South Africa’s tourism restoration is gathering tempo, however successful a contract doesn’t assure {that a} small enterprise has sufficient money to ship it. For a lot of tourism SMEs, the interval between contract award and eventual cost has turn into a serious barrier to progress.
South Africa welcomed 5,584,473 worldwide vacationers between January and June 2026, in accordance with the Division of Tourism. That represented a 12.3% enhance in contrast with the identical interval in 2025, supported by stronger arrivals from each African and abroad markets.
The sector’s broader financial contribution has additionally recovered. Statistics South Africa estimates that tourism straight supported 953,981 jobs in 2024 and contributed R361.7 billion, or 4.9%, to nationwide GDP.
These headline figures level to renewed momentum. Nonetheless, they don’t present how extensively tourism revenue is distributed throughout the 1000’s of smaller companies that present transport, catering, safety, upkeep, laundry, occasions, tools and different providers.
Why successful a contract can create a financing drawback
A tourism contract can require expenditure lengthy earlier than it generates revenue. A transport operator could must safe automobiles, make use of drivers and buy gas. An occasion provider could need to pay venue, tools and staffing deposits. Caterers should buy substances and canopy labour prices earlier than an occasion takes place.
The monetary hole can prolong from contract award by way of mobilisation, supply, invoicing, purchaser approval and eventual cost.
“Profitable a contract doesn’t essentially remedy an SME’s financing drawback — it may well really create one,” mentioned Andrew Maren, founder and CEO of ProfitShare Companions.
In response to Maren, a enterprise could instantly must fund workers, inventory, provider deposits, transport, lodging, tools, venue prices and insurance coverage earlier than finishing the work and infrequently lengthy earlier than the customer is required to pay.
This timing strain can stop an in any other case succesful SME from executing a contract it has already received. Demand exists, the client could also be credible and the transaction could also be worthwhile, however the provider lacks the working capital required to start.
Massive corporations can typically take in this interval by way of money reserves, established credit score amenities or provider phrases. A smaller enterprise could as an alternative have to say no the chance, scale back the scope of supply or search short-term exterior funding.
About R50 million channelled to tourism-related SMEs
ProfitShare Companions, a South African alternative-finance supplier, mentioned its preliminary portfolio overview recognized roughly R50 million in funding offered to tourism-related SMEs. In response to the corporate, that capital helped the companies execute contracts collectively value at the very least R80 million.
The estimate applies a broad definition of the tourism worth chain, together with companies concerned in transport, occasions, catering, safety and different providers equipped to tourism-sector clients. ProfitShare Companions mentioned it had not but accomplished a totally reconciled extraction overlaying each tourism-related transaction.
The corporate reported a mean tourism-sector funding quantity of roughly R800,000. Particular person transactions ranged from lower than R250,000 for a smaller transport or shuttle operator to greater than R5 million for a big event-related task.
Throughout its wider portfolio, ProfitShare Companions says it has obtained greater than 10,000 purposes and enquiries, funded greater than 500 SMEs and offered near R2 billion in capital. These are company-supplied figures reasonably than independently audited tourism-industry statistics.
A 60-day funding hole could start earlier than invoicing
ProfitShare Companions estimates that its tourism-related transactions have a mean funding interval of roughly 60 days. Nonetheless, an SME’s actual cash-conversion cycle may be longer than the cost time period acknowledged in a contract.
A purchaser providing 30-day phrases could solely begin counting these 30 days after the service has been accomplished, the bill submitted, supporting paperwork authorised and the bill entered into its cost system. The SME could have already got been spending cash for a number of weeks or months earlier than that course of begins.
Thirty- and 60-day cost phrases are frequent, in accordance with Maren, whereas 90-day phrases and cost delays past the contractual deadline additionally happen.
The working-capital strain is especially extreme when supply prices are excessive relative to the SME’s steadiness sheet. This often impacts:
- event-production and infrastructure suppliers;
- transport, shuttle and tour operators;
- catering and meals companies;
- safety, cleansing, upkeep and laundry corporations;
- lodging and journey intermediaries required to pay deposits; and
- specialist tools suppliers buying inventory for a particular contract.
Two contracts illustrate the financing mismatch
In a single anonymised instance equipped by ProfitShare Companions, an SME secured an event-related contract value roughly R25 million. The financier offered about R5 million in working capital to allow the enterprise to execute the contract.
ProfitShare Companions mentioned it typically funds giant concert-related transactions solely the place there may be credible secured sponsorship or confirmed ticket-sale revenue.
The transaction was initially structured round a 109-day funding cycle however was settled, with the capital repaid in full, after roughly 83 days. Though the funding represented solely one-fifth of the contract worth, the SME nonetheless required that capital to mobilise and ship the work.
In a second case, a transport and shuttle operator held a contract value roughly R350,000 and required round R250,000 in funding. The deliberate funding cycle was 120 days, whereas the transaction was accomplished and the capital repaid after roughly 69 days.
The second instance demonstrates how a relatively modest contract can create substantial strain when the provider should finance most of its supply prices prematurely.
Why typical lending could not match the contract
Conventional lending typically locations appreciable weight on the borrower’s monetary historical past, current money movement, steadiness sheet and out there collateral. A newly awarded contract could not but be seen within the firm’s monetary statements.
An SME can due to this fact have a commercially enticing R5 million or R10 million contract with a reputable buyer and nonetheless fail a traditional lending evaluation as a result of it has restricted mounted property, a brief buying and selling historical past or inadequate historic money movement.
Buy-order and contract finance as an alternative considers the economics of the particular transaction alongside the monetary place and supply functionality of the SME.
Evaluation can embrace verification of the acquisition order or contract, the cost report of the final word purchaser, provider readiness, supply prices, anticipated gross margin, contractual dangers, cost phrases and any current claims over the ensuing money movement.
ProfitShare Companions mentioned roughly 80% of its preliminary candidates have already got a purchase order order or contract. The remaining candidates are typically nonetheless negotiating a contract or getting ready a proposal and wish to set up whether or not funding will probably be out there in the event that they win the work.
For transactions finally funded by way of the corporate’s purchase-order or contract-finance merchandise, a verified underlying transaction is required.
Finance can not restore an unprofitable contract
Entry to funding doesn’t mechanically make each contract viable. The price of capital have to be thought of towards the anticipated revenue and the life like time wanted to gather cost.
ProfitShare Companions mentioned its pricing varies in accordance with the product, funding supply, threat, transaction measurement and anticipated funding interval. It makes use of a pricing system incorporating greater than 130 variables, whereas its profit-share payment additionally displays transaction monitoring and risk-mitigation work.
A healthy-margin contract funded for 45 days might be able to take in the financing value. A low-margin contract that is still unpaid for 4 or 5 months can depart the SME with little or no revenue.
The danger additionally extends past late cost. A disputed bill, incomplete documentation or failure to fulfill supply necessities can interrupt the anticipated money movement. Contract financiers due to this fact want to observe supply, purchaser acceptance, bill submission and assortment reasonably than treating a purchase order order as unconditional safety.
“A superb debtor doesn’t eradicate timing threat. Even very giant corporates and authorities entities will pay later than anticipated,” Maren mentioned.
A cloth dispute or unexplained delay can lead to extra funding being paused whereas the financier and the SME decide whether or not the issue is administrative, contractual or associated to supply.
Authorities’s 30-day rule doesn’t eradicate cost threat
South African authorities departments are typically anticipated to settle legitimate provider invoices inside 30 days until a contract specifies in any other case. In follow, late cost stays a considerable drawback.
Nationwide Treasury’s report on the 2024/25 monetary 12 months recorded 464,188 invoices, value R43.6 billion, that had been paid after 30 days by nationwide and provincial departments.
On the finish of March 2025, one other 142,801 invoices value R18.2 billion had been greater than 30 days previous and remained unpaid. Provincial departments accounted for 98% of these excellent invoices.
Nationwide Treasury recognized insufficient budgets, financial-system issues, disputed invoices, gradual authorisation, internal-control weaknesses and lacking or incorrectly recorded paperwork among the many recurring causes.
Non-public-sector clients are usually not mechanically sooner. Massive companies can impose cost phrases of 60, 90 and even 180 days. For the SME, the significant measure is due to this fact the entire interval between the primary delivery-related expenditure and the precise receipt of money.
Patrons can scale back the necessity for exterior finance
Different finance can bridge a viable timing hole, however giant consumers also can change procurement practices in order that small suppliers should not have to finance a whole contract themselves.
Choices embrace mobilisation funds after award, milestone-based billing, direct cost of verified suppliers, shorter invoice-approval processes and clearer details about the place an bill sits within the cost system.
Patrons also can facilitate authorised payment-direction or cession preparations when an exterior financier is supporting the provider.
Requiring a small firm to fund 100% of a giant contract after which wait one other 60 or 90 days for cost successfully turns balance-sheet power into an unspoken procurement requirement. That may undermine the aim of programmes supposed to increase SME participation.
A sufficiently giant mobilisation cost or earlier milestone cost could scale back and even eradicate the necessity for exterior finance. The target shouldn’t be to maximise SME borrowing, however to offer viable suppliers an acceptable monetary construction for finishing their contracts.
Development can enhance reasonably than take away the funding requirement
ProfitShare Companions reported a repeat-funding fee of roughly 40% amongst its tourism-related shoppers. Repeat use of working-capital finance doesn’t essentially point out {that a} enterprise is failing to turn into financially stronger.
An SME could accumulate retained earnings and fund extra of every contract itself, but additionally start successful a lot bigger contracts. Its absolute want for working capital can due to this fact enhance because the enterprise grows.
“Repeat use of working-capital finance is just not essentially proof of economic weak spot. It may also be the results of a enterprise scaling sooner than the cash-conversion cycle permits,” Maren defined.
The constraint is most acute amongst micro and small companies as a result of they typically have the least balance-sheet capability and essentially the most restricted entry to overdrafts. Nonetheless, established SMEs can face the identical drawback once they win a contract a number of occasions bigger than their regular month-to-month turnover.
South Africa’s tourism restoration can create significant alternatives for native enterprises, however market entry alone is inadequate. SMEs should even have a financially sustainable approach to mobilise, ship and survive the interval earlier than cost.
The central query is now not solely whether or not small companies can win tourism contracts. It’s whether or not procurement and financing techniques permit them to transform these contracts into accomplished work, revenue and long-term progress.
