July is savings Month, and much has been written on the subject of South Africans’ poor culture of putting money aside, especially following the SA Reserve Bank’s announcement recently that 72percent of households’ income in this country goes to servicing debt.

It seems as a nation, from government down to individual consumers, we have embraced the culture of credit, and have become heavily indebted. But debt is a huge burden, weighing families, businesses and the country down. Our current economic situation and high unemployment figures are also contributing to the creation of this cycle of indebtedness.

As consumers face ever rising costs of living, they are forced to borrow, and not always for those “nice to haves” but simply for life’s basic necessities. This puts pressure on businesses, who see declining revenue streams as consumers tighten their belts and learn to go without.

Given our high unemployment rate, a lot is being done to encourage entrepreneurship in order for small business owners to create their own wealth, but in this climate, many entrepreneurs are struggling under their own balance of payments

Indebtedness in business is a result of a few factors. For companies doing business with the government, which has historically been regarded as a notoriously late payer by the business community, there was some good news out of the Budget Speech of the Department for Monitoring, Planning and Evaluation last week, when Minister Jackson Mthembu affirmed their commitment to the 30-day payment rule, telling businesses not to “suffer in silence” and that he is ready to “crack the whip” in favour of compliance.

His own department has reduced their payment terms to seven days and he commended the Gauteng Provincial Government for getting theirs to 15 days.

But in the private sector there is no one to enforce a company’s payment terms. Late payment is endemic, and cash flow becomes a problem.

I have a friend in the logistics sector whose major client agreed to much more favourable payment terms, but on the condition that he gives them a 1.5 percent early payment discount.

As tempting as this might seem, ensuring a steady revenue stream, his margins are already so tight, he would be cutting off his nose to spite his face, and so has had to decline, staying with longer periods waiting for money to come in.

This is the case for many small businesses, who are being squeezed from all sides. I recall an interesting talk by business guru Vusi Thembekwayo some time ago, where he admonished small business owners for going out and looking for loans which remain for years like a noose around the business’s neck, when all they need to do is to be more efficient about collecting amounts outstanding to them.

But this is easier said than done in a chain of payments that is bottlenecked somewhere along the line.

We are now seeing the creation of companies who are prepared to exploit this and who have seen a gap in the market for business finance based on your debtors’ book, or who pay your creditors for you, keeping the wolves from the door, but a loan is a loan by any other name and comes with terms, conditions and interest re-payments.

The growth of enterprise and supplier development programmes by a number of large companies has been a bonus for the SMMEs they support, offering preferential payment terms that enable them to stay afloat.

But not all SMMEs are lucky enough to be under the protection of such schemes and are left at the mercy of their clients to be paid when and however they can.

We all know times are tough. D J Ganyani’s song Fading perfectly describes the amount of real disposable income still available to consumers, attributable to high levels of indebtedness and persistent unemployment, which adds to business’s woes.

But we must, therefore, make every effort to support our own local businesses with the limited spending that is still taking place and keep what wealth there is here in the country.

And only buy what you can afford and honour your payments, because indebtedness is like a house of cards, which can fold so easily at any time.