SUNConferences, Southern African Institute for Industrial Engineering 2014

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AN INVESTIGATION OF FACTORS AFFECTING THE AVERAGE CREDIT COLLECTION PERIOD FOR SMES SUPPLYING TO A MAJOR MUNICIPALITY IN SOUTH AFRICA – IMPLICATIONS FOR POLICY
Bruno Emwanu, T. Moyo

Last modified: 2014-06-26

Abstract


It is widely agreed that SMEs, unlike big firms, are sensitive to specifically, among other things, changes in their cash flow position. Negative cash flows threaten the survival of SMEs and situations that create these conditions making them vulnerable  are to be avoided. An example of such a situation is when there is delay in paying SMEs for goods and services rendered. While it is recognised that Government through its structures such as Local Government and Municipalities is a key customer for SMEs pre-qualified as suppliers, there are complaints that Government delays in paying its suppliers. This would seem to contradict Government policy as Government also tries through various initiatives to develop and promote SMEs. This study undertakes a survey  of SMEs that supply one of the major municipalities in South Africa and investigates factors affecting the average credit collection period. A similar study in South Africa is not known. Findings from the study are expected to highlight weaknesses in the  current procurement practices of South African Government structures that disadvantage SMEs, hence contradicting Government’s policy of promoting SMEs in business, which are flags for policy makers to pay attention to.


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