Health Committee Submission to Presidential State Owned Entities Review Committee

Meeting report

The Chairperson reminded members of public hearings on 13 and 16 March 2012 on the Health Amendment Bill. Public hearings had been scheduled for 14 March but had to be cancelled as the day had been set aside for the training of Members of Parliament.

Health Committee Submission to Presidential State Owned Entities Review Committee
The Chairperson asked the Committee Researcher to highlight any changes effected to the Report since the previous draft which members had seen.

The Researcher, Mr Zubair Rahim, replied there had not been any major changes to the Report. Editorial changes had been made and references had been included.

Ms D Robinson (DA) stated that it would be helpful if members could receive hard copies of reports beforehand. Ms P Kopane (DA) added that an electronic version of reports would also be useful.

In reply to Ms B Ngcobo (ANC), the Committee Researcher proceeded to give an overview of the Report:

Council for Medical Schemes (CMS)
The CMS was established in terms of the Medical Schemes Act No 131 of 1998 and was the national medical schemes regulatory authority. The CMS was funded predominantly though levies on medical scheme contributions, as well as interest which totalled R89.1m in 2011/12. It also received a grant from the Department of Health which in 2011/12 amounted to R4.1m. The grant amount would increase to R4.3m in 2012/13. Challenges included: Although CMS had received an unqualified audit report for the last five years, the Auditor-General (AG) had raised emphasis of matters in 2011/12 such as the CMS strategic plan covered one year when it should have covered a three-year period; material misstatements were identified during the audit which was corrected by management; procurement and contract management issues were identified. However, CMS indicated that appropriate steps had been taken to address the matters raised by the Auditor General. The Committee noted with concern the significant increase in legal fees from R4.8m in 2010/11 to over R9.8m in 2011/12.

Recommendations made by the Committee were that the CMS had to attend to all financial management and control issues as highlighted by the Auditor General and implement the remedial action plan as discussed with the Committee. CMS also had to avoid expensive litigation by improving relations with the medical schemes industry.

South African Medical Research Council (MRC)
The MRC was established in terms of the South African Medical Research Council Act No 19 of 1969 which was repealed and replaced with Act No. 58 of 1991.The MRC’s vision was to build a healthy nation through research. Its work was conducted through Council funded research units located within the MRC as well as in higher education institutions.

In 2011/12 the MRC received R271.2m from government. This would increase to R279.6m in 2012/13.

Some challenges were that the vacant position of President of the MRC had not been filled. Although the MRC had received an unqualified audit report, the Auditor General had some emphasis of matters. The AG found that not all the MRC’s objectives conformed to the Specific, Measurable, Achievable, Realistic and Time-bound (SMART) Principle. The AG identified numerous deficiencies related to strategic planning and performance management (the strategic plan was submitted late to the accounting authority and it did not have key performance measures and measurable indicators). The AG also noted a lack of oversight responsibility regarding compliance with relevant laws and regulations as well as supply chain regulations.

The MRC had however taken steps to address the challenges mentioned. Recruitment efforts were ongoing to fill the post of President of the MRC and it had an action plan to sort out audit matters which the Committee urged should be implemented as a matter of priority.

The Committee noted that the MRC did not have strategies to attract persons with disabilities. It was also not complying with gender equity requirements as there were insufficient females appointed to senior positions.

National Health Laboratory Service (NHLS)
The NHLS was established in terms of the National Health Laboratory Service Act No. 37 of 2000. One of the primary objectives of the NHLS was to provide cost-effective and efficient laboratory services to all public sector healthcare providers. The NHLS, being the largest pathology service in SA, supported the Department of Health by providing diagnostic laboratory services to all state clinics and hospitals via its 265 laboratories.

In 2011/12 the NHLS received R97.9m from government, the amount would increase to R99.4m in 2012/13. The contribution by government was less than 3% of the NHLS’s total budget of R3.595bn, most of which was generated by sales of goods and services and other non-tax revenue which totalled R3.496bn.

Challenges experienced when dealing with the NHLS was that the organisation had reached a critical point in its existence due to the non/late payment by provinces for services rendered, which amounted to R1.8bn. Whilst undertakings were received by the NHLS from its two largest debtors ie Gauteng and Kwazulu-Natal Provinces, payments had not been forthcoming. Severe cash flow problems made delivering critical services nearly impossible and it meant that some services would have to be terminated. A number of issues were highlighted by the AG. Various strategic outcomes were found not to conform to the SMART Principle. There was also non compliance to National Treasury regulations regarding payments due to creditors within 30 days of receipt of notice. The strategic plan had not been submitted within the deadline of six months before the start of the financial year. Quarterly reporting to the executive authority also did not take place.

The Committee was concerned about the critical financial position the NHLS found itself in and encouraged relevant stakeholders to come to a speedy resolution of this problem. However the Committee also recommended that the NHLS review its tariffs as the Kwazulu-Natal Provincial Department of Health indicated that it could achieve greater cost saving by performing its own pathology services.

Discussion
The Chairperson thanked Mr Rahim for the overview. He pointed out that the Health Portfolio Committee dealt with public entities in health and not state owned entities. The CMS for instance was a regulator and not a business. Funding from government was not that much. The MRC also conducted research and was not a business. The NHLS was also not a business but offered a laboratory service to the poor. He was not to sure what the Presidential State Owned Entities Review Committee expected the Committee to include in the Report as health per se did not have state owned entities. The Committee would decide on whether the Report needed to be changed further or to submit it as it was. Whether the Presidential State Owned Entities Review Committee accepted the Report depended on them. Government funding to the MRC should be increased otherwise the question begged to be asked to whom they were accountable. As it was most of the MRC’s funding came from donations. The NHLS was supposed to be a laboratory service that was affordable. The Kwazulu-Natal Provincial Department of Health however claimed that they were more expensive than private laboratories. The Committee hence recommended that their tariffs become more affordable.

Ms M Segale-Diswai (ANC) suggested the shifting around of certain paragraphs within the Report.

Ms T Kenye (ANC) pointed out that the recommendations of the Committee as contained in the Report seemed too brief. The Committee needed to make further recommendations. For example under recommendations to the MRC it should be noted that greater transformation should take place regarding gender equity and persons with disabilities. In addition, the strategy currently employed in filling vacancies should be reviewed as it was clear that there was a problem.

The Chairperson suspected that the Presidential State Owned Entities Review Committee wished to review state owned entities. He agreed that the Committee could include further recommendations in the Report.

Ms Ngcobo stated that transformation in all entities was a must. She pointed out that the MRC was under the jurisdiction of Health but was also linked with Science and Technology. It was almost as if the MRC was double funded. The NHLS was also under the jurisdiction of Health. It seemed to hoard everything. It wished to train its own employees but yet it lacked the capacity to do so. She suggested that perhaps universities could do the training. The Department of Health could also contribute and become involved with such training.

The Chairperson stated that sometimes Parliament made laws in health but did not consider other laws that impact upon it. Suggestions made by members would be included in the Report. The NHLS was formed with the intention to serve the poor and indigent but the fact was that they were operating like a business for profit was an unforeseen consequence.

Ms Kopane said that if the Committee was not sure what was expected of it, it should perhaps contact the Presidential State Owned Entities Review Committee and ask what was expected.

The Chairperson responded he had already done that. There were problems with state enterprises like Telkom, Transnet and Eskom. They were seen as business enterprises. The Presidential State Owned Entities Review Committee did not know where the public entities of health fitted in. He suggested that the Committee submit the Report and see what happened.

Ms Robinson, speaking on the issue of gender equality and disabled persons, said that these categories of persons were disadvantaged in education. Disabled persons often did not fulfil their full potential because they were not given a decent education. The Committee had to ensure that there was decent education for persons to reach their full potential. She asked whether advertisements for posts even reached disabled persons. Were advertisements published widely enough? Did such persons get this information?

Ms Ngcobo reminded the Committee of the National Development Plan. The issue was how these entities fitted into the National Development Plan.

The Chairperson said that it was clear that certain issues needed further discussion. He felt that the disabled, females and children were the most disadvantaged during apartheid. Why was the Presidential State Owned Entities Review Committee formed? The idea was to perhaps review state entities because even though they were in existence, there was still unemployment. The distinction needed to be made between entities and enterprises. The MRC and the NHLS was developing SA. He was not sure whether they fitted in this Report.

Mr D Kganare (COPE) asked why provincial departments of health did not prioritise its payments to NHLS. The NHLS also complained about training medical technologists. The Committee had to get the Departments of Health and Education to speak to one another as medical technologists needed to be trained.

The Chairperson said that the NHLS should be developing people as it fitted in well with development. The Committee was aware of why some provincial health departments refused to pay the NHLS. The question should be asked whether an amendment to Act No 37 of 2000 was required. The Committee should invite the Colleges of Medicine to address members. It was where health practitioners trained to become specialists.

Ms Kopane referred to the Kwazulu-Natal Provincial Department of Health refusing to pay NHLS and said that persons making such decisions often did not have a background on how things worked in the health sector.

Ms Ngcobo asked Mr Rahim to download Act No 37 of 2000 for members.

Mr Kganare said that perhaps the Committee should review all legislation pertaining to health. It must however not be done on an ad hoc basis.

The Chairperson agreed that all health legislation should be looked at. Questions should be asked whether each was serving its intended purpose and whether it was contributing towards transforming SA.

Ms Ngcobo said that it was all good and well to look at the different pieces of legislation but the Committee had to prioritise which ones should be dealt with first.

The Chairperson agreed that certain pieces of legislation would be prioritised.

The Portfolio Committee on Health Submission to the Presidential State Owned Entities Review Committee was adopted as amended.

Committee Minutes
The Committee adopted the minutes of 15 February 2012 as amended and the minutes of 22 February 2012 unamended.

Ms Ngcobo said that the Health Professions Council of SA needed a great deal of investigation. There was a corruption in the organisation. She asked the Committee Secretary to forward minutes of a meeting between the Standing Committee on Public Accounts (SCOPA), the Department of Health and its entities to Committee members.

Ms Majalamba said that she had the minutes but that these were not yet adopted by SCOPA.

Ms Ngcobo said that the draft minutes would be good enough.

The meeting was adjourned.