Health Portfolio Performance & Audit Outcomes: FFC & AGSA input; NHLS Annual Report 2021/22

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11 October 2022
Chairperson: Dr K Jacobs (ANC)
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Meeting Summary


National Health Laboratory Service

The Portfolio Committee on Health met on a virtual platform with the Financial and Fiscal Commission (FFC) and the Office of the Auditor-General on the health sector’s performance and audit outcomes.


The Commission reported that the Department ranks well below regional and global benchmarks.
SA healthcare expenditure is essentially above average for a developing economy. However, there is a weak correlation between healthcare service spending and health outcomes.


The Commission highlighted that the number of primary healthcare facilities that qualify as ideal clinics per year declined from 1906 in 2019/20 to 1444 in 2020/21. This is concerning because clinics are the first point of contact for most patients.

The AGSA stated that the Department regressed in the current year and received a qualified opinion. The qualification area relates to a limitation finding in accrued departmental revenue relating to the recoupment of the covid-19 vaccine. Overall, there was a regression in the sector due to the Department’s qualification. Eastern Cape, Free State, Northern Cape, Limpopo, and KwaZulu-Natal received a qualified opinion with findings. Gauteng, Mpumalanga, and North West received an unqualified opinion with findings. The AG commended the Western Cape for maintaining its clean audit outcomes consistently over the years. The Eastern Cape, Northern Cape, and KwaZulu-Natal are the most concerning provinces. The main root cause for the lack of improvement in audit outcomes for the Northern Cape and KwaZulu-Natal was the inadequate action plans that were developed and/or the slow implementation of these audit action plans which resulted in repeat findings.

Members heard that as at 31 March 2022, there were 15 148 claims that have reportedly been lodged against the departments and were valued at R125.3 billion. Unnecessary loss of life due to medical negligence, serious harm due to medical negligence and poor record management result in medico-legal claims. The majority of claims are not standardised. This means that they are not specific which contributes to the poor quality of information available to the sector leadership for the management of claims and decision-making processes. The root cause could be the competence of staff capturing the information or the lack of staff to capture the information. These claims mean that money is being diverted away from improving and delivering quality and timely health care services to the citizens. Significant increases in medico-legal claims are putting the sector under immense pressure.

Some Members shared their horror and disgust at the findings, while others acknowledged the issues and said that the progress made should also be commended. Attention was also given to the medico-legal claims launched against the departments, which total R125 billion.

Questions were asked about the impact of loadshedding, the reduction of ideal clinics, the feasibility of the NHI, consequence management, record keeping, repeat findings, implementation of the AGSA’s recommendations, and the disconnect between the headcount and the total cost per person.

Given the plethora of issues in the sector, Members supported the Chairperson’s proposal for a more focused approach the Committee would assign a specific time to a specific topic and deal with it. This would assist the Committee’s oversight processes.

The Committee noted that compliance and monitoring seem to be a continued weakness of the Department and its entities.

The National Health Laboratory Service reported that it had achieved an unqualified audit opinion with findings for the 2021/22 financial period. The NHLS generated a surplus of R76.4 million and achieved 88% of targets, compared to 86% the previous year.

Members welcomed the audit opinion and asked about the backlogs, procurement management, and the Public Protector’s report involving the entity.

Meeting report

Financial and Fiscal Commission (FFC) Presentation

Introductory remarks
Mr Chen Tseng, Head of Research, FFC, commended the progress that has been made since the Committee considered the desirability of the National Health Insurance (NHI) Bill in May. The progress is worth noting and applauding. A lot of apprehension may arise about the NHI, but ultimately it is the right thing, particularly when one considers studies of the market dynamics and the vast inequality of current healthcare. Further support should be extended towards regulations of the private sector and healthcare insurance schemes. There needs to be an observant and careful approach to the implementation of these regulations.


Mr Thando Ngozo, Senior Researcher: Macroeconomics and Public Finance, FFC, made the presentation.

With regards to the Departmental budget, the compensation of employees makes up the largest share of health expenditure. As larger numbers of doctors complete their training, provincial health departments need to offer more medical internships and community service posts. The total number of posts decline from 1410 in 2021/22 to 1167 in 2024/25. This is concerning, given the critical role of health workers. It may also result in structural weaknesses in the operational and administrative consistency, capacity, and capabilities of the department. The personnel costs increase from R760 to R794 million between 2023/24 and 2024/25. However, the total number of posts over the same period is declining. This suggests that there could be a disconnect between the headcount and the total cost of personnel within the department.

With regards to performance, the number of points of entry where port health services comply with international health regulations per year is an indicator of the department striving for quality. Yet, the department ranks well below regional and global benchmarks. The number of primary healthcare facilities that qualify as ideal clinics per year is declining from 1906 in 2019/20 to 1444 in 2020/21. This is concerning because clinics are the first point of contact for most patients.

SA spends relatively the same proportion of its GDP on healthcare as advanced economies such as Canada and the UK. SA healthcare expenditure is essentially above average for a developing economy. There is a weak correlation between healthcare service spending and health outcomes. Healthcare spending and delivery are highly unequal because of the separating equilibrium of the South African healthcare system and financing. Hence, there is a desperate need for more inclusive and affordable healthcare services in South Africa. The FFC noted and supported the progress made in the NHI parliamentary processes.

Some of the recommendations made by the FFC are:
There should be an examination and eradication of the inefficiencies such as wastages, corruption, and leakages that result from the disparity of the two-tiered (private and public) healthcare system.
The Ministers of Health and Finance must ensure that an enabling policy and legislative framework, aligned among the spheres of government, is put in place with due regard to setting norms and standards, and is enforced with proper oversight by the established technical committees.
The Commission noted the transparency created by the Ministers of Health and COGTA led by the President, which enhanced confidence in the government’s capability and competence in response to the COVID-19 disaster.

(See the presentation for more detail).

Ms H Ismail (DA) said that compliance and monitoring seem to be a continued weakness of the Department and its entities. How does the FFC see the quality of the compliance under the proposed NHI, with the current issues that the Department is facing in this regard? There has been a decrease in the number of ideal clinics. What does the FFC foresee as a problem, especially where some clinics pass as an ideal clinic, yet there is a major shortage of staff and resources? What would be their recommendation? What is their view on the fact that the state of the economy has changed tremendously since the introduction of the NHI? Would they agree with the recommendation that a more updated financial feasibility study must be done? SAPHRA has extended the lifespan of Covid-19 vaccines and they have been told what has been spent on purchasing these vaccines. What is their view on how the Department has dealt with vaccinations and the success rate of the vaccine rollout? What are their thoughts on PPE corruption and the Digital Vibes scandal? Every year there is a problem with not having sufficient funds with regard to interns and community service. She notes that it will be incorporated here and there at a minor increase. However, there is also a shortage of doctors and nurses. The Department spends millions on insourcing, such as the Cuban brigade. How can we use the funds of the country to increase the number of local healthcare workers?

Ms M Clarke (DA) asked how much priority the Department places on reaching a 70% Covid vaccination rate. How many resources will be allocated to this in the upcoming financial year? Will the Department have a Covid ring-fence budget? If not, from which budget will this be taken? How did the provinces use their allocated Covid funding to combat the virus and how successful have these efforts been? How much of the budget will be allocated to combatting loadshedding next year, such as generators, solar panels, etc.? What is the reason behind the decline in the number of posts and how is this being addressed? How exactly has the NHI grant been spent up until now? What was Cabinet’s view on the NHI in terms of feasibility and costs? The Auditor-General’s report is like reading a horror book. She is really concerned about how effective the funding is going to be in terms of NHI management, fraud and corruption, and so forth. In 2022, the budget for vaccines was R2.3 billion. Provinces received R2.6 billion in the MTEF to address the fight against Covid. What plans have been put in place to mitigate fraud and corruption, ensure that service providers complete their services on time and that tenders are procured transparently, and that consequent management will be put into place? On slide 6, why are Gauteng, KwaZulu-Natal, and the Western Cape far ahead of the rest of the other provinces? Are there lessons to be learnt from provinces that are doing well to assist those that are not doing well? R7.8 billion has been allocated over the MTEF period to human resources components. How will the Department ensure that hospitals in the province conform to this budget? Many times when they visit hospitals, structures have not been adjusted for many years. How is this going to be taken into account? Will the Department ensure that service providers are paid on time?

Slide 12 indicates that there could be a disconnect between the headcount and the total cost per person. How does this happen? How can it be mitigated so that real-time budget costs are aligned to the number of personnel staff needed? What will the Department put in place to improve the appointment of critical clinicians and nurses, and how will their training be improved? How many hospitals do not comply with the ideal clinic specifications, and which provinces are guilty of this? What are the backlogs of the NHLS currently and how will it affect the budget? What causes the sharp decline in surplus by 52 percent, and over the MTEF, down to 63 percent? In terms of the Compensation Commission Occupational Diseases of Mine Workers, what systems will be put in place to accelerate claims to workers, and will this be managed in that context? How many medical aids do not have low-cost benefit options, and by when will this KPI be realised? Some medical aids do have schemes like this in place that are subsidised by their higher plans. The Office of the Health and Standards Compliance (OHSC) decline of norms and standards went from 17% to 10%. What has caused this, as this is in terms of the quality of health and it is very concerning? Will the 25 employment contracts that are going to cease to exist be renewed, and if they are not going to be renewed, what impact will this have on service delivery? How can they shift funding from mental health and oncology services to NHI, and what impact will this have on healthcare?

Ms E Wilson (DA) said that they have been told that there is a restrained budget, so they will have to do more with less. South Africa already has an “absolutely 100% collapsed health system” and one can’t argue with this. The amount of oversight that they do in hospitals and clinics proves this. There is a deceleration of the budget. Yet, they sit in a situation where the compensation is up and the employment is down. There is already a collapsed healthcare system and this is thus very alarming. The DA has done some research into the disconnect between headcount and total cost per personnel, and it will be finalised shortly. In the provincial departments of health and some of the entities, people are employed at the top of the scale. There appears to be no sliding scale and everyone is automatically employed at the top. This in itself is going to create huge problems. The budget is not there and the entire workforce cannot be employed at the top of the scale. The OHSC decline is very alarming. This has been raised countless times with regard to the NHI. The NHI clearly states that people who can offer NHI have to be registered and meet OHSC standards. Yet, according to the report, the OHSC will only reach 22% of compliance inspections. The decline is devastating. One can see that the OHSC is not getting out there and that there is a complete neglect of health standards by just walking in the front door of any health facility. It is terribly alarming. Under these circumstances, it is obvious that the NHI cannot work. Her other concern is that the OHSC is so severely understaffed. It does not have enough inspectors and it does not have the time or the facilities to do these inspections. It shows. The health establishments are “doing what they like” because there is nobody there to monitor them. There is no monitoring and evaluation. She is looking forward to seeing the provincial presentations on the cost of employment. Under Limpopo, it says 31 percent, and she knows that this is incorrect. She does not know where this information comes from. The presentation compared SA to Canada and the UK. SA might be comparable with these countries, but they deliver and South Africa can’t. How is the loan of R7.6 billion from the World Bank for vaccine procurement going to be paid back? What happened to the huge donation that was received from corporations to assist with the Covid crisis?

The Chairperson said that these questions are not applicable to the FFC, and they will not be able to answer them. Members should direct these questions towards the entities instead. He asked that the FFC only consider the questions that are applicable to it

Mr T Munyai (ANC) asked whether the FFC was made aware that it would need to comment on the NHI in this meeting. Secondly, how old is this research? The FFC said that the Council for Medical Schemes (CMS) is going to devise a guidance framework for the low-cost benefits options for NHI. Why have they recommended that the issues of benefits be determined by the CMS? He agreed with the Commission’s assessment that a two-tier system has led to a wastage of resources in the healthcare system. However, he does not agree with the statement that the Departments of Health and Finance must ensure the development of new policy and legislative frameworks, to ensure good oversight. Is the FFC suggesting that the Committee is not doing adequate oversight? The UK already has the NHS. Though the population will be more or less close, it has an advanced economy. Here, SA has a two-tier system and challenges of unemployment, inequality, and poverty. This is the consequence of colonialism.

Ms N Chirwa (EFF) said that she always looked forward to presentations from the FFC because they are known for their impartiality. However, today she was disappointed. She took issue with the preamble that they opened with regarding the NHI. In their presentation, they speak about issues of accessibility and of ideal clinics declining. The NHI will send people to their closest point of referral and not just any healthcare facility which they choose. They need to note the structural issues of the healthcare facilities. What is the basis of supporting the NHI if these issues are going to persist? The NHI does not seek to solve these infrastructural issues, accessibility, declining ideal clinics, etc. There is a continuing misconception of the NHI as the abolishment of the two-tier system. This is not the case. The abolishment of the two-tier system would mean that the private sector is nationalised. This is not the case; the government outsources to them. They must be very careful of how they mis-term this aspect. They are misrepresenting what the NHI is. They are playing on a need for the actual abolishment of a two-tier system to happen in the country. The NHI Bill is neo-colonial and is not revolutionary. It is going to empower the private sector. What could be the cause of the decline in the number of published journal articles associated with the SAMRC, besides the decline in funding for research grants? This is very concerning. This is one of the primary obligations of the SAMRC. What is the FFC’s position on the CMS regulating medical insurance issues, when they are for medical aid? There are other entities that deal with insurance in particular, such as the insurance ombudsman. The CMS overlaps its jurisdiction. This has been brought up with the Minister and yet it still continues. What is the FFC’s stance on the over-procurement of things beyond the demand and take up? In the presentation, they acknowledge and applaud the competence of the President and of the Minister during Covid-19. Where is this competence? The presentation notes problems and the state of decline of the entities. This ‘competence’ is not visible in the bettering of the healthcare system. The system has collapsed. Today there was a woman that gave birth outside of the gate of a clinic. The government is buying more supplies than it needs, and it is buying expired vaccines. What exactly is the FFC applauding with regards to the Minister and the President, in relation to healthcare?

Ms A Gela (ANC) said that the presentation is very progressive. It’s very different from the previous year. There is a lot of improvement. The last slide focusing on the management of Covid-19 is very powerful. It is also important that they acknowledged that NHI is needed. It is a step forward for the country. With regards to departmental performance, particularly with the ideal clinics - what is the cause in the decline in the number of these, and what is the plan to improve this? The ideal clinic is a good initiative. The clinic in the area that she lives in is a good, modern clinic. With regards to the departmental budget expenditure analysis, she sought clarity on the R9.8 billion reduction to the baseline over the medium term in the Communicable and Non-communicable Diseases programme.


Further, she appreciated the good work that the Chairperson is doing. He cannot satisfy all of the Members as they see things differently. The health system is not collapsed. It is better than before. When they implement NHI, it will be more advanced and it will benefit everyone equally. Other people are negative about this because they do not understand, or they do not care as long as they are covered. The NHI is going to assist the poor to have equal rights and access to healthcare.

The Chairperson commended the FFC for being thorough. Slide 13 says that the number of primary healthcare facilities that qualify as ideal clinics is declining. He asked for clarity on the numbers outlined in the presentation. The presentation also notes that there is a decrease in posts, even though the population is growing. This is concerning. He also commends the Department on being able to take the interns and community service workers into employment. It has been raised that there should be a different approach to this challenge of vast interns which they now have been able to achieve in South Africa, which they needed. More doctors are now in the system. The Department seems like it has an understanding of what it is doing. However, he is quite concerned about the projected decrease in posts.

Mr Tseng said that the budget misalignment of the entities that they pointed out in their presentation is weird and alarming. Financial consistency is lacking. One year there is a surplus, the next year there is a huge deficit. This is what they are trying to achieve within the section on the entities. They are not a department. They are advisors to the Committee. They hope that the information shared today will be taken and used to conduct oversight of the Executive. There hasn’t been a lack of oversight and there has been a lot of work done. This is what they are applauding.

The FFC is objective and tries to be independent in all areas. They looked around the world and it is not too flattering to say that SA responded well to the unprecedented event of Covid-19. It was approached in a balanced, calm, and appropriate manner. Internally, there are a lot of issues, especially to do with the quality of compliance. It certainly is concerning to start off with these conditions with regard to the NHI. NHI is a significant undertaking. They are not saying that it is a panacea to the two-tier market system. From a market perspective, it is two-tier. When there is a two-tier market, inevitably other participants such as the private sector fill in the blanks. The NHI is an attempt to allow for the two markets to at least meet. If the two don’t meet, disequilibrium creates price extortions. It also creates a lemons market. This means that there are two markets and consumers do not know which one they can access. Since everybody wants to make money in these markets, the price tends to increase while the quality does not. Because consumers are not sure of which one, they always tend to go after ‘lemons’, i.e. suboptimal or subpar goods. South Africa is not the first to insert an NHI. It has been implemented in various countries. However, it takes a long time. When the UK first created the NHS, it was not supported by many because of the financial implications. Since its inception, there have been multiple amendments to it to make it sustainable. It is a learning curve that everybody will undertake and which they will have to adapt to. They are not oblivious or naïve about the NHI. He emphasised earlier that a crucial, critical underpinning that will determine the success or failure of this is the data. This involves the issue of quality of compliance. The data shows all the other systems and issues at work. It is evident that the public sector is poor in terms of its information compliance and managing its data systems, too poor to be an enabler for its implementation. This can be seen in other departments and sectors too, such as education. Wherever the government spends money, the data issue is very concerning. Without seeing the patterns, one wouldn’t know how to fix the problems. This issue has created a lot of wastage and issues within the system.

The purpose of the international comparison is not to say who is developed or not developed. The ultimate purpose is to show that it can sometimes be a money problem, but South Africa is past that money problem. South Africa is comparable to other countries in terms of how much has been spent in this sector. Sometimes they even spend more. This issue comes back to the separating disequilibrium of the healthcare market. The graph is not demonstrating who is doing better and who is doing worse. For example, in the US, the majority of citizens pay for their own healthcare. This is why there are stories about Americans going to other countries when they need healthcare. The price of healthcare in the US is too exorbitant. Yet, on the graph, they spend the most. The data used to make these conclusions about the NHI was submitted for the 2021/22 division of revenue. This means that the data comes from the dawn of Covid in 2020. The decreasing of ideal clinics is a very pertinent question. It is about management and how the Department manages and inspects these clinics. There is a lot of work to be done. It is not worse than previous years because the Department has had its fair share of challenges, particularly in terms of financial management. There are also various sectoral implementation issues. The change is not going to be immediate. It has to do with CFOs and management. It is not easy to manage them and it takes time. With regard to a shortage of interns and community service workers, the Minister should consider insourcing. In the healthcare system, there is quality, but it has been polluted by this equilibrium within the market. The training and development of local doctors is good and they are competent.


He concluded that the FFC will also send written answers to the Committee.

Auditor-General of South Africa (AGSA) Presentation – Audit Outcomes
Several people from the Auditor-General’s office took the Members through both presentations. These were Ms Thabelo Musisinyani, Deputy Business Unit Leader, Ms Clothilde Oliphant, Health Specialist in the Performance Audit Team, Mr Corne Pretorius, Executive, Ms Portia Nkuna, Senior Manager, and Mr Andries Sekgetho, Business Executive.

The National Department of Health (NDoH) received a qualified audit opinion with findings. The Council for Medical Schemes (CMS), National Health Laboratory Services (NHLS), and South African Health Products Regulatory Authority (SAHPRA) received an unqualified audit with findings. The Medical Research Council (MRC), Mines and Works Compensation Fund (MWCF –previously CCOD), Office of Health Standards Compliance (OHSC) received an unqualified audit with no findings. Overall, the audit outcomes of the portfolio improved mainly due to the MWCF achieving a clean audit outcome.

The NDoH regressed in the current year and received a qualified opinion. The qualification area relates to a limitation finding in accrued departmental revenue relating to the recoupment of the covid-19 vaccine. The systems implemented by management was not always adequate to ensure all transactions and events were accurately recorded in the financial statements. Although management was able to address procurement findings reported in the prior year, material non-compliance relating to expenditure and asset management were reported. Furthermore, the department had repeat finding on consequence management as investigations on irregular and fruitless and wasteful expenditure incurred were not performed as required by the PFMA.

Several key targets in the Medium Term Strategic Framework (MTSF) for the portfolio were not achieved, including:
A policy and legal framework gazette to manage medico-legal claims in South Africa.
Portfolio Committee and NCOP public hearings on the NHI Bill in Parliament attended.
40 million persons vaccinated against Covid-19.
Complaints resolved within 30 working days and within 6, 12 or 18 months.

For 2021/2, irregular expenditure was R1.3 billion.

The AG made the following recommendations which would allow the Department to receive a clean audit:
-Establish an effective contract management unit
-SCM to take back control of all procurement processes
-Finance unit to invest time to review the information submitted by units before
inclusion in the annual financial statements
-Perform and finalise Investigate on all prior year IFWE
-Strengthen controls relating to proper record keeping and diligently maintain those
-Reconciliations required to support reported financial and performance information

The AG also recommended that the Committee must request regular feedback on the progress of the implementation of effective action plans to improve the internal control environment. The Committee must request management to prioritise investigations into irregular and fruitless and wasteful expenditure incidents, and report back in sufficient detail on the consequence management processes implemented.

(See the presentation for more detail).

AGSA Presentation - Consolidated report on the health sector
Overall there was a regression in the sector due to the NDoH qualification. The provinces remained stagnant as they received the same audit outcomes as in the previous years. Eastern Cape, Free State, Northern Cape, Limpopo, and KwaZulu-Natal received a qualified with findings audit opinion. Gauteng, Mpumalanga, and North West received an unqualified with findings audit opinion. The AG commended the Western Cape for maintaining its clean audit outcomes consistently over the years. The Eastern Cape, Northern Cape, and KwaZulu-Natal are the most concerning provinces. The main root cause noted for the lack of improvement in audit outcomes for the Northern Cape and KwaZulu-Natal was the inadequate action plans that were developed and/or the slow implementation of these audit action plans which resulted in repeat findings.

As at 31 March 2022, there were 15 148 claims that have reportedly been lodged against the departments and were valued at R125.3 billion. Unnecessary loss of life due to medical negligence, serious harm due to medical negligence and poor record management result in medico-legal claims.
The majority of claims are not standardised. This means that they are not specific which contributes to the poor quality of information available to the sector leadership for the management of claims and decision-making processes. The root cause could be the competence of staff capturing the information or the lack of staff to capture the information. These claims mean that money is being diverted away from improving and delivering quality and timely health care services to the citizens. Significant increases in medico-legal claims are putting the sector under immense pressure.

The AG’s call for action has not been taken seriously, and therefore there are repeat findings. Most of the auditees did not adequately implement some of the recommendations, resulting in a lack of progress to clean audit outcomes.

Some of the recommendations made are:
-Appropriate oversight controls must be implemented for proper record-keeping of information supporting the financial statements
-Strengthen controls relating review of financial and performance reports to ensure they comply with relevant reporting frameworks and evidenced by reliable supporting documents
-Strengthen controls relating to diligently maintain reconciliations required to support reported financial and performance information
-Perform and finalise investigations to enable consequence management
-Strengthening the supply chain management processes to ensure all procurement is performed in line with relevant prescripts


In relation to the Committee, the AGSA advised:


-The committee must request regular feedback on the progress of the implementation of effective action plans to improve the internal control environment.


-The committee must request management to prioritise Investigations into irregular and fruitless and wasteful expenditure incidents, and report back in sufficient detail on the consequence management processes implemented.


- The committee must also closely monitor the areas that are contributing the funds be depleted from the sector that could have otherwise been used to procure much needed equipment, expand and maintain infrastructure, increase capacity and skills in the sector. These include the areas of medicolegal claim, fruitless and wasteful expenditure and better management of goods and services processes so that accruals are reduced.

- The committee must invest in engaging the National Health Council (NHC), the sector executives, on how it will turn around the key service delivery matters for the sector, to ensure that it meets its key delivery targets (NHI, Vision 2030).


-The oversight committees in the sector must request the sector leadership to provide plans and measures they will implement to not only improve the systems of internal controls relating to financial and performance management disciplines. This must be supported by proper governance processes.

(See the presentation for more detail).

Ms Ismail said that the presentation was very enlightening and also very alarming. Compliance and monitoring seem to be a continued weakness of the Department and its entities. How does the AGSA see the quality of the compliance under the proposed NHI, with the current issues that the Department is facing in this regard? What is its view on the fact that the state of the economy has changed tremendously since the introduction of the NHI? Would it agree with the recommendation that a more updated financial feasibility study must be done? What is the AG’s view on the fact that less budget has been allocated towards the appointment of doctors, theatre nurses, etc.? What would their recommendation be for the Department to address this core issue? Without sufficient healthcare workers there is no constructive healthcare system. What is their view on service providers not being paid on time? This has a major negative impact on the quality of healthcare services. Examples include medical waste not being picked up on time and linen not being washed on time. What is their recommendation and how will this play out further under the NHI? There have been issues with data and information systems, and they know that a centralised legislation system is required by the NHI. How does AGSA view this and how will this impact the implementation of the NHI? There have been many reports of whistleblowers being discriminated against and penalised. What is AGSA’s view on this and what would their recommendation be?

Ms Clarke asked about the three-year contract to develop the medical case management system. Why was this system only used by one province, and who was responsible for its haphazard implementation? Why was no feasibility study done around this system? How does the Department intend to address this issue? Is there still an intention to implement it in the remaining provinces? How will the Department ensure that it is being used as intended when it has not been up until this point? The information systems that have not been implemented contribute to medical claims. Many hospitals have no internet or computers so record keeping is poor. Record keeping is critical in medico-legal claims. There is also a shortage of staff who work under an enormous amount of pressure. How is the Department going to deal with this? In the past five years, how many projects with external service providers have been undertaken? How many of these followed the correct legislative and PFMA obligations? How many were successfully implemented without irregular or wasteful expenditure? In the case of projects where there was irregular expenditure, were the contractual obligations obliged to? Did these projects incur penalties? Are contractors actually being vetted before being appointed? If contractors do not comply with their contractual obligations and this results in wasteful expenditure, are they blacklisted? Why does the Department not ensure that consequence management is in place? The Committee needs to do vigorous oversight over contractual delinquents. This should be one of the recommendations coming out of this meeting.

How many staff were involved with wasteful expenditure, and have disciplinary processes been put into place against them? How was the reprioritisation of R745 million spent on addressing the funding shortfall of medical internships and community service posts in the provinces? This is a pervasive and persistent problem. How will the Department ensure that this issue does not carry forward to 2023? The AG also mentioned the Department’s lack of consequence management. Given South Africa’s huge issues with corruption, why hasn’t the Department ensured proper consequence management? Will the Department consider ring-fencing funds to protect whistleblowers that reveal corruption? R1.3 billion was irregularly used and most of this has to do with non-compliance with procurement procedures. How does the Department hold these entities and individuals responsible? How many criminal charges relating to corruption have been opened by the Department? Why have they not gazetted the policy for medical claims and when will this be done? Case management, record-keeping, and improving staff skills are now critical. What is the budget for ehealth systems and what is being done by the Department to ensure that these systems are implemented?

Ms Wilson said that she is not sure whether she should laugh or cry. She could laugh because she could have told them exactly what the AG report was going to say. She spends most of her days in an oversight role in one facility or another. It is very obvious on the ground what the report was going to say. Health has taken a very severe backward trend. She could also cry because this is so depressing. This presentation has made her sick. The fact that the Minister is not here for the presentation is deeply disturbing. He is the accounting officer and is overall accountable for this. This is damning and they should be listening to what the Members have to say. It is “absolutely appalling” that he is not in the meeting. This report shows that there are no controls except in the Western Cape. Every material problem and finding all boils down to no controls. They must remember that all an audit does is trace the money and the implementation. The audit findings mean nothing when the entities and the Department are not meeting their targets. The Department is “so deep in the sewerage” that she is not sure how they are going to get out. The report mentions countless times that there is no financial management and no prevention of irregular expenditure. The R1.3 billion in irregular expenditure could have built hospitals and clinics and improved the healthcare system. Instead, this money has been blown and things have gone backward. The report says countless times that appropriate and effective steps were not taken to prevent wasteful expenditure. This expenditure went up 42% in one year. Something is seriously amiss. Who is managing these departments and entities? Where is the expertise? Who is managing the health facilities? Who is managing the finances? If one reads this report, it is clear that whomever these people are, they have “no cooking clue” and they shouldn’t be there in the first place. It is the same with the infrastructure collapse and all of the projects that are not taking off. There is no project control. Who is being put in charge of these efforts? It is obviously not experts, because these people don’t know what they are doing. They are contracting people that are not qualified.

There is R125 billion in medical claims. This exceeds the year’s budget. Where is this money going to come from? R93.8 million has been put into the medico-legal project. Where is this project, and where is the money coming from? R93.8 million is a long way away from the R125 billion that is owed. However, it is coming out of somebody’s coffers. It is coming out of the budget and so the Department cannot offer services. There is no money to do it. It is little wonder that the health sector is in such a mess, that people are dying and that there are medico-legal claims. The more money they put into those kinds of facilities and projects, the more claims they will have to pay and the health system will become worse. The poor and vulnerable will suffer even more. This is against section 27 and section 9 of the Constitution and the Bill of Rights. Who are the four service providers involved with the medico-legal claims project and what are they being paid? Other projects are already not being implemented properly because of cadre deployment. She has gone to hospitals where she has found CEOs and clinical managers who have cases against them in other hospitals. Instead of being fired, they are just transferred to another hospital. The medico-legal claims in these hospitals then increased. This is because they are incompetent. One of the findings was payment for goods and services not received. Why are they paying for things that they haven’t received? This is not a once-off event, it has occurred several times. This report will go, with the comments from the Members, back to Parliament and it will have to be signed off. Why are they bothering? She is the longest-serving Member of this Committee. Year after year, they have complained and exactly the same things are in the reports. Every year the recommendations are the same and nothing gets done about it. Now, they are “so deep in the doodoo that they don’t know which way to turn.” Nobody ever takes this report seriously or is held accountable. Meanwhile, the poor and vulnerable who rely on public healthcare, particularly in the rural areas, suffer. The backlog of surgeries “blows one’s mind” and there are people who are dying. She is “absolutely disgusted” and appalled. Unless somebody takes this report seriously, she wants the Minister and the provinces to meet with the Committee so that they can go through their reports, see what is going on, and find out from the Minister what he is going to do about it. He is “in deep trouble.”

Mr Munyai said that the findings about the national Department of Health did not come as a surprise because the Ministry briefed the Committee on the possible findings. He is not an artist and is not going to “play political drama”, and talk about his period of service on the Committee. Instead, he is going to address the progress that has been made. He welcomes the progress that has been made, such as the areas of certain entities which were outlined in the presentation. There are areas in which they are trying to improve. They must encourage these entities to strengthen their internal controls to make sure that they improve. Where there is repetitive ignorance of these tasks, there needs to be consequence management. Overall, he is very impressed. There are weaknesses and they must support the Department and the entities in trying to improve their work. There are areas that he is concerned about, such as the dependence on outsourcing and consultants. This should be reduced. People who are appointed should have the technical capacity to support the Department. They cannot be a department of consultants. They are not in an NHI public hearing. They are receiving the audit report. They should align themselves with this.

Ms Gela agreed with Mr Munyai. The Committee was informed of the challenges that the Department faces and they received a qualified audit opinion from the AG. They understand the issue of Covid-19 and that it was unprecedented. There were many issues that were raised, such as financial compliance, delayed payment, and irregular expenditure. The issue of monitoring and non-compliance with the PFMA is still lurking. They need to implement the recommendations made by the AG, and make sure that the Department addresses the AG’s concerns. She hopes that there will be more progress in the future. The previous financial year was not easy and they had to direct some of their resources toward Covid-19. This is not the right time to discuss the NHI. The NHI is a good thing as it will address issues in the healthcare sector.

Mr P Van Staden (FF+) asked what the amount was that was spent by the Department for 2021/22. R125 billion in medical claims is staggeringly high. It is almost a billion more than the previous year. It shows that there are significant problems in the public health sector that need to be addressed. What do these litigations consist of, and can the AG provide the Committee with a full list of all the provinces in which these litigations have occurred? Under the infrastructure section, the AG reported 5 facilities. Surely there must be more, as they received complaints throughout the country from various hospitals and clinics. Can the AG provide clarity on this matter?

Ms M Hlengwa (IFP) said that each year, the targets and the budget was there. What happened to the budget for those targets not achieved? She is worried about the documents submitted without evidence reports. When one submits anything, it should be accompanied by evidence records. This is not being done. The report also said that the provinces submitted old-fashioned reports. Who is responsible for this? Is it a lack of capacity or is it negligence? If it is negligence, who is going to correct this?

Ms Chirwa said that they have come to appreciate the AGSA presentation every year because it highlights very important issues that the Committee is able to take on. Noting the decline of the NDoH, the recent findings of the Tembisa Hospital, and widespread corruption, what are some of the other similar issues that the Committee must look out for in order to tackle this? It is important to have recommendations from the AG so that the Committee can strengthen its oversight work. It is important in solving these issues, or at the very least, ensure that they are exposed. What does the AG recommend in response to non-compliance legislation? There seems to be a lack of implementation of the AG’s recommendations. How does the AG defend its recommendations? Are there court interventions that are being pursued by the AG, like with other entities in the country? For instance, if Ministers are ignoring certain recommendations, they can take it to the court of law. What intervention methods of the AG are being pursued to ensure that recommendations are being adhered to? It is a redundant process if the recommendations are not followed, year after year. The presentation shows that the NDOH keeps getting worse. Even the current Minister is worse than the previous Minister, Dr Mkhize.

Mr N Xaba (ANC) supported Mr Munyai. Members have posed their questions. On any wrongdoing, they should offer corrective measures so that things can be improved. He supported and welcomed the report. With regards to the NHI, they need to understand that the Committee is in a very good progress. They have included practices from other countries in order to construct the NHI. They are on course and Members need not worry. It is going to succeed.

Mr A Shaik Emam (NFP) asked what the root cause is of irregular expenditure. Is it because there is a provision in the system for irregular expenditure, and this gets exploited? Is having this as a provision a good thing? It is clear that the Department is not performing well. There is no doubt about that. When the Ministry briefs the Committee on what has happened it is not a justification. They need to be clear about what they are going to do to correct this. Year after year, there are the same findings and the same recommendations. Of course, there has been some improvement which they must welcome. But, how long are they going to go on like this? What are the root causes of this? Do the people who are responsible for management have the necessary capacity? What is the explanation that the AG is getting for vacancies? There is a very high vacancy rate and a lot of money is spent on financial aid. Every department has got vacancies and he cannot understand why. Why is this the case? He has been told that the AGSA office gets a lot of threats because they are investigating corruption and mismanagement, particularly from local and provincial governments. Can they elaborate on this? Recently the AGSA’s powers were amended and extended. Has this reaped any positive results? What can they do to ensure that people actually comply with the AG’s recommendations? Is it possible to get a list of repeat offenders who, despite the interventions, are not doing enough to correct what has been going on?

The Chairperson said that they never invite the Minister and the Director-General to these meetings. They receive this presentation directly from the AG’s office. This meeting is for Members to prepare for the work that is coming in the week. Members must be mindful of this when they make certain points. He sounds like a broken record. He is constantly trying to put the Committee back in its true position where it can perform its prescribed function. This is a consolidated report of the NDoH and the nine provincial departments. It is intended to present an overall view and has predetermined objectives, set by the departments and the entities. Based on the presentations, there are clearly a number of problems that they need to raise as a Committee with the national and provincial departments and entities.

Maintaining proper systems of record keeping is vital in the medical sphere. It assists them in terms of medico-legal claims to be able to view, understand and analyse the records and what has gone wrong with a particular case. It also informs them as to what needs to be done to put an end to these kinds of cases. There are children with cerebral palsy and brain damage that have to suffer with the consequences of negligence. The Committee is going to have a meeting just on medico-legal claims so that they can understand what they can do to assist with this issue. It is clearly very bad that so much of the money goes into paying these claims and the service quality cannot improve. The poor implementation of key infrastructure projects is something that is very serious and needs to be looked at. The ICT control environment insufficiencies, lack of risk assessment, ICT governance issues, etc. is a problem. In the current times, there is a very easy system that allows one to control and manage the functions of everybody else. ICT needs to be funded and it needs to be functional, and its issues need to be corrected. Material non-compliance issues, irregular expenditure, etc. has been raised. Clearly, there are many problems. He is raising these specifically because he hopes that by putting emphasis on these issues, they will be able to get some answers. There should be a plan on how to improve these problems, and how to erase the challenges that have been mentioned. The issues are repeated again and again. At some stage, they need to be solved.

The Committee is in a set programme. If they were not in a set programme, it would be very easy to bring the Departments to the committee and talk to them about these issues. They only get one week to call the Department and the entities and adopt the report. These are the things that they do in the normal programme and they need to find a way to include extra time. This extra time will allow them to do their work more effectively. He called on Members to be supportive of having extra time. Even when it is constituency time, they have been told that they can still have meetings. But the Committee has to apply to have this kind of meeting and get permission. He does not understand how they are supposed to attend to these issues when they have a set programme and have to comply with the timelines provided.

Mr Sekgetho supported the approach that has been proposed by the Chairperson. Considering the plethora of issues, a more focused approach would assist, where they would assign specific time to a specific topic and deal with it. This would assist the Committee’s oversight processes. Around four or five of the medico-legal claims highlighted in the presentation were not supported by appropriate records and audit evidence. It is then difficult for the Committee to defend these cases if the information is not available. Correct record keeping is key. It is also linked to audit outcomes and performance information, as in some cases, they can’t give an accurate review of the performances of the departments and entities. The issues of medico-legal claims and record keeping go hand-in-hand. The AGSA does support a more focused approach. The AG looks at the strategic planning documents of the sector, the core of what the sector is trying to achieve, and the issues that the sector faces. They then devise a five-year sector strategic plan and identify certain key focus areas. The AG will then step back, give the government a year to implement this plan, and then do a follow-up. Since the Committee has a number of issues that it has to deal with, a more focused approach would be suitable.

The issues of consequence management, implementation of AGSA recommendations, and wasteful and irregular expenditure are all linked. The AG has made several recommendations over the years, and these have not been implemented. The process starts off with AG doing the audit and checking that the departments and audits have reported everything correctly. If they pick up a finding, then the material irregularity (MI) process begins. If they have given the entity a chance to implement change and it has not, then the AG looks at using different methods. The MI process involves driving a different culture in the entities and departments. It is a legal process, and it is subject to review. In the first slide, it talks about the accountability ecosystem. This involves raising key insights and helping departments and entities to perform properly. When this is not successful, then they go through the enforcement cycle. This is all to improve the lives of the citizen. He hopes that in the future, they will be able to see some benefits from this process. As a Committee, they would have received submissions from the Department and various role players. Once this has been done, they ask the Committee to request budget allocation in order for them to achieve and deliver on certain commitments. This is approved in the budget vote process. Once this has been done, then the Committee tries to implement the commitments that they would have made. It is imperative that when certain stakeholders present to the Committee, they are asked what quality assurance processes they have been subjected to. This is accompanied by various reports which will help with Committee decision-making. Otherwise, the Committee remains exposed. Members have commented that the same recommendations have been made year after year, but at the same time, the same entities present to the Committee year after year, and they are approved. There is value in interrogating the veracity and the vigour with which the quality of the reports have been adhered to during the in-year monitoring processes.

The threats to the AG office have reduced a lot over the years, as they are mindful of who they are dealing with and are negotiating relations better. The stakeholders are realising that it is not against any specific individual, the AGSA is simply doing its job. This is a sign of a mature process that is able to stand on its own. This is what they want in the respective portfolios too. The Portfolio Committees need to really focus on the implementation of preventative controls. The legislation is very clear about irregular expenditure. In sections 38 and 51 of the PFMA, it says that the accounting authority shall implement sound systems of internal control. These legal obligations also require the accounting authority to implement proper processes that prevent irregular expenditure. Once one is not able to prevent this issue and has an instance of non-compliance, the law says that it needs to be detected and fully disclosed. Once it is disclosed, it is transparent and this case of irregular expenditure can be subjected to a proper process of investigation and root cause determination. The benefit of this is that internal controls can be improved and future cases can be prevented. Behavioural problems can also be corrected. One of the Members asked what the root cause is of irregular expenditure. The Committee will never know if proper root cause determinations are not done. In a limited period of time, the AG investigates and presents limited findings. Sometimes, when they find clear-cut cases they report these to management for follow-up. However, the onus is on the accounting authority.

The NHI did form part of the audit, but they were told to brief on the wider financial scope. They did find an issue with the objective that management has set for the NHI and they raised their concerns in the presentation. It could become significant going forward. Any system will have its benefits and disadvantages, whether it’s a centralised or decentralised model. The system that management ultimately chooses must be supported by proper capacity and systems of internal control. When Committees engage with entities that they are responsible for overseeing, they ask for a list of transgressors. They then question them about when they implemented their consequence management system, etc. In the next feedback session, they request to see more feasible feedback on progress. This is the only way in which officials can be held accountable and this has been done by other Committees. If it is left too long, then the Committee will be hearing about the same findings and recommendations year after year and recurrence will continue. They have highlighted those who are required to take action. It is up to them now to take the baton forward and implement the recommendations. The AGSA does not do an entire review. If they highlight five facilities, then they are just highlighting those five. This does not mean that there are not more.

National Health Laboratory Service (NHLS) Presentation

Prof Eric Buch, Chairperson, and Dr Kamy Chetty, Chief Executive Officer, gave the presentation.

The NHLS maintained an unqualified audit opinion with findings for the 2021/22 financial period. NHLS generated a surplus of R76.4 million for the financial year. It also achieved 88% of targets, compared to 86% the previous year. Some of the obstacles to achieving targets include loadshedding and water shortages, which prevented the entity from completing tests within eight hours, and provincial debt, which led to an increase in debtor days.

The presentation showed that the NHLS has improved substantially both in its service delivery and financial performance. Internal controls in all areas will continue to be strengthened to ensure the smooth delivery on the NHLS mandate.

(See the presentation for more detail).

Ms Clarke said that the NHLS improving its audit status to unqualified must be applauded. The breach of the five pillars of procurement was R339 million. Non-compliance with legislation and contract was quoted at R319 million and non-compliance with procurement requirements was quoted at R626 million. These issues were raised in the AG’s report. NHLS was unable to appoint intern medical scientists in this financial year. Will they be appointed next year, and what impact will this have on service delivery? Tenders above R10 million would go to the Board for approval. How many of these tenders have been approved by the Board? When will ICT development be concluded in terms of the KPI that was not met?

Ms Wilson said that she is the longest-serving Member on the Committee and was here when the NHLS was in deep trouble. The improvement and maintenance of the NHLS and its finance and infrastructure is the highlight of the Department’s various entities. The management and the Board are on top of things, most of the time. There are still issues that Ms Clarke has raised. There is not a huge presence of the NHLS in the Northern Cape. Is there an issue with service delivery in this regard? The NHLS plays a vitally important role and if they are not easily accessible, this creates problems. The Committee has received many complaints about the forensic labs about their infrastructure and equipment. What is the feedback from the investigations into this situation?

Ms Ismail said that the AG’s report gave the NHLS an unqualified audit opinion, with findings on compliance. The material findings relating to compliance, procurement, and contract management resulted in irregular expenditure. These are repeat findings and they were reported in a prior year. Management did indicate that they will capacitate the SCM division and training will be provided to the procurement staff and management. Although there has been a vast improvement, what has the NHLS done to address these findings and how soon will this be implemented so this is not an ongoing issue? Can they update the Committee on the SIU and Hawks investigations? There was a Public Protector’s report, published on 30 March, on the NHLS. There were allegations of conflict of interest, misconduct, and maladministration. How many officials were implicated in this, how many have been charged, and how many have been taken on review? On what basis were these reviews? Can the NHLS explain the claims launched for damages against the entity amounting to R67.1 million? Can they quantify the legal opinion on these claims? How is the NHLS dealing with the resistance to Rifampicin for TB and what are the implications of this? Why does the entity report on 11 performance targets when the annual performance plan provides for more?

Ms Gela welcomed the clean audit opinion. There is progress. It is a good thing that they increased their surplus. In addition, she asked when will the vacant position of COO be filled? Under programme four, she observed that the NHLS has not met the whole target. They have underspent on this. Will the funds be returned to the National Treasury or will it roll over so at least the entity can implement according to its annual performance plan?

Mr Munyai congratulated the entity for the unqualified audit. He asked if there were material issues of emphasis that they need to resolve related to the findings of the AG. What is their role in testing of devices and medical equipment? What is their progress thus far on equity targets to ensure transformation in workforce. How many black people are in senior executive positions?

The Chairperson assumed that most of their facilities are located at public and private health facilities. There have been discussions about the exemption of hospitals from loadshedding. It has been taken up by the Minister and he and the Department have done great work to allow certain facilities to be exempt. Would the NHLS benefit from this, and are their facilities not located at hospitals? Especially in rural areas, this issue is important. It is good to hear how many laboratories are functioning. What can be done to enhance the performance of those that are not functioning optimally? Do they have a challenge with specialists working for NHLS? He knows that there is an issue with registrars being trained in the various laboratories, such as virologists and pathologists. They also said that they did not have an adequate number of epidemiologists. This might not be as important now as it was when the Covid numbers were high, but it should be an ongoing process to ensure that they do have the required number of people to interrogate the results produced by the laboratories. He applauded them on their unqualified audit and their underspending. Can they speak to this and what their intentions are with the unused funds? Will they move the unused funds to other programmes?

Prof Buch replied that there have been two series of corruption within the NHLS. The first one dates back to 2016 and the Board became aware of this in 2017. Immediate action was taken. It was reported to the Minister and National Treasury. The CEO was involved and he personally laid the charges against the implicated persons. They have been working with the Hawks. They went to the SIU and told them that they were worried that there was not enough progress. The SIU told them that this is very unusual because entities do not usually ask after investigations and this led to the promulgation by the President. The former CEO and CFO were dismissed and their dismissal was upheld in the CCMA. The supply chain manager and the legal manager resigned in the face of their disciplinary hearings and the head of internal audits was dismissed for dereliction of duty and misleading the Board. They have done whatever they could. They have shared all the documentation and information that they have on the forensic audit with the Hawks and the SIU. One of the cases is now in court and the CEO, supply chain manager, and legal manager are out on bail. The second instance was the corruption around PPE procurement. They have been adding capacity to the investigations. The asset forfeiture unit has been involved and they have obtained forfeiture. There is a criminal case in court arising from this.

With regard to the Public Protector’s report, the Board remains adamant that it is flawed in both law and substance. It has taken the entire report on review to set it aside. They have submitted their original affidavits to the court and then the Public Protector has to provide them with the information and documents that she has withheld previously. It took a long time for the NHLS to be provided with the substance and the evidence. They have now seen that evidence and feel that their case is even stronger. It is now in the courts. The findings in the report have quite strong words but the sanctions were rather light. In the report, there was a recommendation around the company secretary. There were three allegations against the secretary. The Board has investigated all of these allegations and stand by its decision not to take further steps against this individual. These steps are not warranted. One of the findings was that the secretary had destroyed Board documents irregularly. The documents that were referred to include the report of the forensic auditor on the corruption of the former CEO and her colleagues. The Board decided that there should not be hard copies of these floating around. They were concerned about evidence of entry into people’s offices and documents being removed. He kept the original copy in a secure place. There were electronic copies and the secretary was instructed to destroy those for good reasons. Therefore, it doesn’t make sense to take action against them. If stakeholders approach them asking for them to provide evidence, they will not. They act without fear or favour and will not create victims out of people who are protecting the integrity of the organisation. If the information changes, they will not hesitate to act.

The Board has paid a lot of attention to procurement. Although these numbers look terrible, the procurement systems have dramatically improved. Historically, when they tendered for new equipment, the tender would go towards the lowest cost item that met the requirements. After that, many of these machines are customised to get materials from that supplier only. The issue here is that they were being held to ransom around trying to batter down the prices that they have. This is then called irregular because they aren’t tendering for it. They have no choice because the machine prices could go up. Now, whenever they buy equipment, they have a single tender for both the equipment and the materials, so that when it is bought, they are aware of the total cost. Some people offer a low cost tender, but the cost of the materials pushes their cost up, to a point where they wouldn’t have been chosen had the company known the total cost from the beginning. There are a wide range of improvements on procurement. They used to have a catalogue goods system within the NHLS where they bought off catalogue. This often led to big numbers of irregular expenditure because there weren’t competitive tenders and the NHLS didn’t have a way around it.

The 200 and odd labs that they talk about are where they have the actual laboratories. This is not where they collect specimens from. They travel thousands of kilometres each day collecting specimens. There are couriers that travel and bring the specimens to the labs. The coverage is much wider than where the labs are. The forensic labs were a much bigger challenge than they anticipated. The level of dysfunction was extraordinary. They did not have the laboratory test material to do the tests that they were supposed to do. The backlogs were astonishing. They inherited a situation where the backlogs were going to get bigger, not smaller. There was no proper plan in place to address the backlog and there was no effective quality management or procurement. They have been fixing it and Dr Chetty has been paying a lot of attention to it. The NHLS previously had no plan to address loadshedding and when the power went off they would just stop working. They already have strong evidence that they are starting to make strong progress in turning this around and bringing it up to standard. Fortunately, they have a lot of capability in the NHLS.

The issue of not having enough specialists is always going to be problem. They produce specialists and support their training, but there is always massive poaching where there is a great demand for them globally.

Dr Chetty said their services cover the Northern Cape extensively and that she is not aware of any service delivery issues in the province. It is also one of the provinces that is struggling to pay its debt. They haven’t reported on the forensic labs in this annual report because the NHLS only took them over from 1 April. They will be included in the next annual report. As the Chair noted, they have put in a number of support systems to improve the forensic labs. They recently appointed a new head of forensic chemistry and finance and procurement persons. They are working around the clock to look at the backlogs and how they can be addressed. A more detailed report can be provided when he presents on the forensic chemistry labs.

NHLS Irregular Expenditure Financial year ended 31 March 2022

As part of the response to Members’ questions, Dr Chetty presented a slideshow on the irregular expenditure of the NHLS for the 2021/22 financial year. The amount increased from R778 639 in 2020/21 to R1 284 343 in 2021/22. The investigation into PPE corruption had not finished by the end of the 2020/21 financial year and was carried over into 2021/22. It looks like irregular expenditure has increased, but the amount from the PPE corruption actually belongs to the previous accounting year. The NHLS will be requesting a condonation so it will be reflected differently in the next financial year when the irregular expenditure is cleared up. Irregular expenditure during the Covid emergency amounts to R791 623 789 and this comes from incorrect procurement processes, fronting, collusion, and overpricing. The NHLS has embarked on a number of tenders to regularise the irregular expenditure generally and the system will be cleared up.

(See document)

Continued response from the NHLS

Dr Chetty said that the damages against the entity are a contingency liability in case there are claims against the entity. They have not paid out any damages. It is a contingency that they put in. With regard to Ms Ismail’s question, she is not aware of any Rifampicin resistance but she stands to be corrected. She requested more details and will check with the experts. The NHLS is now doing reflex testing for antibiotic resistance which assists a great deal in picking up antibiotic resistance. Departments are given budgets in a fixed amount. The NHLS determines its own budget with regard to its revenue targets. The NHLS revenue was higher and this explains the surplus. They will apply to Treasury for the rollover of funds and thus far they have been successful in keeping up with their surplus. The Chief of Operations position has been advertised and the interviews will be held shortly. Thus far, they haven’t been testing devices. SAPHRA will ask the NHLS if it has to. It did so for COVID but not for all the other equipment.  


Mr Munyai reminded the NHLS that his question about transformation had not been responded to.

Prof Buch said that they have seven executive positions filled. The Board has shortlisted candidates for the COO position and they will be interviewed within the next couple of weeks, as well as for the position of CFO. All seven positions are filled by black South Africans of great capability. Of these seven, five are black African. Four of the seven are women, three of whom are black African women. The acting CFO is also a black African woman. There are no white executives.

Ms Pumeza Mayekiso, Manager: Group Accounting, NHLS, said that there were three items that were raised with regard to the points of emphasis in relation to the audit report. The first was that there were some figures where they had to do some restatements in their financial statements. The second one was a standard procedure. The material value was significant in relation to the provision for doubtful debt which speaks to the amount that is owed by the provinces. The last one was in relation to the irregular expenditure which has been discussed already.

Prof Koleka Mlisana, Executive Manager: Academic Affairs, Research & Quality Assurance, NHLS, said that they have missed out by a month for the recruitment of the numbers that they need for the previous financial year. Instead of appointing them on 1 March, they appointed them on 1 April. The training programme will continue. The intake for this financial year will not be affected by that delay. They continuously monitor the training. Whenever new equipment comes into the country, it has to be approved by SAPHRA first. They have a division within quality assurance that is called health technology assessment. All technology is evaluated by this division to see if the equipment matches what is described in its information brochure. Once this process is complete and the technology is approved, the equipment goes through the procurement process of the NHLS. They do evaluate the equipment. The accreditation process looks at the number of labs within the NHLS. A significant number of these labs sit at national central levels and 35 of these national labs are accredited, which is just over 70%. There are 16 or 17 labs at a provincial level and 15 of these are accredited, which is 88%. There are a lot more district labs and 30% are accredited. This assures that the quality assurance systems of all of those labs are optimal and up to standard. Any other lab that is not yet accredited goes through audits once or twice a year and they have measures to monitor the reports of those audits. This is monitored within the APP and they have been performing well thus far. All of the targets for the non-accredited labs have been met. So, either way, all of the labs are being monitored.
Prof Buch has addressed the issue of pathologists and other specialists. This is always a problem because of competition globally and with the private sector. The executive will continue to find means to maintain the number of pathologists, but it is certainly a challenge.

Dr Chetty said that they are addressing their equity targets at a professional level as well. This is something that they are very conscious of. The intake of the registrar also depends on the development of the demographic profile of the medical students. This is something that they are trying to address with the provincial departments of health. They do benefit from the hospitals that have been exempted from loadshedding. She has written to Eskom to ask for an exemption for the NHLS. They have referred her to the municipalities. She has been following up with the City of Johannesburg on a regular basis. She really would appreciate the Committee’s assistance in this regard. The lab information system is housed at their head office and they have been struggling with the loadshedding to keep the system online. If this system goes down at the head office, it goes down in all other labs. It is a headache, provinces complain all the time and they really would appreciate assistance from the Committee. They have been saying that they need to train more epidemiologists, especially field epidemiologists. The NCID has a field epidemiology training programme and recently the Gift of the Givers made a donation to provide accommodation facilities for study purposes. They hope to increase the number of field epidemiologists that get trained. The order entry system is busy being developed and they will be piloting that shortly.

The Chairperson thanked the NHLS. Their application for condonation came up last year. It came up this year again and they have a rollover of irregular expenditure. He hopes that the outcomes are better next year.

The meeting was adjourned.




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