28 Nov 2024

Government is committed to addressing  delays in payment to suppliers of goods and services, a problem that has been going on for years now.

When answering a question in Parliament on Tuesday, Minister of Finance Mr Ndaba Gaolathe acknowledged that the delays generally caused significant cash flow challenges to businesses and invariably crippled them.

Minister Gaolathe said during the 12^th Parliament, his predecessor had in responding to a question asked in Parliament, acknowledged the challenges presented by the under-performance of the Government Budgeting and Accounting System (GABS) when it became slow to the extent that it negatively affected the execution of financial transactions.

He said the answer proffered then had also intimated that the resultant delays by government to pay on time had the potential to cause cash flow problems for SMMEs, which could ultimately precipitate the collapse of businesses if not properly managed.

Mr Gaolathe said several measures were then put in place to clear the backlog of payments including using the system at councils to pay outstanding government supplier payments.

The use of the system at councils, which was adopted in June 2024 was a temporary measure while GABS issues were being resolved and in the medium term, the Ministry of Finance would set up an alternative system called Great Plains Microsoft Dynamics 365 in central government as a fall-back system to Oracle, the minister said.

He said analysis by the ministry had shown that the average turnaround time for paying suppliers was 12 days between April and August 2024 against the generic public service standard of 10 working days.

“The extra two days above the average is surely not condoned and work is currently ongoing to re-engineer the procurement and payment processes with a view to reduce the standard to five working days by leveraging on technology,” he said.

Mr Gaolathe said the apparent cost or impact to the economy was that late payments to supplies could result in dire cash flow constraints that at micro-level could ultimately collapse some businesses.

He however, added that at aggregate level, the impact on economic activity had been somewhat minimal given that domestic economic activity decline was recorded since the first quarter of 2023 as various economic reviews showed that much of the slow-down in growth had been due to a decline in the mining sector and other diamond-related activities which were driven by external factors with little and negligible influence from GABS.

“While potential risks of company closure due to cash flow problems cannot be ruled out, the latest company data shows that the total number of registered companies has however increased by 2.4 per cent from 125 962 in August 2023 to 129 000 in May 2024,” he said, explaining that there was no specific data showing that companies had closed down during the period under review.

Minister Gaolathe said after the presentation of a parliamentary motion on December 17, 2023 requesting government to consider hiring temporary staff to push the processing of supplier payments, Parliament resolved that government should have cleared all outstanding supplier payments by December 20, 2023.

He said government was further urged to take measures to minimise the effects of delayed payments on suppliers’ cash flow as some businesses could be rendered insolvent, resulting in job losses.

“The timeline of December 20, 2023 was however, not feasible as the planned remedial work on the system did not yield the intended results since the performance of the system did not improve,” he stated.

He said Oracle Consulting was subsequently contracted in August 2024 to resolve GABS challenges by optimising the system performance and indications were that the system should be operating at full capacity before the end of December 2024, after which it would be upgraded to the latest supportable version that received Oracle premier support.

Mr Gaolathe explained that the Ministry of Finance had from April 1 to October 20, 2024 cumulatively processed and paid 470 865 suppliers at an amount of P41.4 billion, which he said was an indication that though GABS currently did not perform at optimal level, it was able to continue to make payments albeit at a slower pace.

He said paying suppliers late was therefore not solely attributable to GABS but to other issues such as Government Data Network (GDN), bandwidth, network, errors and omissions on supplier invoices or payment certificates, and inadequate supervision at implementing ministries.

Minister Gaolathe said given that the ministry did not have a precise number of outstanding supplier invoices for the whole of government as it featured at the tail-end of the process, ministries had since been guided to collect on weekly basis, information on outstanding payments as procurement units, administration and accounts and at accounting units so that they could be in a better position to monitor and take appropriate steps to timeously clear submitted invoices.

“In view of the foregoing, my government considers the issue of paying suppliers on time as important and urgent, hence all efforts will be put to resolving the challenges within the government’s 100-day commitments,” he stated.

The minister further called on Parliament to appreciate that procedures and processes followed by the Botswana Unified Revenue Service (BURS) were guided by the provisions of the taxation laws which specified the issuance of tax clearance certificates, including the conditions related to tax compliance and the settlement of any outstanding debts.

As such, he said BURS was unable to consider government’s debt to businesses when deciding whether to issue a tax clearance certificate.

Member of Parliament for Kgatleng West, Dr Unity Dow had asked if the minister was aware that many businesses were being financially crippled by government’s failure to pay for services rendered and/or goods supplied.

She had wanted the minister to state whether he would consider the problem to be so important as to form part of government’s 100-day commitments, as well as whether he would consider proposing to BURS that it took government’s debt to businesses when deciding whether or not to issue tax clearance certificates. Ends