Special Reports on the financial management of Government’s Covid-19 initiatives: briefing by the Auditor-General; OHSC & NHLS 2021/22 Annual Performance Plans

Meeting report

Dr K Jacobs (ANC) welcomed Members. He said the Chairperson apologised as he was experiencing issues with his connection. He said the Chairperson indicated the meeting should commence as he would join and continue the meeting as soon as he was on the platform.

The Chairperson thanked Dr Jacobs for welcoming Members. He apologised as he had been stuck in traffic in Cape Town. The Chairperson greeted all Members and apologised once more for being late.

He noted the apology from Mr A Shaik Emam (NFP) as the Committee’s secretary Ms Vuyokazi Majalamba was running late. The attendance of Members was noted, and the register was taken as checked.

The Chairperson welcomed the Auditor-General (AG). He said he had a brief call with the AG as there were certain things it wanted to take the Committee through, but its report was not comprehensive. It would indicate some of the issues it did not include. He said if the issues it included were sufficient to support the Committee, which would meet with the Department on the following day, 7 May 2021, to do oversight, it welcomed the AG’s office.

He invited the AG to introduce the team and commence the presentation on the oversight report the AG had done over the National Department of Health.

AG’s presentation

Mr Eugene De Haan, Deputy Business Executive, AGSA, greeted all Members and colleagues. He thanked the Committee for the opportunity to provide a feedback report. Given the current situation with the pandemic, he said the AG did not take this opportunity for granted -- to present before the Committee and to provide feedback in terms of how it could strengthen the Committee’s oversight over the Department.

He said the AG received an invitation on the specific Annual Performance Plan (APP) review for the Department and Members. [This issue was not covered in this meeting]. It would also use this opportunity to brief the Committee on the outcomes of the two Special Reports (SR) on the financial management of government’s Covid-19 initiatives which it had completed in 2020.

Members would recall in 2020, the President requested the late AG Mr Kimi Makwetu to do some of these special audits on how the Covid-19 funding was spent. With health as a key cornerstone of the distribution of the specific Covid-19 funding and the prevention strategy, he said there was a large amount of money earmarked for health. Since the AG had been unable to present its findings and observations to the Committee in 2020, it would use the present opportunity for this.    

The Chairperson interjected. He asked Members to mute their microphones and for Mr De Haan to ensure there was no noise around him so that the audio could be clear.

Mr De Haan said the AG did a very high-level review of the APP for the Department in the interim review. It provided specific findings or observations to the Department to be considered. In the midst of all the work happening with health in particular, the AG focused a lot more on the actual Covid-19 Funding and Covid-19 Relief Funding the Department received, as well as the distribution thereof. In terms of the vaccine audit, it also looked at the procurement and so forth of all those things.

The AG did a high-level review, but he said it did not have time to follow-up whether the Department implemented some of those observations. He said it decided to share the document with the Committee in this meeting to be noted, but the key essence for this meeting was the SR outcomes 1 and 2. The presentation would speak to those outcomes. He indicated the AG had already shared its APP document with the Committee, but he would not go into that for this meeting. Mr De Haan said he would rather use the time to brief the Committee on the SR audit outcomes which would strengthen its oversight when it actually met with the Department on the following day. He said this was the approach the AG decided to take for this meeting.

The AG invited the team that compiled the SR to be part of this session as well as the team from the AG side to present on their specific sections. Mr De Haan introduced the team. He clarified his role – he is responsible for the audits of the National Department of Health and all its entities, and he was joined by Ms Thabelo Musisinyani, Senior Manager responsible for the National Health Department. From the Performance Business Unit, which assists in executing some of its performance audits: Mr Kevish Lachman, Business Executive, Dr Oliphant, Medical Doctor who assists in reviewing the health compliance, protocols, and procedures, and Mr Jacques Boshoff, Manager responsible for the Personal Protective Equipment (PPE) scoping area that it looked at. From the Information Systems Audit section, he introduced Ms Maud Madondo, IT Audit Senior Manager, who assists with the evaluation of the specific Case Management System that was looked at from the Department’s side.

Mr De Haan said the team would cover their specific sections in the presentations and brief the Committee on specific outcomes. It would take questions at the end of the presentation and engage and share details on what it identified. He said it was important to note it had already issued two SRs that had been tabled. These reports were more detailed on the specific issues such as the particular noncompliance or service delivery observations it identified. The AG would provide a high-level review of its observations. He said if the Committee wanted specific details, it should consult the actual SRs which would outline specific details for example of a particular province or focus areas that were looked at. He said the SRs might provide the Committee details it requires to engage the Department.

He asked the Chairperson if there were further questions before commencing the presentation. The Chairperson allowed him to continue.

Findings in SR1 and SR2

Mr De Haan said the presentation would look at SR1 and 2. The AG combined these two areas together so that it could share in totality the specific outcomes of these reports.

The AG took a comprehensive, multifaceted, and risk-based approach to its audit of the key initiatives introduced by government on the Covid-19 Relief Funding. He referred to the four focus areas at the bottom of slide 3.

During these audits, the AG looked at a three-component approach, as outlined on slide 4. On the prevention component, it looked at the preventative controls the department had in place and if it did not have these in place, the AG considered what it could suggest to the department to put in place. On the second component of the detection audit, the AG followed the standard approach and then developed the specific audit procedures to identify, test, and determine whether those payments were done in terms of the necessary legislation and required compliance standards. It received input from the accounting officers and authorities on how they would address these matters. The third phase was the reporting phase where it reported these specific audits in the SRs. There were currently two SRs on the specific Covid-19 Funding.

On the focus of the audit on slide 5, he said it was important to note the auditees that were looked at in terms of who the audit was applied to which included the National Department of Health, provincial departments of health, and the National Health Laboratory Services (NHLS). He referred to the allocated budget amounts earmarked for the health sector on the Covid-19 Funding at the bottom of slide 5. The AG also looked at an additional area in terms of other medical related expenditure and the procurement processes of that expenditure.

The AG raised specific audit findings in the SR1 for the different provinces, and it followed up on some of those audit observations in SR2. He said those under the green “Implemented” heading on slide 6 were the audit findings that were followed up by the accounting officers for those specific provinces who had followed up and implemented the specific findings and had taken action. The orange meant it was still in progress as the AG was still busy following it up, and the red was what it should still look at. For example, in the Eastern Cape and the North West, the AG found some of the findings it raised had not yet been addressed.  

The Chairperson interjected. He asked Mr De Haan to move to a different room as the background noise had interrupted the presentation.

Mr De Haan apologised. He said from the observations, the AG identified specific weaknesses for the Eastern Cape department and some specific potential fraud risks in its system. When it went back to follow up, it found some of these issues had not yet been addressed. The AG had a discussion with the Chief Financial Officer (CFO) who mentioned that all manual processes had been stopped and that the department had implemented additional internal controls to try to address some of the fraud risks that had been identified.  

In the North West, the AG raised specific preventive controls for the North West department of health to consider. When it came back in terms of SR2, it found some of the preventative controls it had recommended to the department had not yet been addressed. The red therefore indicated there had not been any progress on this matter.

He said those were the two key departments that were highlighted. The next few sections to follow were more important. These would look at the specific focus areas and observations.

The Chairperson asked Mr De Haan not to move his papers on the table too much as it interfered with the presentation and caused a lot of noise to come through. He asked why there was a not applicable (N/A) for Limpopo province and the National Department on slide 7. He said the AG should include this in its presentation so that Members do not have to come back and interrupt the presentation about this.

Mr De Haan said he would hand over to Ms Musisinyani to address this question and the AG would then move forward with the presentation to the specific focus areas. He handed over to Ms Musisinyani.

Ms Musisinyani said at the top of the table under “key commitments received”, there was a section that talked about which commitments were implemented, and the next section talked about which commitments were either in progress or not implemented. Where it indicated N/A, the AG said that, for example, with the Free State and the findings it raised, there were no commitments that management had implemented and hence all the commitments it indicated were sitting under “in progress”. For Mpumalanga, she said it was the same case. In the Western Cape, what the AG had raised was at the point of being followed up. It was still “in progress” with the commitments. With Limpopo and the National Department, the N/A was because the commitments were actually implemented. Hence the N/A was entered under “in progress/not implemented” because there was information under “implemented”.

She handed back to the Chairperson, who asked whether Ms Musisinyani was done with the presentations on both SR1 and 2.  Ms Musisinyani said no, she only responded to the question on the N/A. She said the rest of the team would continue the presentation.

FOCUS AREA 1: PPE for Healthcare workers

Mr Boshoff greeted Members and thanked the Committee for the opportunity. He introduced himself and said he was part of the team involved in the audit of PPE for healthcare workers. His presentation would cover some of the observations and findings that were identified as contained in SR1 and 2.

On the value chain on slide 9, he explained this was the ideal value chain of PPE itself in terms of how it moved through the system and how it ended up with the healthcare facility. The starting point of the needs analysis referred to the process when departments considered how much PPE they required and the money they had to buy PPE, and to how many healthcare facilities they needed to distribute PPE to. This is where the forecasting and the demands and needs analysis should be done. The next step, to obtain PPE, involved procurement such as buying it through quotations or transversal contract suppliers, or via donations. He said there were many benefactors out there that donated PPE to departments during the pandemic. The third part involved storage after it received that PPE and this was where the bulk warehousing came in. He said during the audit, it identified PPE was stored in bulk at 17 bulk facilities which included 7 existing medical depots and for purposes of the pandemic and the mass storage of PPE, it also used 10 temporary facilities. It would then be distributed from the bulk warehouse to the healthcare facilities. The healthcare facilities would request PPE from the bulk warehouses, and it would then be distributed to the various healthcare facilities. In the audit, he said the AG visited 36 facilities which included 24 hospitals and 12 primary healthcare facilities such as clinics. The last part was when the PPE arrived at these healthcare facilities. The AG looked at the use and the disposal. This meant whether PPE was used or simply hoarded at the facility, and when PPE was finished being used, how was it disposed of. He said it should be appropriately disposed of as there was always the risk of transmission of Covid-19 when it was not disposed of appropriately. The AG covered the entire ideal value chain.

Slide 11 outlined the key findings identified as contained in SR1. He said he would only speak to numbers 1 and 2 and Ms Musisinyani would address the rest of the findings from 3.1 to 3.9 at the end when she spoke about supply chain issues. On findings 1 and 2, he said the details of these findings could be found on pages 60 to 70 of SR1. He explained the first finding, which was identified at seven provinces, was that National Treasury had set a certain benchmark and it had instruction notes with certain set minimum/maximum prices. The AG compared a sample of PPE that was procured against these and it found deviations in this regard in seven of the provinces. The second issue on lead times was identified at six provinces. Lead times referred to when orders were placed with a supplier. This would start a commitment with that supplier. When it is delivered, for example within 23 to 30 days later, that was referred to as the lead time. He explained there are certain ideal lead times for example with transversal suppliers, it would usually take about 14 to 21 days and a quotation usually about 21 to 22 days. He said deviations were found that exceeded those benchmarks.

The Chairperson interjected. He requested Mr Boshoff not to rush through the presentation as he only touched on two points. He asked him to touch on the rest of the points on slide 11.

Mr Boshoff said Ms Musisinyani would address the rest of the slide. He asked Ms Musisinyani whether she would address the rest of slide 11 at the time or at the end when she presented.

The Chairperson said Ms Musisinyani should deal with the slide now as it would confuse Members.  

Mr Boshoff handed over to Ms Musisinyani.

Ms Musisinyani explained how the findings were set up. The AG followed the focus areas where the findings had a section on PPE as well as a section on community screening and for field hospitals. Both those focus areas had findings where experts had assisted the AG with some of the work. She noted this was where Mr Boshoff was involved. There were also findings where the regulatory team looked at the procurement processes. As Mr Boshoff indicated, for SR1 for PPE, the regulatory team looked at the procurement processes for the PPE which was listed as 3.1 to 3.9 on slide 11. Findings 3.1 to 3.9 highlighted the challenges in procurement processes that were identified and raised during the audit. The “province” column indicated only three provinces: KZN, GP, and NW. This was because at the point of reporting SR1, the rest of the provinces were behind with the work and only those three provinces had covered ground. She said that was the reason a lot of findings only included those three provinces. Slides 13 to 15 on SR2 would indicate the other findings came through for the procurement processes [including all provinces].

The majority of findings indicated that the administration of the entire PPE procurement process did not go well.

For example, departments were in a hurry and many things fell through the cracks. For example, on 3.1 on slide 11 (Specifications of PPE not indicated on awards and submissions), she said these were things the AG usually expected it to get right while it was auditing the procurement process. It found that with the pressure of responding to the pandemic, some of these processes fell through the cracks and unfortunately would then result in findings of irregular expenditure. There were instances, for example, where there were insufficient controls over the receiving of goods that were ordered, instances where there were tax-related discrepancies with SARS for some of the suppliers a province was contracting with, and in some cases there was no evidence of proper approval for deviations in the procurement of items. She said these were issues where unfortunately, things went wrong in SR1 in those provinces, and the AG then raised the problems in its findings. She noted not all findings were associated with losses. Some identified irregular expenditure which management committed to investigate and implement the necessary consequence management. From finding 3.5 (pricing related discrepancies), she said this was where the AG saw possible financial losses. Similar to finding 3.1, the AG found that the prices at which goods were actually procured were higher than the instruction issued by National Treasury. The AG received feedback that this was because of the pressure to get the PPE into the system to ensure there was no shortage. Some of the departments accepted prices that were higher than the National Treasury guidelines. She said the team would follow up during the 2021 audit to ascertain what investigations had taken place and whether there were any possible financial losses, as well as whether there was any need for the AG to trigger a material irregularity (MI) process [in terms of the Public Audit Act, as amended.]

On slide 13, SR2 also started with the procurement and contract management. By the time of SR2, many provinces had covered ground from an audit point of view as indicated by notes on the Eastern Cape, Northern Cape, and Limpopo on slides 13 to 15. She explained where it indicated “yes” under the “repeat finding” column, this meant the findings reported in the SR1 came through again in the SR2. This may not have been in the same province but it identified the same challenges or deficiencies within the same sector it had indicated in SR1. For example, in finding 1.1, there were deviations with the procurement processes but the reasons for deviations were not properly documented and some were not approved by the necessary level which, in this case, was supposed to be the DG. Tax-related matters came through again as indicated in 1.5. She said this highlighted her point that the administration of the procurement process during the pandemic was not run well and many things fell through the cracks. Unfortunately, some of these things that fell through the cracks triggered findings of non-compliance which resulted in irregular expenditure. She highlighted 1.9 where procurement information requested by the AG was not submitted for audit. This meant that filing processes were not up to standard as some information was missing. The AG was unable to ascertain whether the information had not been received from the service providers it contracted, or whether filing was insufficient, and the information was lying somewhere within the department.

Slide 14 outlined other findings around procurement. Observations 10 and 11 linked to findings 2.1 and 2.2 in SR2. On observation 10, awards were only given to one person (Award granted to a supplier who had to be part of a joint venture, supplier not bona fide PPE supplier and CIPC returns not up to date). Findings 12 and 13 indicated Free State Provincial Treasury (FS PT) came through [internal control deficiencies]. She explained in FS, the PT procured centrally for the province and it then distributed to the different department within the provinces. From a health point of view, there were no findings that came through on the FS however in SR2, it included FS PT so that it could audit and look at the PPE procurement processes. That is why this slide included FS PT as some of the findings.

She handed over to Mr Boshoff to touch on the service delivery section in SR2 which was from finding 14 to 19 on the slide.    

Mr Boshoff said the details of findings 14 to 19 could be found in SR2 on pages 102 to 109. On finding 14, he explained bulk storage facilities did not always have a system to account for PPE. For example, when PPE comes in it should ideally be recorded on a stock card which could be electronically or manually recorded, but ideally it should show the flow of that PPE that comes in. For example, if 10 masks were received, the quantity should match 10 masks at stock level, and if five were issued there should be five left. He noted these systems were not always in place. There were systems at some of these storage facilities, but they were not necessarily effectively used. As indicated, the AG had identified deficiencies in five provinces on this matter.

On finding 15, when a healthcare facilities needed PPE, it would request this from the bulk store. The AG found that sometimes the bulk store did not have sufficient quantities of PPE in stock and it was therefore unable to distribute PPE to the healthcare facilities or it would distribute the order in parts in reduced quantities. For example, if 10 masks were requested, it would only send 5. He said this had a detrimental effect at the healthcare facility itself when it does not have PPE in stock.

On finding 16, the AG identified poor storage issues in eight provinces. Stock or PPE boxes were stored on top of one another, some were stored in the offices of personnel, or in walkways. Some of the boxes were open, and were not securely stored. Mr Boshoff referred the Committee to photos on slide 15.  

On finding 17, limited security controls were found at bulk storage facilities in four provinces: the bulk stores was where the PPE was stored when it arrived. Most of the problems were identified at the temporary facilities and since they were temporary, departments did not upgrade the security at these facilities. The risk with insufficient access controls was that anyone could walk into that bulk store and it could create a risk of misappropriation of PPE, or even possibly theft of PPE.

Finding 18, was that some PPE that was ordered did not match the required quality specifications. It was of very poor quality or it was not exactly what the department ordered. For example, it would order an N95 mask, but it would then be provided with a KN95 mask which was not the same.

Mr Boshoff referred to the three photos on slide 15 as examples of poor storage practices of PPE. In the first image, the PPE was stored in the walkways, outside the boxes, and on top of each other which clearly indicated a disorderly manner of storage. He said when PPE was stored in this manner, it made it very difficult for people working at these bulk stores to retrieve PPE or even to account for PPE if it was stored in a disorderly manner as demonstrated in the image. In picture 2, the PPE was stored at a temporary facility but because the infrastructure at that facility was not well maintained, for example, water leaked through the roof. He said the damage caused to the PPE was evident from the water seepage that came through the ceiling. The third picture indicated how PPE stock was kept outside a bulk storage facility rather than inside the facility. The image showed sanitisers in crates stored outside, exposed to sun and rain. Some of these items were damaged because of exposure to the harsh conditions outside. The integrity and quality of that PPE was therefore compromised.  

He concluded his presentation and handed back to Mr De Haan, who said Ms Musisinyani and Ms Madondo would continue with the second focus area on specific case management systems. Dr Oliphant would then touch on community testing. He handed over to Ms Madondo.

FOCUS AREA 2: Community testing and Case Management Solution

Ms Madondo took the Committee through the community testing and case management solution on slide 17. Following the value chain, the AG planned to start at the provinces where community screening and testing was happening. If people had symptoms, they would be referred for testing which was where the National Health Laboratory Services (NHLS) came in. From an IT perspective, the focus was more on reporting where it covered the case management system.

Slide 19 outlined the findings. She explained when it started the audit, the AG focused on the data lake. The findings raised for the data lake system were stipulated in number 1 in the table (Cost of potential future software license fees unknown). The reason for this finding was when the AG looked at the contract, the agreement was until 31 March 2020 and it did not specify what would happen to the software licenses after that. She said this was why these findings were no longer in SR2 because when it followed up, it found the contract had already ended. On finding 2 (No provision for data backup management process in the service level agreement), this was critical because the AG did not know what would happen if information in the data lake was lost. The public still had to know what was happening with the infections, the numbers, and so forth. Finding 3 (No provision for change management process in the Service level agreement) was also about the data lake. There was no formal process that was defined in the service level agreement on how changes would be addressed, who would authorise changes, and how they would be implemented onto the system. These were the issues identified for SR1.

On slide 21, she said she would only address finding 2 and 3 on SR2 as those were the ones that related to IT. Finding 2 meant that when these systems were developed, there was no business case provided to the AG to indicate the reasons for the development of the system. When it did the audit, it struggled to get someone who was accountable for the systems that were developed. It also could not find the documents that detailed exactly what would be developed, or the specifications on the system. With the actual implementation of the system, it could not find evidence that testing was done before the systems went live. There was simply no documentation around the system. This could cause issues where any updates were needed because the people that would do the updates would not know where to start to update the system.

FOCUS AREA 3: Temporary quarantine facilities and field hospitals

Ms Bilkish Khan-Rawoot, Senior Manager AGSA, took the Committee through the slides on temporary quarantine facilities and the field hospitals. She explained the value chain on slide 23 on the scope of work the AG looked at.

She outlined the key observations for SR1 on slide 25 where the key findings derived from KwaZulu Natal (KZN).

On slide 27, she said SR2 went further into the procedures around the field hospitals. The AG visited eight facilities to come up with the implementation and commissioning findings. There were two key findings in two of the provinces as indicated in 9.1 and 9.2. On the key issue in 9.1, the planned completion date was to be 30 July 2020 but the work on site only commenced on 27 July 2020. The province then revised the completion date to 31 August 2020. When the AG followed up on this project in September 2020, it was still “in progress”. Another key area, highlighted for Bloemfontein Show Grounds, was on the lease agreement where the monthly rental was approximately half a million rand per month. The lease stipulated the monthly rental and the administration fee for August 2020 would be payable before occupation of the premises. This meant even before the facility had been commissioned and utilised, the department was incurring a rental on the facility. On the Clairwood Temporary Field Hospital in KZN, unfortunately, the department could not provide evidence to the AG on how the project costs were broken down and determined. Requests for proposals were not extended to a broad spectrum of suppliers to obtain a more market-related analysis. Only three suppliers were approached and each one received a contract for those facilities, and KZN was doing three projects at the time. For KZN, there was a delay based on the air conditioning units that had to be upgraded which contributed significantly to a delay on the facility. On the quality of the work that was done at the facility, whilst there were project snags that were identified, in addition to this there were also issues identified based on the leaks that were still experienced at the facility and that needed to be fixed.  

For SR2, she said the teams were in the process of following up on the current status of these field hospitals.

She handed back to Ms Musisinyani.

Other expenditure: SR1 Findings: Other expenditure

Ms Musisinyani took the Committee through the rest of the slides. The last focus area the AG looked at was other expenditure. While the AG said there were four focus areas, as it audited and identified other areas that had possible risks, it considered these so that it did not exclude a significant risk.

She referred to the finding raised in the North West on slide 29. It noted although the sector focused on procuring PPE, there were also other support services it procured such as advertising and communications that were looked at to ensure it was also complying with the current National Treasury regulations. In SR2, it did not include any findings under other expenditure because a lot of work was done on the main focus areas.

Conclusion

In conclusion, the observations in SR1 and 2 on PPE procurement processes were of concern to the AG as it noted various instances where the competitive process was not followed as provided for in the guidelines of National Treasury. This resulted in the awarding of contracts to specific suppliers in a process which did not support the competitive spirit that was supposed to apply in the country. They also found some forms of discrimination in the evaluation of the procurement process which came through in Limpopo. Some suppliers were disqualified as they did not comply with requirements but other suppliers were not disqualified even when they also did not comply with certain requirements. Several suppliers were new to the industry. The AG recognised that it exposed the sector to a risk of non-delivery if it awarded contracts to businesses that did not have experience in the industry. Some of the long lead times as highlighted earlier could have resulted from the fact that some suppliers did not have history in providing PPE.

On the quality, price, and delivery of PPE on slide 31, she said the teams were following up in instances where there were possible financial losses. If there were possible financial losses the AG could trigger the Material Irregularity process. For instances where there were potential financial losses suffered by the sector, she said there were 8 teams with the 2021 audit following up to ensure that MI processes would be started in instances where there was a need. She said the Committee should look at the outcomes of the 2021 audit as there could be several MIs coming through on this matter. The SR indicated KZN was one of the provinces that raised the finding of poor controls around the receipt of the PPE that was ordered.

On the field hospital findings on slide 32, she said National Treasury released a lot of guidelines on PPE but there were no specific guidelines on the contracting of field hospitals. The provinces therefore had to use the existing Treasury guidelines. In those instances, it still saw several cases of non-compliance with appointment processes and approvals. In instances where provinces deviated, some of the people who deviated were not of the correct delegation level.

The AG noted management might not have sufficient time to follow-up on commitments as it was still preoccupied with dealing with the pandemic. It was hopeful when it follows up in 2021, much work would have been done on the recommendations it had issued.

She said the accounting officers had committed to investigate instances where the AG raised non-compliance that resulted in irregular expenditure or losses.

The outcome of the audit in the current year would provide a good picture of how far the sector had gone on addressing the internal control deficiencies reported in both SR1 and 2.   

She concluded the presentation and handed back to the Chairperson.

The Chairperson thanked the AG team. He criticised its presentation as he was accustomed to black font on a white background or white font on black background. He said there was a big challenge for some Members to read the presentation as it had white font on a brown background. He noted the presentation was an extract from the AG’s report and requested in future, it should take an extract from the report and improve the font to make it easier to read. He said he was wearing spectacles but still had challenges reading some of the slides.

Of all the presenters, he said Ms Khan-Rawoot was the best presenter to take the Committee through the report as her presentation included all the details.

He said that overall, the presentation was confusing as Members had to juggle between reading from the slide and listening to the presenter as some points presenters’ made were not included in the slides. He said in the closing slides, Ms Musisinyani’s examples of what was happening in the provinces was not in the presentation. He questioned how the Committee could go back to refer to the points made with the slides. He said perhaps the AG focused on having colour, but it made it difficult to read. A white font on brown background with such a small font. He requested the AG to be accommodating of Members.

The Chairperson opened for Members to engage with the presentation.

Discussion

Mr P Van Staden (FF+) said he was glad he made it in time for the meeting as the presentation was shocking and problematic. He asked for clarity on the blocks mentioned in red on slide 6. Why did the Eastern Cape Department not agree with all the identified control weaknesses? He asked the AG to elaborate on this matter.

The Chairperson asked whether it was possible for the presenters to bring back the slides in reference to Members questions, as it was being asked, as some could not recall the issues.

On Mr Van Staden’s question on slide 6, he said that he could not read what was written in the red block. He requested Mr De Haan to read to the Committee what the AG had written in that block.

Mr De Haan apologised to Members and the Chairperson for the presentation. He said the AG noted the Chairperson’s comments and it would rectify it to make it more user friendly in future.

He explained the red block on slide 6 indicated the (Eastern Cape) department did not agree with all the identified internal control weaknesses on possible fraud risks, but it had started improving some controls. In some instances, the control weaknesses led to actual transactions. Therefore, the CFO instructed that manual orders made should no longer be issued. The completeness and accuracy of the asset register, as well as the appropriate classification of Covid-19 expenditure, would be audited as part of the 2020-21 financial audit.

The Chairperson said Mr De Haan should not address Mr Van Staden’s question at that point. He clarified his request was for the AG to put up the slide in reference to what the question was talking to. He asked Mr Van Staden to continue with his question.  

Mr Van Staden said he wanted clarity on the matter he raised.

On slides 11 and 27, he asked whether it was the AG’s view that all the provinces went outside the normal procurement procedures and misused the Disaster Management Act to procure the PPEs outside the normal market-related price.

On slide 15, he said it was disturbing and a shame to see these kinds of images (of carelessly stored PPE). He said the Committee should intervene in these kinds of matters. In his view, he said this was totally unacceptable. While the country was in the middle of a high-level pandemic in 2020 and in view of the great shortage of PPEs as well as other medical equipment, he said the images illustrated how the PPEs were not handled with any care at all. He said it was a shame and it was disgusting. Eight out of the nine provinces did this and as a Committee, he said Members should not let this matter stand as is and the Committee must take action. He emphasised it was totally unacceptable and that heads should roll in these provinces and departments. There was a great shortage of PPEs in 2020 in the middle of the pandemic, and yet these images showed how PPEs were stored in walkways, outside, in boxes on top of each other, and kept outside in the rain. He reemphasised that it was totally unacceptable. He asked, what are the names of these hospitals that did this? He said the Committee wants the names of these culprits. He requested the Chairperson that as a Committee, they should intervene in this matter as this was unacceptable to see things like this.

The Chairperson agreed with Mr Van Staden. He said if the AG shows the Committee images such as these, it should name the hospitals as it was part of South Africa but not all 600 clinics and 200 hospitals were involved. The AG must name the hospitals and he said this was now the Committee’s request. He said this would make the report more user friendly for the Committee as it would not look for a needle in a haystack, it must know where this happened. He noted the AG might provide these names when it responds to questions, but he said it was one of the challenges the Committee faced with the presentation of something that was grossly unacceptable and without a name. He said Members should avoid making generalisations for example by claiming all private hospitals or all 600 clinics in the country did what the pictures demonstrated. He said the AG should name and shame the hospitals to the Committee.

Mr Van Staden thanked the Chairperson for his support.

Mr M Sokatsha (ANC) said the PPE procurement was a disgrace and it was a very disappointing issue to listen to. Given the increased powers of the AG such as its ability to refer issues to the Law Enforcement agencies, he said it was evident there were many irregularities in this PPE procurement issue that ranged from not adhering to National Treasury and Senior Management Service (SMS) regulations, storage, proper deviations, as well as the standard of the PPEs and not accounting for the PPEs. He said there were a lot of irregularities. He asked, were there any issues the AG referred to the Law Enforcement agencies? He said the AG had this power and Parliament had given it these powers to do this. Was there any province or official it referred to the Law Enforcement agencies?

Ms S Gwarube (DA) said the presentation was possibly one of the most depressing things she had ever heard during her time in Parliament. It pointed to how severely broken the system was. She said she struggled to extrapolate what to seek clarity on because in her view on examination of the presentation, the findings were quite clear and astonishing. For example, from the PPE procurement processes, from the quality to the pricing and delivery, to storage, to field hospitals, and the mere scale of the problem from basic requirements that had been needed but were not met. She noted she did not have clarity seeking questions except to say that in her view, the Committee should not simply accept this report and move on.

She agreed with Mr Sokatsha that the AG must inform the Committee which of the accounting officers would be held accountable for some of these things that unfolded in these provinces. More importantly, she said it was absolutely crucial for the Committee to meet with the Minister and the relevant Members of the Executive Councils (MECs), and people need to account for this. She said this was possibly the biggest insult to public finances she had ever seen in her life. The reality was that while there was a pandemic and people were scrambling to get things done, she said some of these things were basic, deliberate, and criminal. As a Committee, it must reflect and consider how to take this forward as she said it would be an indictment on all Members and a dereliction of their duties if it does not question these people: the MECs and the Heads of Department (HoDs) in the provinces, what happened and how these things would be rectified. She said she hoped after people had asked these questions for clarity, the Committee could decide on a way forward because this could not continue.

The Chairperson said this comment was giving the Committee a guide. He said he doubted whether the Committee would get responses within the next 20 minutes, as some Members had to leave, He proposed Members continued raising questions and concerns.

On Ms Gwarube’s point, he said he was very keen to get this presentation done again in the presence of the Minister, the Director-Generals (DGs), and HoDs and for these people to listen to the Committee. He said firstly, the AG should improve its presentation so that everyone could see what was written. It should not be an extract from the report, it should be bolded and the font size increased. He said the Committee should agree before 10h00 that this matter was very serious that it needed a different approach to address it. He noted the AG might respond to Members, but he questioned the point of this when the people who had been at the forefront of these issues were not part of this meeting. He said the Committee would have to lean towards getting this presentation redone in the presence of all the relevant people.

Mr Sokatsha interjected and apologised for expressing his disappointment in this manner. He said the Chairperson did not include the MECs as they should also be part of that delegation.

The Chairperson noted this point.

Mr Van Staden agreed with Mr Sokatsha. He said the MECs must be available for this meeting and they should account on this matter.

Ms A Gela (ANC) interjected. She supported the Chairperson’s proposal.

The Chairperson noted Members’ support and moved to continue with the discussion.

Ms M Hlengwa (IFP) interjected. She supported the Chairperson’s proposal.

Dr S Thembekwayo (EFF) asked to get a chance to speak.

The Chairperson noted the views. He said the Committee had already started the discussion to address this matter. He moved to Dr Thembekwayo’s question.

Dr Thembekwayo said unfortunately what she intended to express explicitly was exactly what the Chairperson raised. To add on, she noted the disorganised manner of the AG’s presentation. She said it cannot have three presenters within a certain slide coming in and out as this was confusing. She proposed the AG should limit its presenters, at least to two as this would suffice, which would enable the Committee to follow exactly what was presented as this was one of the most important pieces of information the Committee had received today. In future, when the AG presents this presentation before the Committee again, she said it should be orderly, and it should change the font and implement all the recommendations the Chairperson mentioned.

She said the most important thing was that the presentation confirmed what the Committee previously asked when the different provinces came to present on the PPE procurements. Today’s presentation confirmed that there was definitely a lot of fraudulent behaviour happening from the National to the provincial, especially on this matter. She said although it could mention two provinces, for example Eastern Cape and North West, the fraudulent activities happened throughout all nine provinces. She noted the mistakes the AG mentioned from monitoring and preventing controls, the storage facilities, the pressure of procurement where there were cracks, where there was no information supplied or who was accountable for what, and how much was paid. Most importantly, the AG discovered that contracts were awarded  to inexperienced people which resulted in financial losses and non-delivery of services. She said the presentation did not mention the recommendations of what was supposed to happen to all these officials who allowed these issues to happen. This was never mentioned because the presentation was about findings and who was responsible for what. She said it did not mention the very strict recommendations of what the AG recommended should happen about this matter.

Dr Thembekwayo supported the proposal for the Minister and the delegation mentioned to be available to hear the AG’s presentation and account. She said she was satisfied that this presentation would allow the Committee to have a different approach of accountability because in all the provinces that presented its PPE procurement, half of the Members congratulated it and recommended it continued its good work. She said today, nothing good was presented about all those provinces. The Committee should therefore take a different turn of approach towards accountability from the Minister to the MECs.

The Chairperson said he volunteered to assist the AG to improve the presentation that would be acceptable to Members.

He agreed with Dr Thembekwayo that it was challenging to follow the presentation with different presenters coming in and out.

Ms E Wilson (DA) said she was at the scene of the fire at the FH Odendaal Hospital on the previous day 5 May 2021. She said it was very depressing and she thought she would not see something as heart-breaking again for a while.

The Chairperson interjected. He thanked Ms Wilson as she went to support the Committee and for her observations for the people.

Ms Wilson responded it was a pleasure. She said it was really depressing and it was the most heart-breaking story. She said she thought she would not be that depressed for a long time only to discover the AG was going to depress her even more today. Members had already alluded to the point that this was just the saddest of sad reports, but she said she was not surprised. In view of the AG’s report on the various provinces and the Department over the last four/five financial years, she said the Committee repeatedly received bad reports on financial processes and procurement processes not being followed, on lack of compliance, and on supply chain management. She said this had been going on for five or six years and she was unsure why anyone would expect this to change because it had not changed in five years, no one addressed it, no one has been held accountable for the problems in those years. Staff changed hands at the rate of knots, and there was no control or governance in many of these provinces and departments. She emphasised it was not surprising to receive such an abysmal result today because until the Minister, the MECs, or someone in this Department owned up, took control, and started holding people accountable for such abysmal reports, including this one, she said nothing would change. It would continue because there was simply no accountability and no action taken.

The biggest tragedy and the most depressing part of this entire report were images of the PPE which Members saw and heard unfair procurement practices were involved, which came as no surprise, and that people were awarded contracts where they registered companies just a few days before. She said what really disturbed her was that there were deliveries of PPE that did not meet standards and PPE that was badly stored and damaged, and this was in the middle of a pandemic. Those people who relied on that equipment were at the frontline. Health workers died in the hundreds, and that was a result of what Members were seeing in this report. She said in her view, it was tantamount to attempted murder when [a business] was prepared to supply that kind of equipment to health workers who were on the frontline trying to save South Africans’ lives. Some had died as a result of this. She said it was criminal to the point of attempted murder in her view.

Ms Wilson said she was very disturbed and upset. She said the Committee should not only have this meeting with the Minister and all the MECs, it should take a step further and investigate criminal charges.

The Chairperson informed Members they could raise these same concerns in the next meeting when the Committee meets, as it was resolving as such.

He said in the interest of time, Dr Jacobs requested to withdraw his contributions and he would therefore allow him extra time when the Ministers and MECs join the meeting.

Ms H Ismail (DA) said Members had covered her questions and concerns. She said the presentation was really shocking and depressing. The fact that many lives had been lost was unacceptable. The Committee needed accountability. She said the recommendations issue that was mentioned was essential. She said she was reserving her comments for the next meeting when the relevant delegation was present.  

The Chairperson thanked Members for their contributions. The Minister would be receiving a letter from the Chairperson later that afternoon on this matter that was being addressed. He proposed that in his opening remarks to the Minister on the following day, 7 May 2021 [when the Committee would consider the Department’s APP], he would mention the Committee would like to have the Minister and his DG, the CFO and the team, as well as the MECs, provincial HoDs and their CFOs in a meeting that would be convened shortly to listen to the AG present on this report.

He said the AG was free to write its recommendations as Members indicated these were not included in the presentation. He said the planned meeting would commence with the AG’s presentation and the Committee would then request the AG to leave the meeting after an hour or two so that it could address this matter with all the necessary leaders mentioned. The Chairperson said the Committee would dedicate a day for this matter to be addressed. He said the Committee could now focus on other things, such as the APP presentation by the Department together with what it heard from other entities. He said it should leave out completely the matter of the AG’s first and second special report on the financial management of Government’s Covid-19 initiatives for another day.

Mr Van Staden noted the national department would be before the Committee the following morning. He said if the Minister or all these nine MECs or CFOs, or whoever could not make that meeting for the following morning, he proposed the Committee should have a special meeting on Monday morning 10 May 2021 where all these people must be present.

Ms Wilson said since a lot of these matters involved the provinces, she requested to have the National Council of Provinces (NCOP) in the meeting as well.

The Chairperson said Mr Van Staden’s proposal would not be possible because this involved quite a lot of leaders and there would be no guarantee that all MECs, HoDs, and CFOs could make it within 24 hours’ notice. He said the Committee should plan this properly.

He noted Ms Wilson’s request to involve additional leaders. He requested her to write to him so that Members can consider who else to invite.

The Chairperson informed Members that the meeting could not happen within a day or 48 hours. He said it would probably be much later, when the Committee had planned properly and indicated who else it should invite. He said a meeting with, for example, only five provinces would not suffice to complete the task. He emphasised that the meeting should be planned properly, and it should not be rushed to take place within the following two days.

Mr Van Staden agreed with the Chairperson. He said everyone should be present as the Committee could not have a meeting when someone was absent. He said if they could not make it for 7 May 2021, the Committee should plan for Monday 10 May 2021, but the meeting should happen within the next seven days.

The Chairperson noted this point. He asked if there were any other questions.

He said the Committee would work with the AG and he would communicate with it on this matter. He urged the AG to redo its presentation. It should not extract from the report document and paste it in the presentation as the font was too small to read in the document as well as a slide. He recommended if presenters were required to present on five points, they should do this separately and not have different presenters coming in halfway through the slides. He said the presenters should talk to what was written in the slides as Ms Khan-Rawoot did, and they should not provide additional information that was not included in the slides. Everything that was presented should be in the slides as it would make it difficult for Members to listen to the presentation and read the slides. He said the AG augmented what was written in the slides and Members did not know how to place the information. He urged the AG to include the information in the slides and to read the slides when it presents as it should not add additional information.

He asked whether Mr De Haan wanted to add before the meeting adjourned.

Mr De Haan noted a hand from his Executive, Mr Andries Sekgetho, Business Executive AGSA, who wanted to make some remarks. Mr De Haan said the AG noted the comments and took it into consideration. He apologised again for the quality of the presentation, the AG would ensure to update the presentation accordingly. It noted the importance of the message it tried to communicate to Members, and it would therefore ensure it considered Members’ comments. He said the AG could already address some of the Members questions which it would include in the presentation it came back with. He appreciated all comments and apologised for a presentation which did not meet Members’ expectations.

The Chairperson moved to Mr Sekgetho’s raised hand.

Mr Sekgetho greeted Members and introduced himself and his role at the AG. From the AG’s side, he reiterated Mr De Haan’s point. He apologised for the presentation. He said the problem was that it was not a presentation as such, but rather a pdf document, which made the font smaller. He said the AG noted the Committee’s comments and it would work on improving the slides and change some of the colours to make it more legible. He hoped that despite some of the challenges experienced around the font, Members were still able to obtain some value from the work that was done by the Office of the AG.

To ease Members’ concerns, he said it was not all doom and gloom. Unfortunately, as the Office of the AG, it reports based on the work it had done. The AG does not give positive reporting but [focuses on problems that need attention]. Certainly a lot of good work was done by the sector generally overall. He said Members would note the same sentiments were shared by the AG herself, Ms Tsakani Maluleke, when she did the actual media briefing on 9 December 2020. He said she commended government for doing quite well under trying circumstances, but there would still be room for improvement and for things to be done better. If the AG had applied itself better in certain areas, it would have probably achieved more. He said that was the underlying message here as it relates to the work that was done.  

He asked Members to read the actual SRs. On the section that deals with the Health Portfolio, he said this was quite large since it looked at nine provinces which therefore made up the biggest section of the actual SRs issued in September and December 2020 by the AG in the previous financial year. He said it was challenging to compress all this information into small slides. Members would have noted that the presenters spoke to a summarised version and would therefore try to expand on it as there was more information in the actual reports. The AG would marry and reconcile how it could provide as much information as possible but also within a limited timeframe. He said this would be part of the challenge it would take forward in terms of repackaging its slides for the next session.

He thanked the Chairperson for the time to engage with the AG and for the opportunity to assist the Committee in its oversight responsibility and role. The AG expressed its appreciation and it undertook to work on the recommendations and to improve to ensure it is of greater value going forward for the Committee.  

The Chairperson allowed Dr Jacobs to raise his point.

Dr Jacobs said he changed his mind as he wanted to raise another response earlier. He was concerned about the manner in which the Members raised their concerns. He said it had been a very challenging time for all of the departments and especially for the healthcare workers, infrastructure, and every person who was involved in treatment and caring for the sick. The manner in which it was put forward and portrayed as atrocities, he said he was not very excited to hear that.

On slide 32 in its conclusions, there are two sections: one in blue and the other orange. In the section in blue, the AG said it was aware of the slow response by management to implement some of the recommendations and commitments made, but appreciation was given that management were occupied with responding to the pandemic. He said the Committee should not lose focus of this. In the orange section, it stated the accounting officers have committed to implementing a number of internal controls. He agreed this was a slow process and that it indicated there should be investigations and consequence management, where applicable, for transgressions. He said he would assume when the AG presents on the new presentation with the Minister, the MECs, and other relevant officials, it should also speak to that point in the orange section to inform the Committee in a more clear manner on how the process has evolved at the time when it does come back. He clarified a number of things would then have happened in terms of the requests it would have made, and it would have probably been worked down by the necessary departments to try to manage and address the questions raised by it.  

The Chairperson said he was confused about the colours as Dr Jacobs referred to the colour on slide 32 as orange while he referred to it as brown.

To the AG, he said Dr Jacobs’ point was important. When it looks at the challenges, it should raise the issues that were done properly. For example, if it comes back to claim it was a rush and therefore it did certain things, he said the issues of those things laying outside in the rain was not an issue of a rush, it was something else. He asked the AG to include this in its report as Dr Jacobs emphasised.

The Chairperson concluded the meeting and asked Members to write to him. He noted Ms Wilson’s strong suggestion to have the NCOP in the meeting. He said he would probably speak to the Co-Chairperson of that meeting to see whether it could have a joint meeting so that everyone could be in one space to deal with this matter once and for all.

He thanked Members and noted he would see them later in the day as there was still much work to be done by Members. The Committee would reconvene at 17h00 for another presentation of the National Health Laboratory Service (NHLS).

The meeting was adjourned until 7pm.

National Health Laboratory Services (NHLS) 2020/21 APP and budget

Dr Kamy Chetty, Chief Executive Officer (CEO), NHLS, introduced the executive team that were on the virtual platform, which included Prof Eric Buch, Chairperson of the Board, and Dr Jeffrey Mphahlele, Vice-Chairperson.

NHLS Chairperson's opening remarks

Prof Buch provided a brief context to the NHLS’s annual performance plan (APP), and said it was important to recognise the improvement that the NHLS had made over the years. He pointed out that at the beginning of 2017/18, the NHLS had only about R200 or R300 million in its bank account at the beginning of each month. At that point, its bank balance was sufficient only to cover the entity’s compensation of employees and payments to suppliers. At its worst point, the NHLS had an accrual of R1 billion owed to service suppliers. Just prior to COVID-19 reaching South Africa, the NHLS had a bank balance of around R4 billion, and had cleared up all accrual debt with minimal fee increases. The NHLS had always tried to keep its fee increase to below 5% per annum in the interest of people. The entity currently had a R2 billion bank balance. He acknowledged that the finance was much tighter now as a result of COVID-19, and fewer tests had been done on TB and HIV.

Prof Buch highlighted the huge contribution that the NHLS had made. Contrary to the private sector, which stepped in only where the profits were, the NHLS went where the people were. For instance, it went to collect samples in deep rural areas which the private sector would hardly step their foot in due to the hefty cost. Hence, it was vital to keep the NHLS afloat, given the work that it did.

He said the entity’s wise investments had resulted in its surplus in finance without asking for extra funding from the National Treasury. He also expressed his gratitude to the Minister, as well as provincial MECs, for ensuring that the provincial governments paid the NHLS on time.

NHLS’s Annual Performance Plan

Dr Chetty outlined the external and internal factors affecting the NHLS.

Presenting the financial statement for the 2021/22 financial year, Dr Chetty said that some items might have been changed, as the statement had been done last year. The National Treasury had instructed public entities to cut their budgets by 5%. The NHLS had kept a small tariff increase, as well as small labour increase. She highlighted the rising cost for polymerase chain reaction (PCR). Its price at R507 was still competitive and more affordable than the R800 rate charged in the private sector.

Dr Chetty also briefed members of the NHLS’s various programmes.

(See details in the attached presentation slides).

Discussion

Due to bad connectivity in the parliamentary village, the Chairperson asked Ms A Gela (ANC) to chair in his stead should he have more network connectivity challenges.

Ms Gela said that COVID-19 had affected many entities and government departments. She wanted the NHLS to explain how COVID-19 had affected it. What measures were in place to expand its service coverage in rural areas?

Ms H Ismail (DA) asked if the NHLS was prepared to test the newly emerging COVID-19 variants. She also asked about its measures to expand its service coverage into rural areas. She referred to the NHLS’s testing backlogs, and wanted to know how it was dealing with it.

She noted in the presentation that R146 million was to be spent on infrastructure in the 2021/22 financial year, and wanted more details on the infrastructure projects.

There had been a decline in the number of tuberculosis (TB) and HIV tests in the face of COVID-19, and asked if the reduction in TB and HIV testing would therefore result in a spike in those two medical conditions. She had already heard on the ground that service delivery for TB and HIV had been delayed because more resources and emphasis had now been shifted towards COVID-19.

Ms Ismail wanted more details of the misconduct of the NHLS's employees, and sought to confirm if any consequence management measures had been taken against the individuals involved. Furthermore, she wanted to know if the NHLS had a systematic framework that was specifically targeted to deal with maladministration and fraudulent issues.

Ms N Chirwa (EFF) wanted the NHLS to provide the Committee with an update on whether its laboratories were equipped with adequate facilities and equipment. If not, she wanted to know if the inadequacy would affect the NHLS’s service delivery to the people.

She emphasised the importance of ensuring that the NHLS was corruption-free. She requested the NHLS to provide the committee with an update on the dismissed employee who had committed fraud for over 13 years before the suspension. Given the severity of the case, she wanted to know what the NHLS had done to create a corruption-flagging system. She said that Committee Members were beyond the stage of only hearing promises made by various entities, and it was time to pinpoint the loopholes in the system and figure out a way to address them.

Ms Chirwa noted that that the Department’s medical scientists had allegedly complained of having experienced immense racism at the National Institute for Communicable Diseases (NICD). When the situation was taken to senior management, the response had been very dismissive. She understood that the NICD might need time to verify facts, so she requested a written response to be sent to the Committee.

She also noted that the testing for HIV and TB had decreased as a result of COVID-19, but wanted to know which areas would be affected most. She pointed out that if there was less testing, there would be more infection, which was a huge concern for her.

Ms E Wilson (DA) commented that the government had gazetted that forensic laboratories under the national Department of Health (DoH) needed to be integrated into the NHLS. The qualifications of those employees were a huge concern for her. The employees at the NHLS should be medically accredited employees, but she noted that some of its employees had only studied chemistry instead of the required medical pathology.

In light of that gazette, Ms Wilson asked if any negotiation had been held between members of staff and union representatives. She did not recall any presentation on this issue, and enquired about the current status of the situation.

Ms Wilson noted that the NHLS had a lot of restraints recovering from the previous years. The country was currently facing a potential third wave. She was concerned with what appeared to be unhappy forensic laboratory staff.

She observed that there had been a spike in the number COVID-19 cases, and wanted to know, with the variants entering South Africa, whether the country had made any preparations to guard herself against the third wave.

Dr S Thembekwayo (EFF) remarked that corruption pervaded all the institutions in South Africa, and the NHLS was no exception. There had been irregularities in the procurement of personal protective equipment (PPE), and she wanted to know if any disciplinary measures had been taken against the involved individuals

She asked about the NHLS’s mitigation strategies and how the entity was adhering to those strategies. She noted that under tested revenue, there was an ‘other’ item which had a large amount of money budgeted for the 2021/22 financial year. She wanted to know what the “other’ consisted of.

Ms S Gwarube (DA) referred to the inevitable budget cut that was also affecting the NICD, and wanted to know how the NICD viewed the budget cut and how it planned to meet its demands, given that there would be budget cuts in future as a result of the pandemic and the economic recession.

She asked about the research outputs of the NICD, and wanted to know the testing capacity between the public and private sectors, and its current capacity to conduct COVID-19 testing.

Ms Gwarube highlighted the importance of surveillance work to detect early signs of a new variant, as well as the collaborative working relationships between various virologist institutions. She wanted to know if any work relationships existed between the NICD and other virologist partners in the field. She highlighted that working together, they could be greatly beneficial to the production and manufacturing of vaccines.

She referred to the NHLS’s historical legacy of provincial debt. She wanted it to provide her with an update on what the backlog was like since last year.

The Chairperson commented that there was a high failure rate for registrars in the programme, and sought clarity on the specific causes for that. For instance, was it because of a lack of mentors or lecturers?

He also noted the entity’s difficult relationship with its provincial clients for the past five to six years, and asked if there had been an improvement towards a conducive working relationship now. He highlighted the importance of a conductive relationship, as the provincial departments were the major revenue streams for the NHLS.

Finally, he asked about the naming mechanism for the NHLS’s district laboratories.  

NHLS's response

Dr Chetty acknowledged that COVID-19 had affected the NHLS fundamentally, as most of the work happening at the NHLS was now focused on COVID-19. The National Health Laboratory Services (NHLS) was at the forefront of the fight against the pandemic. She clarified that the National Institute for Communicable Diseases (NICD), although had undertaken COVID-19 testing in the initial stages, had later de-centralised this task to the NHLS because it was responsible for surveillance, not for diagnostic work.

Dr Chetty confirmed that the expenditure on COVID-19 had been huge. The NHLS was in a fortunate position, as it had a surplus from the previous financial year, so it was able to respond to the pandemic very rapidly. It certainly had affected workers, as a number of its employees had contracted COVID-19. The NHLS therefore tried its best to look after its employees and to ensure that safety measures were in place at the workplaces.

The NHLS also organised and ran the call centre for the COVID-19 hotline. The hotline received a high volume of calls every day. During one day in March, it received over 5 000 calls, which showed that it was indeed reaching out to people and tried to cover as much of the population as possible. There was a doctor hotline to provide services. Its mobile service was also quite well known to reach out to communities and improve access for people.

The NHLS, together with the NICD, had been doing a successful job in providing COVID-19 data on a daily basis. Dr Chetty remarked that it was not only commendable, but the standard of the work that South Africa provided was on a par with more advanced economies and countries.

Responding to Ms Ismail’s query on the NHLS’s footprint in rural areas, she confirmed that the NHLS was the only organisation in South Africa that reached out to rural communities on pathological matters. It covered every clinic, regardless of rural or urban in the country, and conveyed samples with its robust logistic system. It was also concentrating on improving the service that it provides in rural areas. She used the example of the Northern Cape, and said that the NHLS used the Western Cape’s testing methodology to capacitate the Northern Cape. She assured Members that the NHLS continuously strived to expand its services in rural areas.

With regard to the NHLS’s testing capacity to deal with the third wave, Dr Chetty said that the NHLS was more than prepared. Although the NHLS had some backlogs at the height of COVID last year, it currently had no backlog at any of its laboratories. The NHLS had shown itself to be able to deal effectively with an increase in testing in its handling of the second wave. The NHLS currently could conduct up to 50 000 tests a day. The only backlog it had now was the one in paternity testing, but the laboratory was also looking to increase its capacity.

Dr Chetty said there had been a number of renovations and mobile clinics for areas where accommodation was problematic in the NHLS’s infrastructure projects, and she would submit those in full detail in writing.

The NHLS was also quite pleased that there had not been a decrease in the number of HIV tests since the outbreak of COVID-19. However, it was concerned at the decrease in TB testing numbers. Its analysis showed that the reasons were multifold. One of the factors was patients’ concern that they would contract COVID-19 in hospitals, which deterred them from going for tests. As a result, the NHLS had devised a TB surge programme, which was currently being discussing among the provinces. The objective of the programme was to get more people to do TB tests against the current pandemic. The NHLS also used its mobile units to go out to communities to increase TB testing. Reports indicated that this effort had already resulted in a slight increase in the number of TB tests. She was confident that with concerted approach to TB, the country would have a good chance to eradicate the disease in the near future.

Dr Chetty said that the questions surrounding the NHLS’s alleged misconduct and fraud issue could be responded to by Prof Buch. She highlighted that because of the laboratory’s comprehensive and robust risk mitigation system and strategy in place, the NHLS had been able to detect the fraud issue and act very swiftly. The current status was that the disciplinary cases were being adjudicated. There had been dismissals, suspensions and charges. Fraud and corruption had been found not only in the procurement of PPE, but also in other areas. There were also some individuals who had resigned after being suspended. The NHLS was working closely with the Special Investigating Unit (SIU) and the HAWKS.

Responding to the question on some of the laboratories' inadequate equipment, she said the NHLS had gone on a massive project to modernise its equipment. Some of the laboratories had been used by the private sector, as well as internationally, and were highly-automated and fully modernised. It was part of the NHLS’s strategy to extend this programme to the rest of the laboratories that still had not been automated and modernised yet.

Dr Chetty referred to the case of the dismissed former NHLS employee. She was aware of the case, as Ms Chirwa had communicated with both the Minister of Health and the Department’s Director-General. Due to the fact that the disciplinary process was still under way, she was not in a position to make any comment on the matter. The involved person may still exercise their right to appeal the disciplinary ruling should they find it to be unjust. Dr Chetty believed that it would be difficult to make any predictions at this stage, but she guaranteed Members that the NHLS was following due processes.

Dr Chetty responded to Ms Wilson’s question on the NHLS’s forensic laboratories, and said the President had signed a proclamation instructing that forensic laboratories needed to be incorporated into the NHLS as part of the NHLS Act, effective from 1 April. The national Department of Health was in the process of negotiating with the unions. The latest update was that the unions had agreed to the incorporation, but the agreement still needed to be formally signed. She could not comment on whether any employees at those forensic laboratories were unhappy with the transfer, as it was the role of the DoH to comment. She assured Members that a memorandum of services had already been signed between those forensic labs and the NHLS, to allow for a smooth transfer. She agreed with Ms Wilson’s concern that some employees working at the forensic laboratories were chemists and not pathologists, and said that the issue needed to be addressed. She commented that there were advantages in having forensic laboratories incorporated to the NHLS, and was confident that the incorporation would greatly assist the NHLS in dealing with any future backlogs and improve its efficiency.

Prof Adrian Puren, Acting Executive Director: NICD, responded to Members’ questions about COVID-19 and its variants, as well as the much talked about third wave. He assured the Committee that South Africa was in a good position in terms of its detection of the South African variant, as well as its high-level of testing on a daily basis. In addition, South Africa also had its own mechanism to identify COVID clusters and outbreaks. This not only allowed the NICD to prioritise the testing for Polymerase Chain Reaction (PCR), which was used for diagnostic testing, but also allowed it to identify the sequence in circulation. The specimens of those individuals who had travelled from India would be going through a sequencing mechanism to identify what the variant was. There was a network of laboratories in South Africa that were able to perform the sequencing mechanism. He was not aware of them having identified the sequence that had originally been identified in India -- the NICD was still waiting for those test results to be concluded.

He confirmed that the NICD and NHLS had collaborative working relations with other laboratories and the private sector. These labs worked with both the NHLS and the NICD and put all data together for international sites. The data was therefore accessible to all and could better inform the public of any emerging variants. There were also other types of collaboration between the NICD and other organisations to identify what variants were currently out there, and whether they would affect the efficacy of vaccines.

Prof Puren pointed out that there was limited information on the Indian variant, and the available data showed only association but not causation. However, he was confident that the NICD was well prepared to identify any COVID-19 variant. Its detection of the South African variant early in the second wave showed the NICD’s capacity in the early identification of variants in order for the country to stay informed and alerted.

He said the NICD was part of the COVID-19 modelling consortium which had just recently released a report on the third wave. The report indicated that it would be difficult to make any prediction when, where and how the third wave would happen. Although there was great uncertainty on the third wave, the country could expect it and protect its people with non-pharmaceutical interventions. So far the data analysis did not indicate that the increase in the number of COVID-19 cases in Gauteng was a third wave or a concern, but rather an outlier. The possible explanation for the increase in the number of COVID cases was not due to a new variant, but to the province’s high population density.

Dr Chetty said that the NHLS had a very strong risk mitigation strategy. It was also improving its capacity to do its own internal audit because of the organisation’s huge oversight role, to ensure proper compliance in the supply chain area. A hotline was available for members of the public to report any fraudulent and corrupt activities. She would forward the NHLS’s risk mitigating strategy to Members of the Committee.  

She said that the NICD was extremely concerned with the budget cut, but it was also cognisant of the deep recession which the whole country was experiencing at the moment. It therefore needed to play its part and work with the resources that it had. It was also working on strategies to bring in new revenue streams in addition to the conditional grant that it receives. It was aware of the budget cut's effect on provincial departments, which would subsequently impact the NHLS. They were both prepared to deal with the challenge.

She confirmed that there was collaborative work between the NHLS and the NICD with both the South African Health Products Regulatory Authority (SAHPRA) and the South African Medical Council (SAMC). Those entities remained in close and continuous contact, and all played their roles in the fight against COVID-19. The NHLS did all the work and tests which were later being validated and approved by SAHPRA. The SAMC was also very much involved in the sequencing and detection of new COVID variants.

Dr Chetty told Ms Gwarube that the NHLS was not involved in any work with mortuaries -- either private or pathologist mortuaries -- and clarified that the provincial departments of health oversaw mortuaries. The NHLS was therefore not involved in any backlog issue related to mortuaries.

The NHLS’s relationship with the provinces was extremely strong. It was continuously working with provincial governments, and the good relationship could be shown in its collection of revenue. The province of KwaZulu-Natal was so far the only problematic province with a historical debt owed to the NHLS, but it was working on recouping the debt amount.

Mr Jonas Shai, Business Manager: Finance and Administration, NHLS, explained what "other incomes" entailed in its 2020/21 financial statement. He said it included funds that were allocated from the Solidarity Fund, which amounted to R250 million. In essence, this fund had been used for teaching income and the realisation of grants over the medium term. These grants had been received in addition to the conditional grant transferred by the DOH.

Prof Koleka Mlisana, Executive Manager: Academic Affairs, Research & Quality Assurance, NHLS, acknowledged the serious issue arising from the poor pass rate for registrars. The responsive measure taken by the NHLS was that apart from its usual support, which was to provide training through its virtual platform, the NHLS also had their whole curriculum reviewed. The revision had been done across all disciplines to ensure that registrar students understood what was expected of them. Furthermore, the exam structure had also been changed, as the bulk of exams now consisted of more multiple-choice questions. The NHLS was looking forward to seeing what the new results would be like. Students had just finished their theoretical and practical examinations, and the results showed an improvement from last year. The pass rate had been around only 23 to 30 percent of the total students last year. For this year, however, the pass rate was 100% for biology, 50 to 55 percent for microhematology, and was 75% for chemical pathology. She said that 19 registrars had written micro-biology this year, and the good news was that all 19 of them had passed the written exam, and now they were just waiting for the results of their practicals.

Prof Mlisana provided more information on the NHLS’s output of publications. Its annual performance plan stated that its objective was to produce 70 more articles than the previous financial year, which would be 650. She was pleased to inform the Committee that it had managed to bring its publications up to 670 in total, adding that this year’s significant increase in publications was also driven by COVID-19 related research work.

Prof Mlisana said that the naming of district laboratories followed the hospitals where the laboratories were based.

Prof Buch explained the adequacy of laboratory equipment functionality. He reminded Members to bear in mind that it was important to recognise that different hospitals and laboratories provided different services. Similar to district, regional or academic hospitals, where high services with complex procedures were being done, the NHLS also provided different services at different levels. Every laboratory was equipped and was able to provide the service at the level it deemed necessary. If a test required a higher level of equipment, the NHLS would arrange for the test be transported to an appropriate laboratory facility.

He reported on the corruption issue within the entity. As soon as the board identified the alleged corruption charges surrounding the former CEO and the CFO in early 2017, the NHLS had laid charges with the South African Police Service (SAPS), and had also tried to bring HAWKS into the matter. The NHLS had subsequently suspended these two officials and also undertook disciplinary hearings, which resulted in the dismissals of both the CEO and the CFO. The head of internal audit was dismissed for dereliction of duty and misleading the board, and three other managers resigned in the face of their disciplinary hearings. These involved individuals were now out on bail, but had been charged with offences related to corruption. The NHLS took it on itself to meet with the head of the SIU and had informed him about the corruption charges. The SIU had commended the NHLS, saying it was unusual for a public entity to bring attention to corruption issues. The forensic audit had been provided to both the SIU and the HAWKS.

There were a number of measures that were now put in place to close the loopholes in the procurement process. In the past, tender procurement was managed manually, with piles of paper, which was way too easy for them to disappear. With the new electronic management system database in place, the storage of documents was now much safer and more reliable.

The NHLS had discovered and reported the PPE corruption before the President had started the process of the forensic audit. It had hired independent auditors to investigate all board members, the CEO and other senior officials at the NHLS. The finding was that the board had met all its statutory obligations, and  the CEO had undertaken tasks, identified problems and acted promptly. The finding had also flagged that a number of other staff had either not carried out their duties with diligence or did not take proper measures. A number of staff had been identified as bordering on collusion with suppliers. Those employees had all been suspended. The board was providing all the necessary support to the SIU, and had also set aside some of the irregular procurement contracts.

The Chairperson was pleased that Prof Buch had spoken so passionately about the NHLS’s firm stance against corruption. It was excellent that the NHLS had a surplus from its previous financial year. It was commendable that the SIU had not come to investigate the NHLS, but that the entity itself had taken on the role to report and address the fraud and corruption issue. He could also attest personally to the fact that the NHLS had its presence in the deep rural areas of the KZN province.

The meeting was adjourned.