Government contracts represent huge opportunities for companies, but payment delays from government departments are crippling South African businesses.
Understanding the reality of government payment timelines and having a funding strategy is essential for businesses working with the public sector.
BizFunding helps businesses navigate government payment cycles without compromising cash flow.
The scale of government payment delays
Payment delays are one of the key reasons businesses fail in South Africa. The scale of the problem is sabotaging growth.
The facts and figures below relate to late- and non-payments by government entities to suppliers.
Government’s supplier payment policy in South Africa
In South Africa, the government’s legislative framework (Section 38(1)(f) of the Public Management Finance Act and Treasury Regulation 8.2.3) mandates that all invoices must be paid within 30 days of receipt of a valid invoice.
The reality is a very different picture.
The reality: long payment delays
In practice, a payment cycle of anywhere from 60 to 120 days is typical. Some contractors wait much longer – even years – for payment.
National departments tend to perform better than those at provincial level, where delays are longer. Depending on region and department, the poorest performance is at municipal level.
In an effort to mitigate the late-payment crisis, National Treasury established a centralised email (30daysqueries@treasury.gov.za) to deal with supplier complaints.
Treasury views non-compliance as financial misconduct, and follows up with transgressors. However, to date, accountability has been weak.
How bad is the delayed payment problem in South Africa?
Statistics on government payment delays
According to reports by the Public Service Commission (PSC) and National Treasury, national departments paid 143,245 invoices later than 30 days.
The outstanding value for invoices still not paid by the end of the 2025 financial year was R381 million.
Provincial departments were even more tardy. A total of 320,943 invoices, valued at more than R3.7 billion, were not paid within the legislated payment window.
As of March 2025, a further 140,364 invoices, valued at more than R17.8 billion, were outstanding.
Based on one estimate, more than R63 billion worth of construction projects have been disrupted since 2019. Payment delays on this scale have potentially devastating consequences for businesses and the entire sector.
Why government pays slowly
Government’s failure to pay suppliers on time is a systemic issue caused by a combination of factors.
Bureaucratic red tape, administrative inefficiencies, budget cycles and financial constraints all contribute to the problem.
The real costs to your business
Late payments can strain cash flow and hamper growth. Without sufficient funds, businesses can’t pay suppliers, tender for new projects, or cover day-to-day operational expenses.
Skilled workers may be forced to seek work elsewhere, and relationships with customers and suppliers suffer irreparable damage.
Businesses that are approved for emergency funding are expected to pay interest. This exacerbates an already tenuous cash-flow situation.
If a company has failed to build sufficient cash reserves, government payment delays can prove catastrophic.
Rights and recourse for delayed government payments
Section 26D (2) of the Department of Public Works’ Prompt Payments Regulations entitles suppliers to interest on late payments at a rate of prime + 2%. That said, the claims process is onerous and administratively burdensome.
For more efficient resolution, businesses are advised to follow the accepted escalation procedure.
Step 1: engage directly with the project manager or contract administrator.
Step 2: if that doesn’t resolve the issue, escalate the complaint to the chief financial officer (CFO) of the relevant government department.
Step 3: if the CFO is unable to expedite payment, contact the Provincial Treasury. It has supplier monitoring units to ensure a fair, equitable and compliant procurement system.
Step 4: if the problem persists, submit your query via National Treasury’s centralised hotline, 30daysqueries@treasury.gov.za.
Step 5: when all else fails, contact the Public Service Commission, an independent body mandated to monitor compliance and investigate complaints.
Strategies for managing government payment cycles
Maintaining liquidity in the face of lengthy payment delays requires a multipronged approach.
For example, factoring delays into pricing ensures there’s available cash to complete the project and tender for more work.
The milestone payment system is another means of guaranteeing steady income. Tying payments to measurable progress reduces financial risk and provides clarity as to when and how much a government entity must pay at each stage of the project.
Maintaining detailed documentation, such as invoices, financial statements and payment vouchers, is a must. As is building payment track records.
Proper record-keeping is the most critical factor contributing to the financial well-being of your business.
Sometimes, the most carefully conceived strategies fail. When that happens, an alternative source of funding is required to navigate the deficit.
How tender and invoice funding solve the problem
When cash flow is strained, tender and invoice funding can help.
These financing solutions unlock immediate access to working capital, either on the award of a contract or while waiting for payment from government.
It provides the funds required to maintain operations without taking on additional debt.
Tender and invoice funding essentially bridge the payment gap. They maintain cash flow throughout the project lifecycle, enabling businesses to deliver as promised.
BizFunding’s experience with government contracts
BizFunding has a deep understanding of government payment realities.
Our funding structures are designed to accommodate payment delays and support businesses through the full tender and fulfilment cycle.
For fast, reliable business funding and same-day approvals, Contact BizFunding on 010 157 2499 or apply for funding online.
