GEA calls on mining giants to ease the pressure on contractors
WAITING 90 days for payment from major mining companies is squeezing the purses of small businesses so tight they are cutting back on research and training.
Gladstone Engineering Alliance and six other industry and development bodies wrote to Glencore, Anglo American, BHP Billiton, Peabody and Rio Tinto requesting they revert back to payment terms of 30 days, instead of 60.
GEA chief executive officer Carli Homann said a survey of regional suppliers confirmed some payment terms caused problems for small businesses seeking work in the mining sector.
She said some businesses were unable to pay their staff in seven days or their creditors in 30 days.
As a result, she said businesses have cut back on research and development, and staff training.
"All of which ultimately impact their ability to service and supply the mining sector," Mrs Homann said.
"Ultimately if the extended 60 day payment terms persist there will be fewer suppliers in the market, meaning higher prices and less competition."
Gladstone Drafting has experienced the 90-day payment term and said it put pressure on its cash flow.
For suppliers, long payment times can create a burden for paying wages and for goods and services.
"If the majority of your clients are on 90 day terms that would definitely hurt a small business," owner Vicki Buenen said.
"It's not ideal, but work is work, you're not going to say no because of the terms."
In May Rio Tinto made the change to 30-day payment terms for suppliers under $1 million of expenditure.
"The changes should be helping our smaller suppliers manage their cash flow more effectively," a Rio Tinto spokesperson said.
Peabody Energy, which said it has a case-by-case structure with suppliers, is reviewing its payment term system for improvements.
"We understand on occasion suppliers have faced delays in excess of agreed payment terms and we have worked expeditiously to resolve these cases," a spokesperson said.
While Glencore said the claims made did not apply to them, they have arranged a meeting with Resource Industry Network to discuss the matter.
BHP offers a standard 60-day payment term, but a spokesperson said there were a range of other terms available dependent on the size and location of suppliers.
The letter was a collaborative move between Gladstone Engineering Alliance, Resource Industry Network, Central Highlands Development Corporation, Toowooomba and Surat Basin Enterprise, Greater Whitsunday Alliance, Townsville Enterprise Limited and Capricorn Enterprise.