Late Payments Threaten SME Survival As Unpaid Government Invoices Climb To R12.4bn

Lawrance Ramotala, area manager at Business Partners Limited

At the end of the second quarter of 2025, 95,399 invoices older than 30 days with a combined value of R12,4bn remained unpaid. This represents a regression of 17%, or an additional 13,663 unpaid invoices, compared to the end of the first quarter, when 81,736 invoices were outstanding.

The value of unpaid invoices has also worsened. Treasury data shows that the rand value of invoices older than 30 days rose from R11,7bn at the end of the first quarter to R12,4bn by the end of the second quarter. This reflects a 6% deterioration, or R663m, over a single quarter.

For small businesses, these figures translate into far more than administrative inefficiencies. “Late payments are not just a cash-flow inconvenience for SMEs, they are a direct threat to business continuity,” says Lawrance Ramotala, area manager at Business Partners Limited. “Unlike large corporates, most small businesses do not have the balance sheets or reserves to absorb prolonged payment delays.”

The impact is particularly severe for sectors that operate on tight margins and high volumes. Retail, manufacturing and service-based SMEs often feel the effects first, as they rely on consistent cash inflows to replenish stock, fund production cycles and meet day-to-day expenses. “When payment cycles stretch beyond 30 days, it disrupts the entire operating rhythm of a small business,” says Ramotala. “That uncertainty makes planning almost impossible.”

Longer payment delays, whether by government departments or the private sector, also create a ripple effect throughout the broader economy. When SMEs are not paid on time, they are often forced to delay paying their own suppliers, many of whom are also small businesses. This can set off a chain reaction of late payments that spreads across value chains, further weakening already fragile business ecosystems.

Late SME payments also lead to salary payments being delayed or staggered. For employees, many of whom are the sole or primary earners in their households, this immediately disrupts their ability to meet essential monthly obligations such as rent, school fees, transport, insurance, and groceries. Missed or late salary payments can push families into debt cycles, cause emotional stress, and erode financial stability. Over time, this strain affects productivity, morale, and retention, while placing additional pressure on social support systems. What may begin as a single late invoice can therefore escalate into real-world hardship for households, contributing to wider socio-economic vulnerability.

Beyond immediate cash-flow challenges, persistent late payments undermine SMEs’ ability to invest in growth. Businesses are less likely to expand operations, hire additional staff, invest in new equipment or increase inventory levels when income streams are unpredictable. Over time, this constrains job creation and limits the contribution that small businesses can make to economic recovery and growth.

“South Africa’s SMEs are resilient, but this resilience has limits,” says Ramotala. “When delayed payments become the norm rather than the exception, even well-run businesses are pushed into survival mode. That has long-term consequences for competitiveness and employment.”

In this environment, access to reliable cash-flow management tools and appropriate financing options becomes critical. Short-term funding solutions that are aligned to invoicing cycles can help SMEs bridge payment gaps, maintain operational stability and protect supplier relationships while waiting for outstanding invoices to be settled.

However, financing alone cannot resolve the underlying issue. Consistent enforcement of existing payment regulations and greater accountability for late-paying departments and those in the private sector remain essential to restoring confidence among small business suppliers.

“As long as late payments persist at this scale, small businesses will continue to carry disproportionate risk. Addressing the late payment crisis is critical to safeguarding the sustainability of the SME sector and the millions of jobs it supports,” concludes Ramotala.