Treasury responded yesterday to an article in Business Maverick on alleged hold-ups in the signing of vaccine contracts over the issue of the indemnification of pharmaceutical companies, saying it was “seeking to ensure that the issue of indemnity will not prove to be an obstacle that ultimately inhibits the vital procurement of vaccines”.

“The National Treasury is seeking to implement appropriate measures to balance the urgent need to obtain vaccines to protect the health of the population, with the potential issue of the assumption of liability by Government which may have significant implications for the fiscus,” a spokesperson for the department said.

Treasury Director-General Dondo Mogajane has previously complained about “onerous clauses” the pharmaceutical companies wanted health officials to sign, an approach that some Department of Health sources consider frustrating and irrational in the circumstances.

The indemnification of pharmaceutical companies is a controversial issue because it shifts the potential costs if faults are experienced as part of the vaccination process from the pharmaceutical companies to the state. 

Normally, governments would be reluctant to take on this risk, but in the case of the coronavirus epidemic, the need for the vaccines is so intense and the number of vaccines required is so huge, that governments around the world are typically accepting this burden as the lesser of evils. 

The issue is even more complicated in South Africa’s case because Section 66 of the Public Finance Management Act, in the normal course, prohibits institutions of government from indemnifying providers of goods and services. However, this provision can be overridden with the specific agreement of the Treasury.

“The approach of the National Treasury and the Minister of Finance is that any proposed indemnity provision in each potential vaccine procurement agreement is assessed individually, and the Minister of Finance then assesses whether or not to give concurrence in respect of the granting of the requested indemnity in respect of that particular agreement,” the Treasury spokesman said.

“A blanket approach to indemnities is not adopted, as the provisions of agreements may vary significantly”.

“The Department of Health has been engaging with the National Treasury regarding the proposed procurement agreements that are proposed to be entered into with various vaccine manufacturers, and the Departments have engaged on the content of the provisions, which then enables the Minister of Finance to be properly briefed regarding the proposed indemnity provisions that are contained in the Agreements”.

Minister of Finance Tito Mboweni has already approved the provisions pertaining to the Serum Institute of India and Pfizer agreements. “The issue that is still under negotiation with a third manufacturer is the requirement of a no-fault compensation fund,” the Treasury spokesman said. BM/DM

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