Gauteng Health’s R8bn indebtedness threatens patient care

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JEREMY MAGGS: Gauteng’s public health system is facing a supplier-debt crisis that could directly threaten patient care. The [Gauteng] Health Department has acknowledged that it owes suppliers something in the region of R8 billion, while medical technology companies say they are being forced to continue supplying essential services, diagnostics and consumables despite months of delayed payments and procurement failures.

The industry is warning now that hospitals cannot keep operating on the assumption that private suppliers will finance a broken system indefinitely. This is a real worry.

I’m in conversation now with Monica Lucas, who is vice chair of the South African Medical Technology Industry Association [Samed]. Monica, welcome to you. How close, then, is this crisis to affecting patient care in Gauteng hospitals?

MONICA LUCAS: Hi, Jeremy. Sad to say, it already is affecting patients. I think we are all aware that there are some suppliers who have already ceased supply to Gauteng Health, some to specific institutions and some across the board to the entire province, due to the lack of payment that has been forthcoming over the last few months from the department.

JEREMY MAGGS: So can we break it down? What essential medical supplies, then, are most at risk if suppliers can no longer carry this debt burden?

MONICA LUCAS: Jeremy, MedTech covers a range that goes from syringes to bandages to gloves, to servicing of MRI machines or X-ray machines, to knee implants, cardiovascular stents – to a whole host of other products. And every single one of these categories is potentially at risk.

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JEREMY MAGGS: These numbers, Monica, are absolutely staggering. If I’ve read this correctly, Gauteng Health owes suppliers something in the region of R8 billion rand. One has to ask how a debt like this, so big, can build up without any consequences for senior officials – unless that of course is happening.

MONICA LUCAS: Jeremy, yesterday I was actually on the road with the MEC as she was hosting a road show for the major academic units within Gauteng, and it was very encouraging to hear her position on the situation. I think she feels the way that the rest of us do.

She’s [Gauteng’s Health MEC] flabbergasted that this is even a reality that’s being faced by the public sector and she really was holding everybody to account yesterday during each of those meetings, and made no secret of the fact that inefficiencies will not be tolerated.

So I really hope that there is going to be follow-through on those promises and we’ll see delivery on what’s being asked of those officials at those institutions.

JEREMY MAGGS: Monica, ‘flabbergasted’ and ‘hope’ of course are cheap currency. What would your association specifically like to see happen in the very short term?

MONICA LUCAS: We would like to see the debt that is owed to medical suppliers – and all suppliers in Gauteng for that matter – paid within the 30-day PFMA [Public Finance Management Act] framework that is promised to us in the law. Unfortunately, that is not happening, and it hasn’t been happening for a very, very long time due to various reasons of systemic issues, human-resource challenges, and ultimately budget constraints.

So at the moment it’s R8 billion and probably more, if I’m completely honest. It seems like a very insurmountable number.

But we are aware that National Treasury has made commitments to try and assist provinces to alleviate this debt problem that we are facing. But I don’t know if it’s going to be enough is my honest answer.

JEREMY MAGGS: Well, that’s exactly the point. As you say, the department is meeting suppliers. But at this point why should anyone believe this is going to produce results when previous commitments we know have failed 100%?

MONICA LUCAS: 100%. This is a conversation I think Samed has been having with various provinces and National Health for over 10 years – and we’ve seen some successes and some failures over the years.

But unfortunately this ball carries on rolling and, unless there is systemic change in the way in which budgets are managed and payments are done to suppliers to put them within that 30-day period, we are not going to see a significant change happening anytime soon.

JEREMY MAGGS: Monica, if this has been going on for more than a decade, why has your organisation, do you think, failed to force meaningful action before now?

MONICA LUCAS: Jeremy, unfortunately Samed is a voluntary organisation for MedTech suppliers, and we have regular and ongoing engagements with National Treasury, National Health and the various provinces.

But unless there is effective will to change within the governmental structures and institutions, there’s a limited ability as to what we as an association, as well as suppliers, are able to do.

From an ethics perspective as MedTech suppliers, we are very, very aware of our impact on patient care, and we are aware that we are responsible for helping to deliver those patient outcomes to the public within the realms of South Africa.

JEREMY MAGGS: And that’s the trump card, surely, that the authorities hold – that they know you’re going to hold that line.

MONICA LUCAS: That is unfortunately the situation, and suppliers have to make that decision independently as to how they are going to continue to operate their businesses – whether they’re going to continue to operate in the public space or not. Those are the choices that some companies are facing at the moment.

JEREMY MAGGS: I just want to circle back to the reasons. If I heard you correctly, is it fundamentally a cash shortage? Is it just procurement failure, as you alluded to, or are you also suggesting, Monica, just plain administrative incompetence?

MONICA LUCAS: All of the above. We are very aware that the budget has been reduced significantly over the past few years. There are massive budget constraints facing the SA health sector. Everyone is aware of the challenges that happened at Tembisa from a corruption-scandal perspective. And certainly errors and corruption and inefficiencies in the way in which goods are procured has a major impact on how the money is spent.

Listen/read: Jeff Wicks on how syndicates bled Tembisa Hospital of billions

Ultimately, yes, there is certainly the administrative failure when it comes to the accountability at the institution level as to how they are spending their money and where they are spending their money.

JEBERY MAGGS: So you’ve engaged with the MEC on this issue as early as yesterday. Have you pushed for any kind of resolution timeline here?

MONICA LUCAS: She has committed to having this resolved and the P8 billion paid by the end of 2026, by December 2026 – with accountability follow-up that she has requested by November.

The roadshow is continuing, I believe, next week as well to some of the smaller institutions to identify shortcomings in those spaces. And we are going to certainly try our best to hold her accountable for the promises that she made yesterday, as well as the accounting officers at the various institutions and the promises that they’ve made to all the suppliers.

JEREMY MAGGS: Monica, that seems to me to be a very generous timeline. If it’s elongated for too long, surely some suppliers, particularly smaller ones, would risk going out of business?

MONICA LUCAS: 100%. They have committed to settling suppliers’ debt which is I think below a million rand within the next 30 days. So hopefully those smaller SME and EME [Exempted Micro-Enterprise] businesses will see that payment relief in the short term.

One of the biggest challenges, Jeremy, being seen in the sector is the lack of purchase orders which is impacting the ability to handle the budget effectively and pay suppliers on time.

We’re experiencing delays of months at a time, due to lost paperwork and staff inefficiencies that are compounding this issue.

So when I say that R8 billion that we anticipate is owed to suppliers, that figure is probably possibly significantly more because there is so much still sitting there which is still waiting for purchase orders – which will only then become invoiced.

JEREMY MAGGS: And how close are you to taking legal action if there is no credible repayment plan that is honoured?

MONICA LUCAS: Samed has explored legal action options, which we continue to do, and that is that is something that we will implement should that need arise.

JEREMY MAGGS: Monica Lucas, thank you very much indeed – vice chair of the South African Medical Technology Industry Association.