27 Aug 2024

Government remains committed to monitoring and addressing the situation until Government Accounting and Budgeting System (GABS) performance challenges are resolved and revels back to normal operations, Minister of Finance, Honourable Peggy Serame has told Parliament.

Minister Serame said this when responding to a question in Parliament on Monday.

She said government had, in the immediate term, put temporary measures to clear the current outstanding government supplier payments to alleviate the plight of businesses.

She indicated that in the medium to long-term, government would upgrade the application software to the latest version and modernise the Integrated Financial Management Systems (IFMIS).

The minister acknowledged the challenges presented by GABS’ underperformance, which she said declined since August last year, when it became slow and adversely affected the execution of financial transactions, especially payment to suppliers of goods and services to government.

She indicated that delays by government to pay suppliers on time had the potential to cause cash flow problems could affect Small Medium Micro Enterprises (SMMEs) businesses and that may ultimately precipitate the measures to optimise the system’s performance to ensure continuity of government business.

She said such measures included managing users as per their critical needs by giving priority to banking, revenue offices, payroll and pensions, establishing a call centre on November 1 last year for the general public to call and report their concerns or queries in relation to their outstanding payments and be accordingly assisted.

She added that measures also included acquiring sewers on lease terms to provide relief while attending to the challenges of system performance, monitoring on weekly basis the status of outstanding invoices at the ministries, independent departments and 34 revenue offices across the country, revenue office, banking and line ministry started working beyond official working hours to expedite outstanding payments.

Also, she said they allowed use of the system at councils to pay outstanding government suppliers’ payments as a temporary measure to clear the backlog.

She indicated that the average turnaround time for paying suppliers between April and August this year was 12 days against the Generic Public Service Standard of 10 working days.

Therefore, she said the extra two days above the average was not acceptable, adding work was currently ongoing to re-engineer the procurement and payment processes with the view to reduce the standard to five working days leveraging on technology.

“We have analysed data on government payments from April 1 to August 20 for all ministries and independent departments. It was observed that 293 103 invoices valued at over P32.564 billion were submitted for payment.

From these, it was noted that 160 164 invoices, representing 55 per cent and valued at over P24.646 billion were paid within 10 working days, with an average turnaround time of five days,” she said.

She added that 132 939 invoices, constituting 45 per cent and valued at over P7.918 billion were paid outside the standard of 10 working days, with an average turnaround of 21 days.

Therefore, she said the average turnaround did not meet the standard set by government.

She indicated that the apparent cost or impact to the economy was that late payment to suppliers resulted in dire cash flow constraints that may ultimately collapse some businesses, resulting in huge costs to shareholders and job losses.

“As I have indicated earlier, majority of 55 per cent of invoices submitted by ministries between April and August this year were paid within the set turnaround time of 10 days.

Government recognises that the current turn-around time related to challenges with the GABS has affected SMMEs through delays in paying suppliers on time.

This, she said had in turn impacted on company cash flows at micro-level, but at aggregate level the impact on economic activity had been somewhat minimal given that domestic economic activity declined in the first quarter of last year.

She added that while potential risks of company closure due to cash flow problems associated with late payments cannot be ruled out, latest company data showed that the total number of registered companies had however increased by 2.4 per cent from 125 962 in August last year to 129 000 in May this year.

“We do not have data specific to companies that closed down during the period under review,” she said.

Notwithstanding the foregoing, she said government was cognisant that the situation with GABS cannot be allowed to continue any further.

Gaborone North MP, Mr Mpho Balopi had asked the minister if she was aware of the challenges presented by GABS’ reported under-performance.

Mr Balopi also asked the minister to update Parliament on the average turnaround time for paying vendors who supplied goods and services to government.

He also wanted to know whether the current average turnaround time met the minimum standards that government has set. ENDS