30-day payment of valid invoices to service providers; Public Administration Laws General Amendment Bill

Public Service and Administration, Performance Monitoring and Evaluation

21 September 2022
Chairperson: Mr T James (ANC)
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Meeting Summary

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In a virtual meeting, the Committee was briefed by the Public Service Commission on the 30-day payment of valid invoices by government to the service providers in the public service.

The Commission reported that there were 36 000 invoices for the last quarter of 2021/2022, and 29 000 in the quarter of the current financial year. 959 invoices had not been paid by departments at the end of June. The Department of Water and Sanitation and the Department of Tourism were the biggest contributors number of unpaid invoices. The Rand value of invoices that are not paid on time remains unacceptably high.

The reasons for late and non-payment of invoices varied. Some of the reasons included systematic challenges – a lack of an IT system to track invoices, a lack of financial delegations, and unrecorded invoices, among others. Another challenge is the poor financial management from the government departments and a lack of alignment between the budget and procurement plans. Prevalent was also the poor contract drafting and different interpretations of the contract clauses. There was a lack of documented processes, which resulted in delays and errors in executing elementary processes.

Delayed payments have a profound impact on a small business. Salaries are not paid on time, raw materials cannot be acquired, and existing projects suffer. Small businesses live or die by their cash flow. If the invoices are not paid, the businesses will not survive. The Commission would therefore recommend that Parliament assists in holding Departments, especially accounting offices, accountable for their failure to meet their statutory obligations in terms of section 38(1) of the Public Finance Management Act.

Amongst Members, there was a concern over the fact that the cases of unpaid invoices have been ongoing since 2019, and they seem to be getting worse. The Members were concerned about the implementation of consequence management, and they asked what was being done in that regard.

They suggested that the Departments should be invited to explain the issues they are going through and how they plan on solving some of them. There were also concerns over the lack of financial management of employees and the lack of care from government towards the small businesses.

The Committee then considered and adopted its report on the motion of desirability on the Public Administration Laws General Amendment Bill – the Bill was considered undesirable.
 

Meeting report

The Chairperson opened the virtual meeting and welcomed the Members, support staff and all the guest delegates. He said that the Department of Public Service and Administration (DPSA) was in attendance to give an update on the wage negotiations in the public sector. He indicated that he received a letter from the Minister the previous day requesting that the item be withdrawn from the agenda, as Cabinet had not yet scrutinised it. The Chairperson said that the briefing by the Public Service Commission was a priority for the Portfolio Committee.

He invited the chairperson of the Public Service Commission to give a few opening remarks.

Ms M Ntuli (ANC) supported the proposal of the DPSA item being postponed on the agenda.

There were no apologies noted.

Briefing by the Public Service Commission
Dr Henk Boshoff, Commissioner, indicated that the chairperson of the Commission would not be present in the meeting, as he would be attending a citizens’ forum in the Northern Cape. He said he would lead the presentation with the assistance of Ms Irene Mathenjwa, Deputy Director-General: Monitoring and Evaluation.

He made a few opening remarks before handing over to the DDG. He said that, as a part of the Public Service Commission’s oversight role, the Commission has been monitoring quarterly requested from both the National and Provincial Treasury for many years.

There was a disruption, as some of the Members could not hear the commissioner due to connectivity issues.

Dr Boshoff continued with his remarks. The Public Service Commission (PSC, Commission), in partnership with the Portfolio Committee, has been conducting public engagements with Departments and service providers to identify challenges and solutions to the non-payment of invoices. He highlighted that the briefing prepared by the Public Commission would cover the first quarter of the current financial year, the period ending on 30 June 2022, on the non-payment of invoices. He said that the Committee should be cognisant of Section 38 (1)(f) of the Public Finance Management Act, which he took the Committee through. Accounting officers are compelled to comply with the specific section, which will be highlighted in the presentation.

Ms Mathenjwa took the Committee through the presentation outline, indicating that it would cover the oversight role of the PSC on the 30-day payment of invoices; the statistics of the invoices paid after the 30 days and those not paid; reasons for the late and non-payment of invoices on small businesses; the impact of the late and non-payment of invoices; the impact of invoices on small business; the impact of late or non-payment of invoices on governments.

The PSC is mandated to promote the constitutional values and principles (CPV) contained in Section 195. The CVPs provide the PSC and the Public Administration with a value system in respect of the conduct of public services officials. They serve as a starting point for every public administration practice, which includes the payment of invoices.

Departments are required to report to National Treasury on the 7th of each month, and on the 15th for provinces to Provincial Treasuries. There are nine constitutional values and principal values in section one.

She took the Committee through the role of the PSC on the oversight of 30-day payments. In partnership with the Portfolio Committee, the PSC conducted public engagements, as mentioned by the commissioner. The PSC also received reports from National Treasury and the provincial treasury to identify where the blockages are, and which departments have defaulted.

The report indicated that some departments are not always in compliance with the Submission of the Exception Reports with National Treasury, as requested in terms of instruction note 34 of November 21. She highlighted that the Department of Agriculture, Land Reform and Rural Development did not submit its report in June 2022. Other departments are highlighted as late submissions. She said that the non-submission compromises transparency in the provision of information.

She highlighted the number of invoices that are paid after 30-days and those that are older than the 30-days and remain unpaid. The report focuses on the first quarter of 2022/2023, but there was a trend analysis that looked at the previous quarter.

The report showed the invoices that were paid after 30-days. There were 36 000 invoices for the last quarter of 2021/2022, and 29 000 in the quarter of the current financial year. She said that it was critical to note that 959 invoices had not been paid by departments at the end of June. Of the 959 invoices, the value thereof was R4.1 million. The Department of Water and Sanitation and the Department of Tourism were the biggest contributors number of unpaid invoices.

The report indicated the submission rate by each province. In terms of compliance with instruction note 34 on the submission of exception reports, Limpopo did not submit two of its reports on time. She further urged departments to comply with the requirements of the instruction note. The report also looked at all the provinces with the leading amounts of unpaid invoices.

She took the Committee through the reasons for late and non-payment of invoices. Some of the reasons included systematic challenges – a lack of an IT system to track invoices, a lack of financial delegations, and unrecorded invoices, among others. Another challenge is the poor financial management from the government departments and a lack of alignment between the budget and procurement plans. Prevalent was also the poor contract drafting and different interpretations of the contract clauses. There was a lack of documented processes, which resulted in delays and errors in executing elementary processes.

The report highlighted some of the impacts of non-payment on small businesses. Delayed payments have a profound impact on a small business. Salaries are not paid on time, raw materials cannot be acquired, and existing projects suffer. Small businesses live or die by their cash flow. If the invoices are not paid, the businesses will not survive.

She concluded that the PSC would like to recommend that Parliament assists in holding Departments, especially accounting offices, accountable for their failure to meet their statutory obligations in terms of section 38(1) of the PFMA.

See presentation for further details

Discussion
Ms M Ntuli (ANC) welcomed the presentation from the PSC. She commended the entity for the role that it plays. She said that, since the beginning of the term in 2019, there had been discussions around the issue of unpaid invoices. It is now nearing 2024, but the matter is a thorn in the flesh.

She highlighted that National Treasury (NT) has put down regulations. However, when they are breached, NT does not take any action. She proposed that the Committee should invite the NT to explain how regulations are implemented.
 
The delay in payments impacts the growth of emerging small businesses, as highlighted in the report that there are black women and youth who are affected. She said that these are companies that assist in job creation.

She said that NT should follow the regulations it has put in place.

She spoke on the reasons highlighted for the non-payment of invoices. She said that systematic issues should not be a matter of concern in this day and age. The excuse not to pay people based on system issues is uncalled for. It was a way of pushing back the previously disadvantaged. She proposed that the Departments that are highly involved, in terms of skills audit, evaluate whether they are incapacitated, and indicate why they are taking so long to pay invoices.

Mr J McGluwa (DA) expressed his appreciation for the presentation. He said that it was a sad day in the history of South Africa that, in this day and age, companies are being held down to the drain as far as survival. He said that he was unsure how the Committee would assist the PSC on their request, while all the key players in the oversight role are involved.

He suggested that the Committee should consider an in-person meeting and summons the various Departments involved.

He asked for clarity on where the money that the presenter mentioned in the presentation was, and what actual problem resulted in money not being paid.

He sought clarity on what should be done to combat the issues surrounding incompetency and the lack of manpower. The country currently has a crisis where taxes and levies are concerned, and these issues affect small businesses owned by young black women trying to feed their families. He also proposed that the Committee go into the particular provinces and meet with the people dealing with the invoices.

Ms S Maneli (ANC) said that the presentation raised critical challenges experienced in the Departments. The issue of late payments of suppliers by Government Departments has been an ongoing problem in the public service. She highlighted that it was indicative of the lack of compliance by the Departments.

She supported the proposal raised by her colleague, Mr McGluwa, that the Departments should be summoned to Parliament, and they should account for the lack of compliance.

She said that, on slide 13, the reasons for late payments of invoices had been highlighted. The slide also points out a bigger issue within Departments that the Auditor-General flagged. Public servants are breaching the code of conduct and not embodying their Batho-Pele principles. She said that there needs to be a role played by the DPSA to uphold the norms and standards in the public service.

She asked for clarity on the recommendations and what is being done about the issues mentioned in the presentation. She also said that digitising the public service is a critical aspect and a process requiring implementation. Non-digitisation has led to information loss.

She asked whether the lack of financial management was due to the lack of financial skills among public servants.

Ms M Kibi (ANC) said that the same song had been sung since 2019. She highlighted that the Committee is nearing the end of term, and it cannot allow for a situation where the same issues are being discussed every single time. Due to the delays, it may look as though government is far from winning the battle against poverty and unemployment.

She supported the proposal made to bring the Departments to Parliament and find out what their challenges really are. She expressed her frustration with the situation.

Ms R Komane (EFF) welcomed the presentation. She said that it was an indication of the work done by the Portfolio Committee thus far, and it indicates that the Committee has “no teeth to bite” because it is almost the end of term and it has been faced with the same challenges for quite some time.

She echoed the sentiments of her colleagues in that public servants are a law unto themselves, and there is a sense that they are untouchable. The Auditor-General has pointed out these issues, yet nothing has happened to the departments.

She said that it was worrisome to have 959 unpaid invoices. She asked for clarity on the reasons for these late payments, and the steps to combat the issue.

She also supported the suggestion of a physical meeting.

She asked for clarity on the consequence management implemented in the various departments for the delay of payments.

Ms C Motsepe (EFF) sought clarity on why the departments do not intervene immediately after reports are submitted.

She asked for specificity on which other provinces have not submitted, because some provinces tend not submitting reports at all. She said that the report needs to be more specific in naming the provinces with high non-payments and late payments.

She recommended that the departments, together with NT, should be visited and given the platform to explain the issues they are experiencing, which are causing the delays in payments.

She asked how often the departments received training, and they may need a refresher because they are now derailing the country's economy.

She said that the role of the DPSA is to monitor and evaluate; it does not have any help to offer these departments. Its role ends there.

Inkosi R Cebekhulu (IFP) said that the Committee Members had said quite a lot about the challenges faced by small businesses dealing with government departments. He said that one should be reminded of the address by the President in the State of the National Address, where he stressed the importance of paying service providers within 30-days – which is not happening right now.

He asked whether it was not a question of laziness from the employees’ side, or even to let down the efforts of uplifting small businesses from doing business successfully with the state.

He raised his suspicions about the conduct of the departments, saying that the way they are doing in the provinces they are very relaxed simply because they know that, at the end of the month, they will get their service, yet there is no care on what happens to the service providers. There is no care in improving the conditions of living for those that are employed by small businesses. He said it is quite painful to hear that billions of Rands are kept within NT and have not been paid to the relevant small businesses who have rendered a service.

He agreed with the proposal to invite the Departments to come and explain the challenges that they are experiencing.

Dr L Schreiber (DA) said that it was a bit difficult to find the words to respond to an issue that has not only been ongoing for quite some time, but an issue that is also getting worse. He said that the amounts being spoken of are quite devastating to hear because, as of the first quarter of the current financial year, R9 billion is being owed to service providers – many of which are small businesses.

He said that the current situation is in a context of an already struggling economy, on the edge of recession. It showcases the idea that government simply does not care. It is unexplainable how R9 billion could be withheld.

Slide 12 indicates that only one province is paying all of its service providers on time and has been doing so for years – the Western Cape. He said that the question should be around why the Western Cape is able to pay all its service providers consistently and on time. He reckoned that the reason for that is the province’s level of care for its small businesses.

If the departments do not get to the point where they start appointing officials based on merit – on the basis of their ability to do the job, regardless of any political affiliation.

Responses from PSC
Commissioner Boshoff highlighted that the PSC is an extension of the oversight arm of the National Assembly in general and the Portfolio Committee, which is one of the reasons for the request to assist the commission in executing its oversight responsibility.

He responded to the proposal made by some of the Members – that the departments should be invited before the Committee. He said that the presentation had already indicated that proposal – that NT should be invited to explain the ongoing issues, and why nothing is being done to address the issues. The PSC welcomed the proposal from the Committee Members.

He agreed that systems could not be used as an excuse for non-payment.

He said that the PSC has attempted to provide the reasons for the non-payments, which can be found on slide four of the presentation.

He referred to the question raised by Ms Maneli, on consequence management by the departments. He said that departments are constantly assuring the PSC on implementing consequence management. However, there remains little to no progress on the payment of invoices.

The Chairperson thanked all the delegates for appearing before the Committee.

Report of the Portfolio Committee on Public Service and Administration on the Public Administration Laws General Amendment Bill [B 16 2021]

Having extensively deliberated on the Public Administration Laws General Amendment Bill, the Committee appreciated the efforts made by Dr Schreiber in drafting and introducing the Private Member’s Bill to the National Assembly. The Committee further appreciated institutions and members of the society who have participated in the process through written and oral submissions. However, the Committee resolved that the Bill was undesirable.

The Committee agreed to the report, with the EFF and DA reserving their rights to take a position on the report.

The Chairperson thanked the Members for participating in the discussion.

The meeting was adjourned.
 

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