The National Treasury’s latest payment data shows a worsening late payment crisis across national and provincial government departments, raising concerns about the sustainability of current payment terms for South African small and medium-sized enterprises (SMEs), SME business loan provider Business Partners warns.

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

The value of unpaid invoices also regressed. Treasury data shows that the rand value of invoices older than 30 days rose from R11.7-billion at the end of the first quarter of last year to R12.4-billion by the end of the second quarter. This reflects a 6% deterioration, or R663-million, over a single quarter, it adds.

 “Late payments are not just a cash flow inconvenience for SMEs, they are a direct threat to business continuity. Unlike large corporates, most small businesses do not have the balance sheets or reserves to absorb prolonged payment delays,” says Business Partners area manager Lawrance Ramotala.

The impact is highlighted as especially severe on sectors that operate on tight margins and high volumes.

Retail, manufacturing and service-based SMEs are indicated 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. That uncertainty makes planning almost impossible,” Ramotala cautions.

Longer payment delays, whether by government departments or the private sector, also impact 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, the company says.

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,” the company posits.

It says 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, the company avers.

“South Africa’s SMEs are resilient, but this resilience has limits. 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,” says Ramotala.

In this environment, the importance of access to reliable cash flow management tools and appropriate financing options is highlighted.

Short-term funding solutions that are aligned to invoicing cycles could help SMEs bridge payment gaps, maintain operational stability and protect supplier relationships while waiting for outstanding invoices to be settled, the company suggests.

However, it warns that financing alone cannot resolve the underlying issue and calls for consistent enforcement of existing payment regulations and greater accountability for late-paying departments and those in the private sector.

“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,” Ramotala says.