Federal Government may enforce 30-day payment terms for mining companies by 2020

THE Gladstone Engineering Alliance (GEA) is encouraged by a Federal Government report recommending mining companies should adhere to 30-day payment terms for small to medium businesses working in the mining/resources sector.

The Industry, Innovation, Science and Resources Committee yesterday tabled the report for its mining inquiry, entitled Keep it in the regions: Mining and resources industry support for businesses in regional economies - an inquiry that the GEA appeared at in August.

GEA Acting Chief Executive Officer Julie Gelder said the GEA appeared as a witness at the inquiry because for small to medium businesses working in the resources sector particularly, prompt and on-time payment is crucial.

“A reliable cash flow and working capital enhances a business’s ability to grow, create jobs and plan for the future,” Ms Gelder said. 

“The stress and uncertainty of lengthy or late payments can take a direct personal toll on employees, owners and shareholders.  The ongoing viability of businesses has been threatened by extended payment terms especially if they are unable to secure finance for their operations to cover their regular and unavoidable outlays such as wages, superannuation, and taxation payments”

Chaired by Hon Barnaby Joyce MP, the Federal Government report addressed a number of issues relating to the inquiry including mining companies’ procurement policies, royalties for regions, skills shortages and skills development, social licence to operate, and terms of payment and contract terms.

“The committee’s recommendation regarding payment terms is for the Australian Government to consider the outcome of the review into the Business Council of Australia’s voluntary Australian Supplier Payment Code (the Code) or enforce 30-day payment terms as early as 2020,” Ms Gelder said.

The report states if the review does not result in the significant strengthening of, and compliance by industry with, the Code, the Australian Government should then move to legislate maximum payment terms.  If the Code is not significantly strengthened by July 2019, the report further recommends the Australian Government introduce legislation which sets a maximum payment time for business to business transactions depending on the size of the company.

Over the last few weeks a number of mining companies have moved to introduce 30-day payment terms for small to medium businesses including BHP/BMA, Peabody, Origin and Ango-American.

“Terms of 60 to 90 days are choking cash-flow and crippling regional businesses to the point that Mr Joyce said mining companies are essentially using regional businesses as a bank ,” Ms Gelder said.

“Large and small mining companies need to take notice of the recommendations which are fundamentally aimed at improving the capacity of regional businesses to supply the mining sector and for the Federal Government to even consider introducing legislation shows how endemic the issue is across Queensland and Australia.”

Picture: GEA001: The Hon Barnaby Joyce MP with George Christensen MP and Brian Mitchell MP at the inquiry into how mining companies can support businesses in regional economies in August.

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