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Tutwa Newsletter | September 2019

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Dear [subscriber:firstname | default:reader],

Late payments will be the downfall of our economy

As a small consulting firm (by every definition) over the past year, we have had the most rewarding engagements with some of the most talented, able and passionate government officials with whom I have had the pleasure of working. Our consulting group has learned so much because of their openness and willingness to share information – not only with us but through a series of public-private dialogues (PPDs) run throughout the country.

One of the major touchpoints during the PPDs has been the ongoing problem for small enterprises that has led to a significant number of failed businesses – late payments. Certainly, there are many causes for late, or non-payment: contractual weaknesses; late invoicing; lack of official supporting documentation or improper invoicing; bureaucratic procedures involved in the approval of payment at larger companies and government departments. Fewer evaluations have gone into the effects of late payment. We submit that the reason is that many small enterprises are fatally affected by this growing propensity by larger companies.

There is clearly a lack of budgetary planning that takes place at paying firms since a more sinister reason for non-payment cannot even be considered. Surely, ordering a basket of goods, or commissioning a service must trigger a message in the feedback loop – whatever the payment system – that payment will be required by month-end. We as social beings plan to pay our accounts monthly. Why is it this so challenging for large companies, private or public? Could it be that the procurement division is too far removed from where the good or service is ordered? And, is it likely that this distance between ordering division and paying division of the company is actually preferred? Then, non-payment is always someone else’s responsibility, right? Someone with whom the service provider has no relationship?

This tendency towards late payment – sometimes up to 90 days or more! – causes serious harm to small enterprises, often billed as the greatest influencers of local socio-economic development in the wider economy. Yet, it is small enterprises that are nimble enough to take risks and bring onboard new innovative solutions seeking efficiency and cost-effectiveness. This is largely the reason they are sought out in the first instance.

Small Business Development Minister Khumbudzo Ntshaveni’s departmental research shows that over R600 million is owed to small businesses in payments that are 30 days or more late. The link to our current flatlining economy, and especially our high unemployment rate is unmissable. This seems such an important area that businesses, large and small, should unite to commit to doing our part for this country’s economic survival.

On other matters, South African National Women’s Day has come and gone, and as a country we’ve celebrated how, since 1956, women have stood together, peacefully raising voice and fist against oppression. President Ramaphosa has honoured a commitment to gender parity by making 50% of his Cabinet represented by women. Is this parity tricking down to other elements of our society? Tutwa Director Catherine Grant Makokera reflects on SADC Industrialization Week in Dar es Salaam, Tanzania and provides her view on an answer. Phindile Ndlovu considers how the Fourth Industrial Revolution will likely impact the gender divide in Africa. In Tutwa’s regular trade focus, Heinrich Krogman excerpts a recent study on protectionism vis à vis competition, highlighting the example of the South African poultry industry.

A plea for the end of the ‘manel’

Catherine Grant Makokera
Earlier this month I attended the SADC Industrialisation Week in Dar es Salaam, Tanzania and had the opportunity to learn new things. One of them was the term ‘manel’. I am a veteran of many conferences, summits and workshops dealing with international relations, trade, investment, regional development and economic governance. I have witnessed ‘manels’ before but had not picked up …
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Women in the 4IR

Phindile Ndlovu
Advancing gender equality is crucial to ensure a sustainable future since they account for just over half the world’s working-age population. If women do not achieve their full economic potential, the global economy will increasingly be lopsided with half the population contributing significantly less than half the output. As Africa navigates the shifts that Fourth Industrial Revolution (4IR) will bring, …
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Domestic poultry’s ‘food security catch 22’

Heinrich Krogman
Trade protection is an easy sell, especially in an environment where supply-side economics does not deliver the benefits that it is supposed to. The narrative is simple: imports from other countries are displacing domestically produced goods, so intervention is required. Domestic industry protection needs to trump consumer welfare – after all, no one would be able to buy anything if …
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