At the end of April South Africa moved from a defined National Lockdown period, to a so-called "Risk Adjusted Strategy". That is when a holiday home turned into a new residence, or perhaps put differently, when a trip to a prison to see someone, turned into a prison sentence. But I digress. When we shifted into this indefinite era of a lockdown, businesses were forced to re-evaluate long term survival.
The situation impacts not only existing debts, but the willingness of companies to extend credit in the current climate.
The severe consequences for businesses that are trying to pick up the pieces has been well-documented. As we all now know, cash is king, and one of the underlying problems that businesses face is the slow payment by customers of their accounts, with many businesses stuck in the cycle of not being able to pay because they, in turn, have also not been paid. The collection of unpaid debts is, it seems, something that is viewed as being unsavoury and even despicable. And yes, we understand that aggressively collecting consumer debts at this time is insensitive with so many people being people suffering the impact of Covid-19. If, however, there is absolutely no mechanism in the legal system that exists in the current version of our new world, to actually enforce contracts, this will contribute significantly to the problems that legitimate businesses face. And when I say enforcing contracts, I also mean recovering payment of amounts due for services provided or goods delivered. Some may refer to this as "debt collection" even in a business context, but it is actually nothing more than enforcing a binding contract.
As things currently stand the Courts are not open fully for business, with the result that one cannot take the simple step of enforcing a contract through a legal process. For the most part, businesses are not withholding payment out of a malicious plan to harm suppliers, often it is a knock-on effect of customers who are similarly distressed.
Opening the Courts fully is obviously not a panacea. However, the ability to enforce legally binding contractual obligations is fundamental to the orderly functioning of any economy.
www.contractzone.co.za
