South Africa

Gauteng Health: Department gives itself four years to pay supplier debt

By Orateng Lepodise 29 March 2018

Gauteng Health Department is to enter into a payment plan with suppliers that will see cash-strapped department pay off debt over a maximum of four years. By ORATENG LEPODISE.

Businesses supplying a variety of services to the Gauteng Department of Health are being made to wait more than three months for payment.

This is despite Treasury regulations stating that businesses who provide services to government are to be paid within a period of 30 days.

They expect (Gauteng health department) you to service their orders and if you don’t they cancel their orders and blacklist you,” said one of the department’s suppliers who asked not to be named.

But this is not a new problem. According to DA Gauteng Shadow Health MEC, Jack Bloom, this has been an issue faced by suppliers for the past three years.

Lesemang Matuka, spokesperson for the Gauteng department of health, blamed the non-payment on “severe liquidity challenges”.

This he said was due to a “misalignment between the increase in the burden of disease, increase in population and the above average increase of medical inflation with the budget.”

According to Matuka the tough economic conditions, high unemployment rate and the technical recession that South Africa experienced in 2017 had exacerbated the financial challenges that the department is currently faced with.

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

Jack Bloom, DA Gauteng Shadow Health MEC said the department’s budget allocation was increased this year, up R4.7-billion to R46.6-billion.

Matuka said their liabilities stood at a projected R7-billion but that the department only had R1.5-billion with which to settle its debt.

He said a decision had been taken to “split” the available money “ in the interest of saving small businesses”.

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,” said Matuka.

He said suppliers who are owed R5-million or less by the department will be paid first. Suppliers who are owed larger amounts will be paid over a period of a maximum of four years.

But Bloom said: “This is an unacceptable and illegal arrangement as all payments should be done within 30 days.”

The department’s inability to pay suppliers has knock-on effects.

This has a serious impact on business, you can never function properly. I have staff members that I have to pay and they have to take care of their families and I also have a family to take care of, so this means that my staff cannot provide for their families,” said one of the department’s suppliers.

Suppliers also claim the department cancelled orders without informing them.

In a recent incident, a supplier wrote to Gauteng health’s MEC Dr Gwen Ramokgopa complaining that they were only made aware that an order had been cancelled when they had arrived at Helen Joseph Hospital.

The receiving clerks’ claim it is not necessary to send out cancellation letter to suppliers for orders they intend cancelling,” said the supplier in the email to the MEC.

According to the supplier his staff had been in constant communication with one of the clerks at the hospital as they had a delay of stock and they had to wait for stock to be delivered from China, but were not informed of any cancellations.

Matuka failed to respond to queries regarding the cancellation of orders.

Bloom said: “Service delivery is being affected as some companies refuse to deal with the department and others put up prices to cover for late payment.”

According to Bloom it is also disturbing that some companies have delivered to hospitals only to be told that their orders had been cancelled.

Providing details on the department’s new plan Matuka said payment to suppliers would begin on 1 April.

According to the plan:

  • As from 1 April 2018 the department will settle all confirmed invoices within 30 days of receipt of a valid invoice.
  • No interest will be considered – only verified and reconciled outstanding balances will be considered.
  • Payment period will be a maximum of four years. This means that for a case where the department owes a supplier in excess of R10-million as at 31 March 2018, then a payment plan will be signed off between the supplier which will see the department settle its debt over a period of four years.
  • Payment instalments will be incremental, with the smallest payment to be expected by 1 April 2018.

According to Matuka there will be an iron-clad approach by the department which will ensure that no deviations from the allocated budget will be tolerated. DM

Photo by Hush Naidoo on Unsplash

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