Govt speeds up payments to suppliers

Source: Govt speeds up payments to suppliers | Herald (Business)

Minister Ncube (left), in the company of permanent secretary in his office Mr George Guvamatanga at a press briefing in Harare on Monday, said the Government is in the process of procuring a world-class computer system to enhance transparency in the public procurement system

Oliver Kazunga

Senior Business Reporter

THE Government is working on modalities to shorten the payment cycle for goods and services supplied to public entities from the current 21-30 days after submission of the invoice.

Secretary for Finance and Economic Development Mr George Guvamatanga said this while responding to questions from journalists during a press conference on value for money audits on public entity supply contracts on Monday.

He said reducing the payment cycle was imperative as the Government needed to support small and medium enterprises. Delays in settling invoices have often been cited as the reason for overpricing to hedge against inflation.

“The payment cycle for the Government is normally 21 to 30 days after submission of the invoice, (in that period) we should be able to settle and to pay.

“But it’s also a process which we are also reviewing because at the moment I have an accounting general office almost working as a payments office.

“We are actually trying to see whether we can have six payment runs per month rather than that on a daily basis we have to settle invoices. 

“So, that system is also under review and we might also just review the payment cycle so that we enable businesses to get their money from the Government on a quicker basis than what we are currently doing,” he said.

The Government is in the process of aligning the Public Finance Management System (PFMS) with a new procurement system.

“Once the new procurement system, which will align with PFMS system that we are running, then we expect that we can be more efficient because things are then automatically and electronically loaded once an order has been confirmed by a Government ministry and the payment process then immediately starts from there, and we should be able then to shorten the payment cycle,” he said.

“It’s important for us to shorten the payment system given that most of the suppliers to Government are Small to Medium Enterprises whom as Government we want to support.

“But I think for us to continue to support them it’s important that they also understand that they now have to rely on normal business margins to survive, not on the pricing models that we have been witnessing in the market.”

Suppliers have been using forward pricing models and benchmarking prices to front load parallel market exchange rates leading to extortionist pricing of goods and services supplied to ministries, departments and agencies (MDAs), which was not anchored on economic fundamentals. Speaking during the same occasion Finance and Economic Development Minister Professor Mthuli Ncube said the Government was in the process of procuring a world class computer system to enhance transparency in the public procurement system.

“We are in the process of procuring a world class computer system, where things can be uploaded, we can check against recommended price list while we will upload on the system to make sure that again procurement agencies across all our MDAs are properly guided and are not going to deviate and start pricing things well away from the official exchange rate.

“The system is critical for us to implement and enforce the value for money process going forward,” he said.

Prof Ncube said MDAs through the various procurement management units, have not been exercising due diligence, especially regarding the value for money process in terms of pricing.

“They have merely been following procurement rules without due regard to established value for money practices already enshrined in the Procurement laws of the country.

“Tenders have been awarded without due regard to price checks on the basis that prices have passed a competitive bidding process.

“The combined effect of the above behaviours has resulted in the rapid erosion of budgeted resources and hence the need for the Government to come up with a raft of measures to deal with the menace,” he said.

As a result, Prof Ncube said the value for money process the Government was implementing would result in punitive measures being taken against public sector officials found to be complicit to overpricing and procurement malpractices. Suppliers who continue to defy the new rules on fair pricing, he said, will be blacklisted and excluded from future supply contracts.

 “In light of the above Government started enforcing measures to enhance economic stability by suspending all inflated payments and ordering an audit exercise to revalidate all running contracts and renegotiate prices with various suppliers,” said Prof Ncube.

In an interview, Harare-based economist Ms Chipo Warikandwa said the move by the Government was necessary and long overdue.

“We applaud the move that the Government has taken in a bid to further tighten screws and close any loopholes that uncouth individuals and corporates have been using to destabilise the macro-economic stability authorities have been ensuing,” she said

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