Health4Sale

Spotlight: Ace Magashule cleared way for controversial private ambulance company to cash in

By Marcus Low & Anso Thom for SPOTLIGHT 25 April 2018

ANC secretary general Ace Magashule speaks to journalists outside the ANC’s national executive committee meeting in Cape Town, 23 March 2018. Photo by Leila Dougan

Buthelezi EMS netted more than R15-million from two suspect backdated price increases from the Free State Department of Health, apparently without much scrutiny. Documents that Spotlight has had sight of reveal how the increases were signed off during a five-day period, when it seems the Free State Department of Health was temporarily taken out of administration by decree of then Premier Ace Magashule. The Democratic Alliance told Spotlight that it will ask the Public Protector to investigate.

Five days in February

According to a response by the Free State Department of Health to questions posed by Spotlight, the department was under administration by the provincial treasury for almost four years from 17 March 2014 to 15 February 2018. Among others, this means that the accounting officer – the person who ultimately signs off on all health spending – was not the head of the provincial department of health, but head of the provincial treasury.

Yet, contrary to what the department told Spotlight, this was not the case for five days in February 2017. In a signed memorandum dated 3 February 2017, seen by Spotlight, then Free State Premier Ace Magashule effectively takes the provincial department of health out of administration for five days by appointing the head of the department of health, Dr David Motau, as acting accounting officer from 6 February 2017 to 10 February 2017. In this five-day window, Motau signs off on what procurement experts describe as two highly unusual backdated 8.5% price increases for Buthelezi EMS.

When asked about the five days that the Free State Department of Health was taken out of administration, Mariette Pittaway, Democratic Alliance (DA) member of the Free State legislature and spokesperson on Health, told Spotlight:

The DA is fully aware of this. We are in possession of a copy of this appointment letter and are compiling a case docket to submit to the office of the public protector for further investigation.”

Red lights over price increases

The first price increase, signed off by Motau on 10 February 2017, grants Buthelezi EMS an 8.5% price increase for their inter-facility transfer service. Critically, the price increase is backdated to April 2016.

Where government contracts allow for backdating of increases, they typically do not allow for backdating beyond the date at which the increase was applied for. It could be that this specific contract has more flexible conditions attached to it, but in that case the question would arise as to why Buthelezi EMS was granted such an unusually favourable contract.

Free State Department of Health spokesperson Mondli Mvambi has previously said that the Department of Health paid Buthelezi EMS R204-million in the 2016/2017 financial year. It is not clear whether or not this includes the 8.5% increase. Either way, the increase would amount to a back-payment of between R15-million and R17-million. (Spotlight previously reported on how the Free State Department of Health overspent its emergency medical services budget by around 100% during the period in question. It is this budget line that paid for the increases.)

The second price increase relates to a contract between the Free State Department of Health and Buthelezi HEMS, a joint venture between Buthelezi EMS and HALO Aviation. Internal departmental documents show that on 10 February 2017 this price increase is both recommended by Motau in his capacity as Head of the Provincial Department of Health and approved by Motau in his temporary capacity as accounting officer.

This increase is also backdated, but to October 2016. According to internal departmental documents that Spotlight has had sight of, this price increase was only applied for on 27 January 2017.

Also raising red flags is a letter dated 24 January 2017 in which the departmental bid adjudication committee expresses its support for Buthelezi HEMS’s requested increase. As noted above, according to the department’s own documents this increase was only applied for by the service provider Buthelezi HEMS three days later on the 27th.

Motivation for increases

While the backdating of increases raises eyebrows, normal price increases are not straightforward either. Where government contracts allow for increases, they either happen simply as a matter of course since it is priced into the original contract, or they do not happen as a matter of course, in which case the increase requires a detailed motivation with supporting evidence (as in this case).

Spotlight asked the Free State Department of Health for the full documentary justification for the rate increases given to Buthelezi EMS. The department’s response, signed off by Motau, was simply: “Rate increases are based on the annual Price adjustments and price schedules.” A request for clarification of this answer was not responded to.

Internal departmental documents seen by Spotlight show departmental officials making the case for the increase granted to Buthelezi HEMS (the joint venture) only in broad terms. The key motivation also signed by Chief Director Supply Chain and Asset Management Nelisiwe Phitsane, a senior procurement officer in the department and wife of Tafetso Bernard Phitsane – a senior ANC member in the province and known ally of Magashule – motivates the increase by referring in relatively broad terms to import duties, currency fluctuations, inflation and increases in fuel prices.

The internal departmental documents seen by Spotlight make no reference to any more detailed justification for the increase – as is typically required for such increases in government contracts. There is, for example, no record of specific imported items of which the cost may have increased and how those increases impacted on the cost of delivering an aeromedical service to the province. Spotlight asked the Free State Department of Health to share any documentation they may have in support of the increase granted to Buthelezi HEMS (the joint venture). No such documentation was shared by the given deadline.

It emerged last week that Minister of Health Dr Aaron Motsoaledi had asked National Treasury to investigate the Free State’s ground ambulance contract with Buthelezi EMS. In previous articles in the Health4Sale series Spotlight described various complaints about the service provided by the company and various irregularities around the Free State tender. Spotlight also previously published a two-part investigation into similar concerns around Buthelezi EMS in North West.

Spotlight contacted African National Congress Spokesperson Pule Mabe as well as Mr Magashule’s personal assistant in an unsuccessful attempt to get comment from Mr Magashule. Messages were also left on two different numbers we have for Mr Magashule. DM

Note: While Spotlight is published by SECTION27 and the Treatment Action Campaign, its editors have full editorial independence – independence that the editors guard jealously. Spotlight is a member of the South African Press Council.

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