitoring and Evaluation
13. International Relations and Cooperation
2. Communications/ Government Communication and Information Systems
14. National Treasury
3. Public Enterprises
15. Public Service and Administration
4. Statistics South Africa
16. Arts and Culture
5. Basic Education
17. Health
6. Sport and Recreation South Africa
18. Defence
7. Telecommunications & postal services
19. Economic Development
8. Energy
20. Environmental Affairs
9. Human Settlements
21. Mineral Resources
10. Science and Technology
22. Tourism
11. Trade and Industry
23. Transport
12. Military Veterans
24. Small Business Development

8. Performance of National Departments – Invoices Older than 30 Days and Unpaid at the end of the Fourth Quarter of 2017/18 Trend Analysis: Quarter 1 to Quarter 4
Number and Rand Value of Invoices Older than 30 Days and which remain Unpaid by National Departments
Number of Invoices
Value of Invoices Q1
9 755
R 42 million Q2
8 930
R 39 million Q3
11 081
R 124 million Q4
14 746
R 334 million
Comment: Increase in both number and rand value of unpaid invoices between Quarter 3 and Quarter 4.

9. National Departments with Unpaid Invoices at the end of Quarter 4
National Departments with the highest amounts of Unpaid invoices
Department
Number of Invoices
Amount Outstanding at the end of 2017/18
1. Cooperative Governance and Traditional Affairs
666
138 
2. Agriculture, Forestry and Fisheries 30
96 
3. Water and Sanitation
1842
52 
4. Police 11
23 
5. Independent Police Investigative Directorate
197
16 
6. Social Development 31 3 
7. Public Works & PMTE
11924 2 
8. Women 1 2 
Total
14702

10. PERFORMANCE OF PROVINCIAL DEPARTMENTS

11. Invoices Paid after 30 Days
Performance of Provincial Departments – Invoices Paid after 30 Days during the fourth Quarter of 2017/18 Trend Analysis: Quarter 1 to Quarter 4
Invoices Paid after 30 Days
Number of Invoices
Amount of Invoices Q1
R ,3 billion Q2
70 636
R ,1 billion Q3
75 696 Q4
57 275
R ,1 billion
Comment: Decrease in both number and rand value of invoices between Quarter 3 and Quarter 4.

12. Invoices Older than 30 days and not Paid
Performance of Provincial Departments – Invoices older than 30 days which remained unpaid at the end of the fourth Quarter of 2017/18 Trend analysis: Quarter 1 to Quarter 4
Invoices Older than 30 days and not Paid
Number of Invoices
Amount of Invoices Q1
56 897
R ,4 billion Q2
66 596
R ,5 billion Q3
67 218
R ,9 billion Q4
93 339
R ,7 billion
Comment: Significant increase in both the number and rand value of invoices between Quarter 3 and Quarter 4.

13. Comparative analysis of Quarter 3 and Quarter 4 - Invoices older than 30 days and Unpaid
THIRD QUARTER 2017/18
FOURTH QUARTER 2017/18
Number of Invoices older than 30 days and unpaid
Value of Invoices older than 30 days and unpaid
% of total amount not paid
Gauteng
48 643
62 770 R
60%
Eastern Cape
6 108
19 123 R
15%
Kwazulu-Natal
3 456
3 338 R 8%
Free State
1 903
2 149 R 7%
Limpopo
583
4 681 R
Mpumalanga
511
555 R 1%
North West
4 739
548 R
Northern Cape
1 274
171 R
Western Cape 1
37 210 4 R 0%
Total
67 218
93 339
100%

14. Analysis by Sector – Number of Invoices Older than 30 Days and Unpaid by Provinces (In order of highest to lowest)
Mar-18
Health
Education
Public Works
Others
Total
% of Total GP
58 597
3 690
476 7
62 770
67%
93% 6% 1% 0% EC
18 675 6
246
196
19 123
20%
98% LP
4 571 43 67
4 681 5%
KZN
2 316
296
507
219
3 338 4%
69% 9%
15% 7% FS
1 519
505
125
2 149 2%
71%
23% MP
532 23
555
96% NW
538 8 2
548 NC
144 27
171
84%
16% WC 4
100%
86 210
5 226
1 237
666
93 339 %
92%
100% 
Comment: The Health sector is responsible for 92% of invoices that were due to suppliers. Gauteng province is responsible for 67% of that.

15. Reasons forwarded by departments for Late or Non-payment
Medico-legal claims due medical negligence.
Cross border and boundary migration.
Cash flow challenges, resulting in accruals.
Revenue management (Collection and debtor management).
Poor internal controls.
Poor administrative processes.
Lack of consequence management.

16. SUMMARY AND CONCLUSION

17. Summary and Conclusion
There are eight departments that are mostly responsible for R334 million that national departments owe service providers (Cooperative Governance and Traditional Affairs, Agriculture, Forestry and Fisheries, Water and Sanitation, Police, Independent Police Investigative Directorate, Social Development, Public Works and PMTE and Department of Women)
The health sector is responsible for 92% of the 93 339 invoices that provincial departments owed suppliers at the end of March 2018.
Whilst Gauteng Health is responsible for 62% of all the invoices that are older than 30 days and unpaid, data shows that the numbers in other provinces such as Kwazulu-Natal, North West, Free State, Eastern Cape and Limpopo are gradually increasing.

18. The Work of the DPME Unit on Payment of Suppliers
DPME actively engaging departments that are not complying in order to find sustainable solutions.
DPME has initiated a project with the health sector to find solutions to its non-payment challenges.
This area has been prioritised for Accounting officers
It has now been included as an indicator in their performance agreements.
We are exploring mechanisms of working with the Auditor General in line with the newly approved Bill to root out corruption that contribute to non payment of service providers.

19. Recommendations for PCC
The following are recommendations for the PCC:
PCC should note that Cooperative Governance and Traditional Affairs, Agriculture, Forestry and Fisheries and Water and Sanitation together make up 86% of the R334m owed by national departments to service providers at the end of the fourth quarter of 2017/18 financial year.
PCC should note that the health sector is responsible for 92% of the 93 339 invoices that provincial departments owed suppliers at the end of March
PCC should note the continuing failure by Gauteng Department of Health to pay suppliers. The Department was responsible for 62% of the 93 339 invoices that were older than 30 days and which remained unpaid at the end of March 2018.
PCC should take note that the entire health sector is struggling to pay suppliers with data showing that the number of outstanding invoices in Kwazulu-Natal, North West, Free State, Eastern Cape and Limpopo are continuing to increase.