Late Payments Have Collapsed SMMEs – CEDA CEO
- CEDA pays suppliers in 24 hours
- Wants SOEs, private sector to follow suit
- The initiative could boost liquidity
Citizen Entrepreneurial Development Agency (CEDA)’s decision to pay its suppliers within 24 hours was meant to demonstrate to government, state owned enterprises (SOEs) and the private sector that it is possible to pay suppliers immediately, Chief Executive Officer (CEO) Thabo Thamane told The Botswana Gazette in an interview.
Thamane acknowledged Small, Medium and Micro Enterprises (SMMEs) as the engines of economic growth and job creation, with significant potential to foster economic diversification. He however decried the tendency of some government departments and private sector companies to delay settlement of SMME invoices, saying it causes problems for them as it impacts on their cashflow and working capital.
“This ultimately affects their operations and ability to settle their own debts, pay salaries and service other clients,” he said.
Thamane added that delaying payments to SMMEs effectively reverses the gains that Botswana has made in developing the national economy. He urged other government institutions and private sector companies to start paying SMME’s on time and rethink how they can best assist SMMEs to grow. This commitment is in line with CEDA’s mandate of providing financial and technical support for business development, with a view to promoting viable and sustainable citizen owned businesses.
Thamane’s bold declaration was informed by CEDA’s findings that SMME’s are more vulnerable to late payments than large companies because they have lower cash reserves.
Because of late payments, some SMMEs may in turn be unable to service their clients, pay their debts and even pay salaries, which results in a cumulate negative effect on the national economy.
In most cases, SMME’s are unable to take any action against defaulting clients because they are dependent on them. Others do not have the resources to seek legal recourse against defaulting clients or even follow up on late payments. In the end, those that are able end up taking out loans to bridge the gap, which sinks them deeper into debt. Most that are unable to access finance end up collapsing.
“It is my firm belief that this commitment will reinvigorate the SME sector and help it to become innovative and competitive. One of the values that drive us at CEDA is the ability to always have our finger on the pulse, which enables us to respond to challenges with innovation and determination,” said Thamane.
Thamane initially made the bold announcement at the CEDA/DBSA University Challenge awards ceremony on 23rd January that the Agency will henceforth pay all suppliers and service providers within 24 hours.