South Africa’s tourism recovery is gathering pace, but winning a contract does not guarantee that a small business has enough cash to deliver it. For many tourism SMEs, the period between contract award and eventual payment has become a major barrier to growth.
South Africa welcomed 5,584,473 international tourists between January and June 2026, according to the Department of Tourism. That represented a 12.3% increase compared with the same period in 2025, supported by stronger arrivals from both African and overseas markets.
The sector’s broader economic contribution has also recovered. Statistics South Africa estimates that tourism directly supported 953,981 jobs in 2024 and contributed R361.7 billion, or 4.9%, to national GDP.
Those headline figures point to renewed momentum. However, they do not show how widely tourism income is distributed across the thousands of smaller businesses that provide transport, catering, security, maintenance, laundry, events, equipment and other services.
Why winning a contract can create a financing problem
A tourism contract can require expenditure long before it generates income. A transport operator may need to secure vehicles, employ drivers and purchase fuel. An event supplier may have to pay venue, equipment and staffing deposits. Caterers must purchase ingredients and cover labour costs before an event takes place.
The financial gap can extend from contract award through mobilisation, delivery, invoicing, buyer approval and eventual payment.
“Winning a contract does not necessarily solve an SME’s financing problem — it can actually create one,” said Andrew Maren, founder and CEO of ProfitShare Partners.
According to Maren, a business may suddenly need to fund staff, stock, supplier deposits, transport, accommodation, equipment, venue costs and insurance before completing the work and often long before the buyer is required to pay.
This timing pressure can prevent an otherwise capable SME from executing a contract it has already won. Demand exists, the customer may be credible and the transaction may be profitable, but the supplier lacks the working capital required to begin.
Large companies can often absorb this interval through cash reserves, established credit facilities or supplier terms. A smaller business may instead have to decline the opportunity, reduce the scope of delivery or seek short-term external funding.
About R50 million channelled to tourism-related SMEs
ProfitShare Partners, a South African alternative-finance provider, said its preliminary portfolio review identified approximately R50 million in funding provided to tourism-related SMEs. According to the company, that capital helped the businesses execute contracts collectively worth at least R80 million.
The estimate applies a broad definition of the tourism value chain, including businesses involved in transport, events, catering, security and other services supplied to tourism-sector customers. ProfitShare Partners said it had not yet completed a fully reconciled extraction covering every tourism-related transaction.
The company reported an average tourism-sector funding amount of approximately R800,000. Individual transactions ranged from less than R250,000 for a smaller transport or shuttle operator to more than R5 million for a large event-related assignment.
Across its wider portfolio, ProfitShare Partners says it has received more than 10,000 applications and enquiries, funded more than 500 SMEs and provided close to R2 billion in capital. These are company-supplied figures rather than independently audited tourism-industry statistics.
A 60-day funding gap may begin before invoicing
ProfitShare Partners estimates that its tourism-related transactions have an average funding period of approximately 60 days. However, an SME’s real cash-conversion cycle can be longer than the payment term stated in a contract.
A buyer offering 30-day terms may only start counting those 30 days after the service has been completed, the invoice submitted, supporting documents approved and the invoice entered into its payment system. The SME may already have been spending money for several weeks or months before that process begins.
Thirty- and 60-day payment terms are common, according to Maren, while 90-day terms and payment delays beyond the contractual deadline also occur.
The working-capital pressure is particularly severe when delivery costs are high relative to the SME’s balance sheet. This frequently affects:
- event-production and infrastructure suppliers;
- transport, shuttle and tour operators;
- catering and food businesses;
- security, cleaning, maintenance and laundry companies;
- accommodation and travel intermediaries required to pay deposits; and
- specialist equipment suppliers purchasing stock for a specific contract.
Two contracts illustrate the financing mismatch
In one anonymised example supplied by ProfitShare Partners, an SME secured an event-related contract worth approximately R25 million. The financier provided about R5 million in working capital to enable the business to execute the contract.
ProfitShare Partners said it generally funds large concert-related transactions only where there is credible secured sponsorship or confirmed ticket-sale income.
The transaction was initially structured around a 109-day funding cycle but was settled, with the capital repaid in full, after approximately 83 days. Although the funding represented only one-fifth of the contract value, the SME still required that capital to mobilise and deliver the work.
In a second case, a transport and shuttle operator held a contract worth approximately R350,000 and required around R250,000 in funding. The planned funding cycle was 120 days, while the transaction was completed and the capital repaid after approximately 69 days.
The second example demonstrates how a comparatively modest contract can create substantial pressure when the supplier must finance most of its delivery costs in advance.
Why conventional lending may not fit the contract
Traditional lending generally places considerable weight on the borrower’s financial history, existing cash flow, balance sheet and available collateral. A newly awarded contract may not yet be visible in the company’s financial statements.
An SME can therefore have a commercially attractive R5 million or R10 million contract with a credible customer and still fail a conventional lending assessment because it has limited fixed assets, a short trading history or insufficient historical cash flow.
Purchase-order and contract finance instead considers the economics of the specific transaction alongside the financial position and delivery capability of the SME.
Assessment can include verification of the purchase order or contract, the payment record of the ultimate buyer, supplier readiness, delivery costs, expected gross margin, contractual risks, payment terms and any existing claims over the resulting cash flow.
ProfitShare Partners said approximately 80% of its initial applicants already have a purchase order or contract. The remaining applicants are generally still negotiating a contract or preparing a proposal and want to establish whether funding will be available if they win the work.
For transactions ultimately funded through the company’s purchase-order or contract-finance products, a verified underlying transaction is required.
Finance cannot repair an unprofitable contract
Access to funding does not automatically make every contract viable. The cost of capital must be considered against the expected profit and the realistic time needed to collect payment.
ProfitShare Partners said its pricing varies according to the product, funding source, risk, transaction size and anticipated funding period. It uses a pricing system incorporating more than 130 variables, while its profit-share fee also reflects transaction monitoring and risk-mitigation work.
A healthy-margin contract funded for 45 days may be able to absorb the financing cost. A low-margin contract that remains unpaid for four or five months can leave the SME with little or no profit.
The risk also extends beyond late payment. A disputed invoice, incomplete documentation or failure to meet delivery requirements can interrupt the expected cash flow. Contract financiers therefore need to monitor delivery, buyer acceptance, invoice submission and collection rather than treating a purchase order as unconditional security.
“A good debtor does not eliminate timing risk. Even very large corporates and government entities can pay later than anticipated,” Maren said.
A material dispute or unexplained delay can result in additional funding being paused while the financier and the SME determine whether the problem is administrative, contractual or related to delivery.
Government’s 30-day rule does not eliminate payment risk
South African government departments are generally expected to settle valid supplier invoices within 30 days unless a contract specifies otherwise. In practice, late payment remains a substantial problem.
National Treasury’s report on the 2024/25 financial year recorded 464,188 invoices, worth R43.6 billion, that were paid after 30 days by national and provincial departments.
At the end of March 2025, another 142,801 invoices worth R18.2 billion were more than 30 days old and remained unpaid. Provincial departments accounted for 98% of those outstanding invoices.
National Treasury identified inadequate budgets, financial-system problems, disputed invoices, slow authorisation, internal-control weaknesses and missing or incorrectly recorded documents among the recurring causes.
Private-sector customers are not automatically faster. Large businesses can impose payment terms of 60, 90 or even 180 days. For the SME, the meaningful measure is therefore the complete period between the first delivery-related expenditure and the actual receipt of cash.
Buyers can reduce the need for external finance
Alternative finance can bridge a viable timing gap, but large buyers can also change procurement practices so that small suppliers do not have to finance an entire contract themselves.
Options include mobilisation payments after award, milestone-based billing, direct payment of verified suppliers, shorter invoice-approval processes and clearer information about where an invoice sits in the payment system.
Buyers can also facilitate approved payment-direction or cession arrangements when an external financier is supporting the supplier.
Requiring a small company to fund 100% of a large contract and then wait another 60 or 90 days for payment effectively turns balance-sheet strength into an unstated procurement requirement. That can undermine the purpose of programmes intended to expand SME participation.
A sufficiently large mobilisation payment or earlier milestone payment may reduce or even eliminate the need for external finance. The objective should not be to maximise SME borrowing, but to give viable suppliers an appropriate financial structure for completing their contracts.
Growth can increase rather than remove the funding requirement
ProfitShare Partners reported a repeat-funding rate of approximately 40% among its tourism-related clients. Repeat use of working-capital finance does not necessarily indicate that a business is failing to become financially stronger.
An SME may accumulate retained earnings and fund more of each contract itself, yet also begin winning much larger contracts. Its absolute need for working capital can therefore increase as the business grows.
“Repeat use of working-capital finance is not necessarily evidence of financial weakness. It can also be the result of a business scaling faster than the cash-conversion cycle allows,” Maren explained.
The constraint is most acute among micro and small businesses because they generally have the least balance-sheet capacity and the most limited access to overdrafts. However, established SMEs can face the same problem when they win a contract several times larger than their normal monthly turnover.
South Africa’s tourism recovery can create meaningful opportunities for local enterprises, but market access alone is insufficient. SMEs must also have a financially sustainable way to mobilise, deliver and survive the interval before payment.
The central question is no longer only whether small businesses can win tourism contracts. It is whether procurement and financing systems allow them to convert those contracts into completed work, income and long-term growth.