It is unacceptable that government departments fail to pay their suppliers within 30 days, as that is a legislative requirement contained within the Public Finance Management Act, as well as National Treasury regulations, the Portfolio Committee on Public Service and Administration said on Friday.

The rand value of invoices older than 30 days and not paid by provincial government departments from March to April 2014 was R2.7-billion, compared with R3.1-billion for the corresponding period this year – a regression of 14.8% or R400-million.

“Noncompliance is tantamount to breaking the law,” committee chairperson Bertha Mabe pointed out.

Following public hearings, the committee noted that a lack of internal controls and capacity constraints within some departments represented two of the biggest challenges impacting on the ability of departments to pay within the stipulated timeframe.

This included the inability to verify banking details and documents, such as tax clearance certificates, resulting in departments not having updated banking details of suppliers; a lack of internal controls for tracking invoices from date of receipt until payment is made; poor budgeting and a lack of alignment between budget and procurement plans; unresolved invoice discrepancies; a lack of human capacity within the departments; and slow information and communications technology systems.

The committee added that noncompliance had a dire impact on businesses and the entire economy.

“Noncompliance stifles the economy, especially in townships. Noncompliance goes against the spirit of the National Development Plan, which seeks to achieve inclusive economic growth, create job opportunities, eliminate poverty and reduce inequality,” Mabe said.

While the committee acknowledged the intensive focus placed by the current administration on this area, it was concerned that some departments continued to fail service providers.

“Interventions such as the requirement for all directors-general to report to the Forum of South African Directors-General on their timeous payment to suppliers, as well as bimonthly exception reports submitted to National Treasury and the Department of Planning, Monitoring and Evaluation, have the potential to make a positive impact,” Mabe emphasised.

GOOD EXAMPLE
Meanwhile, the committee lauded the Northern Cape Department of Social Development and cited it as an example where best practices could be learned.

The department paid its service providers within one week of presenting a legitimate invoice. “This shows that the payment of service providers can be accelerated and achieved if there is leadership, commitment and effective systems to achieve this,” the committee said.

It further called for the speedy implementation of a Cabinet directive for the establishment of a new special unit that would be a partnership between the Department of Performance Monitoring and Evaluation and National Treasury.

The mandate of the special unit would include investigating cases where there was late or nonpayment of correct invoices within 30 days, and identifying causes for delays and nonpayment in the aforementioned cases.

It would also facilitate the process for instituting misconduct proceedings to ensure that there were consequences for late and nonpayment of correct invoices and supporting or intervening in cases of continuous noncompliance.

The committee also called for the inclusion of compliance within 30 days as a key performance area in performance contracts of directors-general, heads of departments and municipal managers.

“We will continue to monitor this area as we regard it as a driver in efforts to create more jobs and fight the triple threat of unemployment, poverty and inequality,” the committee said.