Gauteng Health on payment of suppliers

R17 billion paid to Gauteng Health suppliers to date

As part of its supplier’s payment plan, the Gauteng Department of Health continues to pay suppliers through arranged manifold approaches. Since April 2017 to 19 March 2018, the department has paid R 17 billion to 7513 suppliers

Despite this the Department has been facing severe liquidity challenges due to the misalignment between the increase in the burden of disease, increase in population and an above average increase of medical inflation with the budget.

The tough economic conditions, high unemployment rate and the technical recession experienced in South Africa in 2017 exacerbated the financial challenges faced by the department. More citizens became uninsured and had to use public healthcare facilities. The high quality care that is offered in some of our institutions at affordable rates had also led some citizens to use our tertiary and provincial hospitals thereby increasing the demand for healthcare services.

Due to these factors, the Department has thus been unable to stay within its allocated budget a phenomenon that resulted in the build-up of accrued liabilities for unpaid goods and services.

The National Minister of Health, Dr Aron Motsoaledi, the Premier of Gauteng, Mr David Makhura together with the MEC of Health in Gauteng, Dr Gwen Ramokgopa established the Health Intervention Task Team (ITT) in the fourth quarter of 2017 to assist in stabilising the finances of the department.

The ITT composition comprises distinguished South Africans with impeccable credentials in the health and finance fields, whose sole interest is to bring stability to the finances of the Department.

In February 2018, the ITT presented its recommendations to the Executive Council Lekgotla, which is the highest decision making body in the Gauteng province. These recommendations were accepted and they have since become the mandate of the Gauteng Department of Health (GDoH) to implement.

The recommendations are engineered to bring about sustainable solutions to the department and not stop gap measures. The recommendations are tough and require commitment and collaboration from all Health stakeholders.

To ensure stability and sustainability in the finances of the GDoH and to guarantee continued provision of quality healthcare services, the ITT recommended that the 2018/2019 budget be ring-fenced only to 2018/2019 expenditure. This meant that a method had to be found of dealing and settling the large accrued liabilities that built over time.

The Gauteng Provincial Treasury came on board and has made R4.8 billion available to settle accrued liabilities over the Medium Term Expenditure Framework. R1.5 billion of these funds will be made available in the new financial year � 2018/2019.

With the projected accrued liabilities of at least R7 billion as at 31 March 2018, a decision had to be made on how to split the R1.5 billion available. In the interest of saving small businesses, for most of whom the Department is their biggest customer, the Department has made an undertaking to settle all confirmed historic debt owed to these suppliers. These are suppliers that are owed R5 million and less.

The GDoH has begun engagements with major suppliers, some of which are providers of critical goods and services. The Department took comfort in that the majority of these suppliers understood the plight of the Department and are willing to work together with the Department to bring about a turn-around in the Department’s finances.

The GDoH has since proposed the following payment plan which will be predicated on a legally binding contract:

As from 1 April 2018, the Department will settle all confirmed invoices within 30 days of receipt of a valid invoice.

Only verified and reconciled outstanding balances will be considered.

Payment period will be a maximum of four years. This means where the department owes a supplier in excess of R10 million as at 31 March 2018, a payment plan will be signed off with the supplier to settle this debt over a period of time to a maximum of 4 years.

No interest will be charged on the outstanding balances.

Payment instalments will be incremental, with the smallest payment to be expected in year 1.

The Prescription Act will not apply. After a period of time when an invoice prescribes, it means that the invoice/debt is no longer payable. We have committed to suppliers that invoices for which we have agreed is owing as at 31 March 2018 will be exempt from the Prescription Act.

The above interventions will be coupled with measures to contain the generation of commitments including identifying areas of wastage and inefficiencies and strict adherence to clinical protocols. Further, there will be an iron clad approach which will ensure that no deviations from the allocated budget is tolerated.

Savings realised during the 2018/2019 and reprioritised funds will be used to fund accruals and where necessary Provincial Treasury will be called to assist. It is business unusual at the GDoH and we hope that our suppliers, who are our valued stakeholders, will walk with us on this journey to financial recovery.

Source: Government of South Africa