Sanjeev Gupta promises to speed up payments for Whyalla suppliers

British billionaire Sanjeev Gupta has apologised to Whyalla businesses which supply his steelworks and promised to speed up payments following a lashing from Small Business Ombudsman Kate Carnell.

• Sanjeev Gupta feels heat over late payments

British billionaire Sanjeev Gupta has apologised to Whyalla businesses which supply his steelworks and promised to speed up payments following a lashing from Small Business Ombudsman Kate Carnell.

In a letter to suppliers, Mr Gupta said his company, GFG Alliance, had inherited payment systems — and importantly terms — from the troubled former Arrium business which it bought out of administration.

These were substandard, and the company was working to replace them and introduce a new system by March which would speed up payments, Mr Gupta said.

READ THE FULL LETTER BELOW

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman. Picture: Kym Smith

“Responding to these issues and the impact of our growth on our suppliers, we are in the process of working with Greensill, the world’s leading non-bank provider of supply chain finance to introduce a Supplier Credit Facility (SCF) by March.

“This facility will enable us to fast-track future payments, and also alleviate the impact of any

increased demands on our suppliers and ensure they can grow with us.’’

Under GFG Alliance’s current policy, which stipulates businesses should be paid back inside 62 days plus the period until the end of the calendar month, small businesses can wait more than 90 days for payment.

Ms Carnell this week condemned that arrangement as “not even nearly good enough” but said she’d also received a host of complaints from businesses who had waited for more than 100 days for payment.

South Australia’s Small Business Commissioner John Chapman also said today he had spoken to a number of businesses who were experiencing delayed payments.

Ms Carnell said this week her office had received between 10 and 20 complaints from businesses, including one supplier who had waited more than 120 days to be paid $200,000.

Under new Federal Government rules, companies must pay suppliers inside 20 days to receive government contracts, but no rules exist compelling businesses generally to pay inside a certain time period.

Ms Carnell said most businesses had moved towards paying suppliers inside 30 days in recent years, with a large growth in businesses paying other businesses more swiftly in recent years.

Sanjeev Gupta has apologised for his company’s late payments.

LETTER FROM SANJEEV GUPTA

You may have noted that the GFG Alliance has recently been subject to some media reports focusing on our standard payment terms and concerns by suppliers in Whyalla over delayed payment.

I would like to take this opportunity to respond to these reports and explain what we are doing to resolve these issues. If you have been affected, I would also like to provide you with my reassurance that we are working through these issues as a matter of urgency.

GFG purchased the ex-Arrium assets in September 2017. It is a complex business with many challenges that we continue to work through. Amongst other things, when we purchased the business, we inherited the standard terms and conditions that Arrium and the administrators had been dealing with vendors on. This included payment terms. We have not changed these payment terms.

We also inherited a working capital management system which was not fit for purpose. GFG began to upgrade these systems at the end of 2018 with the aim of replacing complex multiple treasury systems and payment terms inherited from Arrium, which are not suited to the needs of a fast-growing business such as Liberty.

For background, we operate in over 200 locations, with 10 separate financial and treasury systems, one such area that is overloaded and inefficient is that of collections and payments management.

In order to fast track the upgrade of our working capital management systems we have engaged additional consultancy resources to ensure, amongst other things, that all our small business vendors have appropriate payment terms.

In addition, the market in Australia has grown by 20% in the last 10 months, so we are also responding to that very fast growth rate. We have ramped up production to ensure Australian infrastructure and construction projects are supplied in time.

That growth and demand is placing new stresses upon our working capital requirements, our working capital systems and our suppliers.

Responding to these issues and the impact of our growth on our suppliers we are in the process of working with Greensill, the world’s leading non-bank provider of supply chain finance to introduce a Supplier Credit Facility (SCF) by March. This facility will enable us to fast-track future payments, and also alleviate the impact of any increased demands on our suppliers and ensure they can grow with us. If you are interested in finding out more

about this program (and potentially participating) please register your interest as soon as possible by emailing [e-mail].

The overall aim of the above initiatives is to improve our payment processes and terms, which will ensure that our suppliers can play a critical role in the long-term growth of our business.

I can assure you that we fully understood the feelings of those suppliers affected by the above issues and I am determined we will keep things on track so that we can grow together.

[e-mail]