Regular Force Medical Continuation Fund; SANDF deployment to counter illegal mining; with Deputy Minister

Meeting report

Regular Force Medical Continuation Fund

Ms Thobekile Gamede, Acting Secretary for Defence, said the Regular Force Medical Continuation Fund (RFMCF) was meant to continue providing medical services to retired members of the South African National Defence Force (SANDF). This was money that the retired SANDF members had contributed when they were in service. This was the money used to ensure that the retirees were taken care of as far as their medical bills were concerned. When the Fund was established, it was set up to buy medical services solely from the South African Military Health Service (SAMHS). The Fund was a private fund run by a board elected after a specified period.

Dr Anushka Jamuna, Principal Officer, Regular Force Medical Continuation Fund, took the Committee through the presentation. The RFMCF, established around 1964 to provide continued healthcare benefits for retired regular force members, faced a critical juncture in its history. The Fund, a medical pension type, was distinct from other SANDF funds and was dedicated to managing healthcare for its beneficiaries. The Fund's sustainability was paramount, necessitating a comprehensive turnaround strategy.

In the past, challenges had persisted within the Fund, leading to a financial and management crisis in 2016. The subsequent dissolution of the board and the appointment of an interim board marked a crucial intervention. The current board, comprising the SANDF and private sector trustees, with the Surgeon-General as chairperson, was striving to address historical issues and ensure the Fund's viability.

The RFMCF managed a diverse portfolio, with 32 827 lives covered, including 57 841 active force members. The claims ratio stands at 101.7%, and the Fund has consistently faced medical inflation increases. The turnaround strategy emphasised improved governance, management, stakeholder relationships, and the impact of interventions in managed healthcare and financial management.

The Fund's financial status revealed a nuanced picture. While the Fund had grown under effective management, rising healthcare expenditure had led to shortfalls in recent years. The claims ratio had fluctuated, reaching 100% in 2023. Based on age of entry criteria, the financial model illustrated contribution levels that were not determined by rank or salary. However, the Fund's current funding model faced challenges, with monthly shortfalls indicating financial strain.

The actuarial report underscored the Fund's increased risk and sustainability challenges. The gross liability had surged from R8.4 billion in 2019 to R18.8 billion in 2023, with the Fund only 6.83% funded. Proposed changes in payment fees by the SAMHS posed a severe threat, potentially bankrupting the Fund within a year. Successes to date included improved governance, financial management, member communication, fraud investigations, technological advancements, and benefit schedule implementation.

However, challenges loomed large, including low contribution levels, membership complexities, increased private sector usage, and inadequate control. The Fund's sustainability was intricately tied to the status of the SANDF and required prudent financial management, a review of the funding model, and heightened stakeholder engagement. The Fund's future hinged on strategic priorities, including managing conflicts of interest, addressing challenges impacting the Fund, and maintaining effective risk management. Ultimately, the sustainability of the RFMCF relied on the professional management of the Fund within the broader context of the SANDF.

See attached for full presentation

Discussion

The Chairperson remarked that he could see the risk, and if it was not mitigated, the SANDF would not have medical aid cover unless they privately funded themselves. It had to be ensured that the Fund was sustainable to ensure that retired members of the SANDF had their medical needs met. However, if the matters that had been presented were not attended to, the Fund would be at risk of collapsing.

The work that had been done by the Fund, given the decreased finances from R1 billion in 2015 to about R358 million, meant that it was still able to recover and meet its obligations. This showed the Fund's commitment and resilience.

The SAMHS was like an insurance for both serving and retired members of the SANDF, hence the Fund was in existence. If SAMHS was not functioning well and the challenges were not addressed, then there would be a high reliance on the private sector, and the SAMHS would be compelled to outsource, which would be costly for the Fund.

Co-Chairperson Nchabeleng asked for clarity on how ready the Fund was for the developments happening in the country, specifically the National Health Insurance (NHI). How would the Fund fit into the NHI?

Mr S Marais (DA) welcomed the presentation, and highlighted that it provided a picture of what was happening with the Fund. What was the overall purpose of the Fund? This was because the presentation had highlighted the challenges that the Fund faced, but the critical point was that it should be curated to serve its members. If the Fund was unable to serve its members, then it had no justification.

For the retirees, it was important to review the contract between them and the SANDF when they contribute every month. This would ensure that there was clarity on the co-payments, including the entitlements that the retirees had. This was because most of the complaints received were about the poor clarity about co-payments.

Concerning the funding of the Fund, it was hard to understand why there had been no increase in premiums. How had this occurred and been allowed to go on?

Regarding the huge cost of the private sector for retired SANDF members who needed to access health services, but were in remote areas far from a military hospital, they ended up having to use the private sector. Mr Marais indicated that this could not be used as a sound argument, because this was something that the SANDF had known. Who carried the cost of outsourcing -- was it SAMHS or the Fund?

There had been complaints from members of the Fund indicating that they were unable to go for follow-up treatments, as doctors refused to treat them due to delayed and outstanding payments. How was this being addressed?

How was the Fund’s Board of Trustees structured? Did the board have representatives from active and retired members of the SANDF? This was only fair, as it ensured that the needs of all the members of the Fund were catered for. Furthermore, how was the board elected?

Mr M Shelembe (DA) said the Fund was a good programme that looked after the SANDF members who had dedicated themselves to serving the country. The presentation mentioned that the Fund's claims were more than its income, which had resulted in it being unable to fulfil its obligations. Understandably, one of the issues and challenges was that the unions seemed not to be agreeing on the issues around increasing premiums. What was the reasoning of the unions as to why the Fund's premiums should not be increased? What solution was proposed?

One of the challenges that had been raised was the number of spouses of beneficiaries. How did the Fund define “spouse”? Was the definition exclusive to those who were married, or did it include unmarried spouses? It was important to have a definition, as the presentation mentioned that the number of spouses cost the Fund.

Mr Shelembe asked that information on investigations and disciplinary procedures be provided to the Committee if there had been any fraud and corruption cases in the Board of the Fund.

Mr T Mafanya (EFF) asked if members of the SANDF joined the Fund voluntarily, or if it was compulsory?

The presentation had mentioned that the Fund was not registered with the medical funds, and that it was a private entity that perhaps had a contractual obligation towards the SANDF. If there was a contractual agreement, what were the terms of reference, especially since SAMHS was the one responsible and received the budget from the Department of Defence? Who funded the Fund?

The presentation prompted the question of why the Committee should listen to the Fund, as it was a private entity that did not account to the Committee. He asked if the money that the SANDF contributed was insured.

The presentation indicated that some patients were referred to the SAMHS by the Fund. Who made the payments for these referrals? Did the SAMHS cover the costs of these referrals, or did the Fund make payments to the SAMHS?

Responses

Lt Gen (Dr) Peter Maphaha, Surgeon General, SANDF, responded to the question of how the NHI would relate to the Fund, and said it had been indicated that the present provisions of the NHI state that active members of the SANDF would not be part of the NHI. There were still discussions with the Department of Health (DoH) in terms of understanding what that provision means, and whether it also meant that active members of the SANDF would not contribute towards the NHI, and if so, how the retired members of the SANDF would benefit from the NHI.

SAMHS was also exploring ways that if SAMHS met the national health standard, it may be able to provide services to the NHI and thus be able to generate funds. However, it would be important for SAMHS facilities to meet the national health standards.

The purpose of the Fund was to provide health care for the retired members of the SANDF. When the Fund was established, it was intended to get all services from the SAMHS. Members of the Fund were supposed to pay only a nominal fee to SAMHS. The expenditure that the Fund was experiencing was not envisaged. For each of the services provided by the SAMHS, the Fund was supposed to pay R15, and National Treasury proposed increasing the contributions because of the expensive health services. The Fund was not coping with the outsourcing of health services.

Dr Jamuna added that when an active member of the SANDF visited the SAMHS, and they needed to be outsourced, the SAMHS would pay for the medical bill. However, when a retired member of the SANDF who was part of the Fund was going to the SAMHS and required outsourced services, the Fund would pay for the medical bill.

Lt Gen Maphaha said it had been mentioned that there were no co-payments that members of the Fund were supposed to pay. However, as part of managed healthcare, the board and the administrator had negotiated with certain designated healthcare providers to have a standard chargeable fee. If a member of the Fund visited a health provider who was not designated without authority, the member would be expected to pay the difference for the service.

Concerning the question of where the Fund gets its funds, he said the members of the SANDF contribute towards this Fund while they are employed. This was not voluntary, and the contributions of members were invested with a reputable investment company which was liable for the money invested with them. When the active members of the SANDF retire, that money forms part of the Fund. One of the reasons the income had not increased was because the unions had vetoed the recommendation to have an increase.

There was no provision from the government to provide health service coverage for retired members of the SANDF. The contractual agreement that the government had with the active members of the SANDF was that the government would provide 100% health care. However, this provision did not extend to retired members of the SANDF, hence the commission of the Fund.

The Fund was found to be going through financial challenges around 2015. Over the years, it had relied completely on the SAMHS. However, the SAMHS started outsourcing due to various challenges in terms of facilities, medical equipment, and human resources. This came to the stage where the SAMHS was unable to pay the medical providers, so the board made a decision that the Fund would pay for itself. When the interim board was appointed, certain measures were implemented, and one of them was managed health care. Managed health care meant that when a service provider had seen a patient, the Fund scrutinised whether the invoice was for what had been provided to the member of the Fund. The interim board had been able to cut down the Fund’s expenditure.

The budget that the SAMHS was getting did not match the healthcare expenses, including ensuring that the SAMHS had reliable facilities and equipment with the ability to sustain and retain healthcare professionals.

The Fund's permanent board, which the Minister of Defence appointed, comprised active SANDF members, including legal representation from the Defence Force. Some retired SANDF members formed part of the board, and it also had a private sector member with extensive knowledge of managed healthcare.

In the financial status report, the Fund was clear about its liquidity. The actuary had predicted that if it continued without reviewing the contributions of members or curbing the outsourcing, it would collapse by 2027. The Fund was underfunded by 10% because the contributions were not in line with private medical care costs and the country's inflation.

A spouse was a registered member defined as a spouse by the SANDF. This could be more than one spouse, and their children were considered dependents. There were concerns that there were members of the Fund who had many spouses and dependents, and this was often perceived as unfair by those with fewer dependents but still receiving the same quality of service.

Further discussion

Ms P Phetlhe (ANC) said it was confusing that the Fund was a private entity that was not regulated by the legislation that regulated the medical schemes, but was appearing before the Committee. What were the reasons for the entity appearing before the Committee?

The issue of premiums should be in the rules and involve no negotiations. The Fund should have rules on premiums, especially focusing on increasing the premiums. This would ensure that the Fund could raise sufficient income to remain sustainable. If the manner things were managed in the Fund were not changed, it would collapse, and this must be looked at closely to ensure a turnaround.

Who elects the Board of the Fund, and what rules govern this process? The board should also include someone with financial knowledge.

Adv M Mothapo (ANC) said that she did not expect the issues about spouses to be raised by him [Mr Shelembe], as customary law allowed polygamy, and this was not surprising. In the SANDF, some were in polygamous relationships, and this was not a foreign idea in African traditions.

Mr D Ryder (DA, Gauteng) interjected that the comment by Adv Mothapo was inappropriate.

The Chairperson requested that Adv Mothapo be allowed to continue without being interjected.

Mr Ryder pointed out that the rules of Parliament should be followed. He said that making condescending comments about other Members of the Committee was inappropriate. Members of the Committee should maintain an appropriate decorum.

He continued by highlighting that the Fund's reckless trading was concerning, and this had implications for its members. He hoped that the trustees and Board members had the appropriate training and were aware of their responsibilities to ensure that the Fund maintained an acceptable level of sustainability.

Mr Shelembe said that the Committee was a forum where Members could ask questions. He understood what polygamy was, but the question had been directed at understanding the meaning of spouse according to the Fund.

Mr K Motsamai (EFF, Gauteng) said the military veterans did not have the necessary support, to the extent that some of them did not have proper houses. This should be considered in the interventions, so that they could also benefit.

Responses

Lt Gen Maphaha said the current board had made recommendations that the regulations that govern the Fund be reviewed so that they were in line with the current functioning of the Fund, especially the private health sector. The Fund was not intended to get services from the private sector, but solely the SAMHS. However, given the challenges that the SANDF was experiencing, the SAMHS was no longer desirable for the Fund. Hence, the recommendation for the regulations to be amended.

A process was underway to get the Fund to be part of the medical schemes as a medical fund, as being a medical scheme came with many complications.

The Board of the Fund was fully aware of the reckless spending, and training was provided to ensure members were aware of their responsibilities. They were appointed based on their expertise, including finance, law, medical schemes, actuaries and auditors.

Mr Thabang Makwetla, Deputy Minister of Defence and Military Veterans, thanked the Committee for the insights and reflections on the status of the Fund. The responses clarified issues that had been unclear. This discussion had been occasioned by the submissions of the actuarial report, as the Fund's liability had more than doubled since 2019, and this was a matter of concern. It was comforting that the Fund had recovered in the past, and if the necessary interventions were executed, then the Fund would be able to recover from its current setbacks.

SANDF deployment of Operation PROSPER (Illegal Mining)

Lt Gen Lucky Sangweni, Chief: Joint Operations, SANDF, presented on the deployment of the SANDF under Operation PROSPER, specifically targeting illegal mining. The President had authorised the SANDF's deployment, in collaboration with the South African Police Service (SAPS), to prevent and combat crime and maintain law and order in the country. This fell under the provisions of section 201(2)(a) of the Constitution. The deployment was a strategic response to address the prevalence of illicit mining, accompanied by brazen organised crime, involving illegal weapons, explosives, and the harassment of communities near disused mining areas.

A contingent of 3 300 SANDF members would collaborate with the SAPS to combat illegal mining and related criminal activities over six months, from 28 October 2023, to 28 April 2024. The estimated expenditure for this deployment was R492 143 296, covering the compensation of employees (R256 651 296) and goods and services (R235 492 000). Importantly, these costs were not funded in the Department of Defence's (DOD's) 2023/24 financial allocation, and were considered unforeseen and unavoidable.

This deployment represented a critical and timely intervention by the SANDF in addressing the serious challenges posed by illegal mining, ensuring the safety and security of communities, and upholding the rule of law. The associated costs, though significant, were deemed necessary for the effective execution of Operation PROSPER.

Discussion

The Chairperson highlighted that Operation PROSPER was expected to cost nearly half a billion rands. However, without reinforcing the country’s borderline security, the exercise would be futile as the illegal migrants would continue to stream into the country. Therefore, borderlines should be strengthened, and illegal immigration prevented.

Mr Marais expressed his appreciation for what the soldiers were doing under very difficult circumstances. He said it was concerning that this operation was unfunded. This should be brought to the attention of the National Treasury. What kind of training was required to do a deployment of this nature?

Mr T Mmutle (ANC) asked what the role of the SANDF in this type of deployment was, and what limitations they were confronted with in terms of enforcing the law. What would be done differently to ensure that the law was rightly enforced? How would the SANDF be working with the SAPS?  

Mr Ryder echoed that this operation was not a military function, but was a function of the SAPS, as the SANDF was not appropriately trained to take on these duties. It was concerning that the government, through its failures in other areas, had been brought to a point where such interventions were necessary to bring about law and order. This position should not have been reached in the first place.

The Chairperson expressed his concern that the operation was unfunded, and hoped there would be an appropriation before the end of the financial year.

Responses

Lt Gen Sangweni said the insights of the Committee were appreciated. It had been mentioned that the Committee would form part of the process of securing the required financial resources needed for the SANDF to do its work. Undoubtedly, a stronger hand was necessary, given the status of things regarding illegal mining. The illegal mining environment was quite violent, and the SANDF was the law enforcement agency that was equipped to deal with such an environment.

Members of the SANDF were currently undergoing mission-specific training to ensure readiness based on the conditions in which they would be working so that there was a readiness to undertake the task.

There was much that the SANDF would do in this operation, as the force had the same capabilities and there were no new advanced capabilities. This operation focused on counter-insurgency operation training to ensure that the force could fully execute its mandate. The SANDF was part of the security cluster led by the Justice, Crime Prevention and Security Cluster (JCPS), so other departments were involved in the issue of illicit mining.

Deputy Minister Makwetla, in his closing remarks, said the deployment was a necessary and responsible decision for the country. The feedback from the general public had been positive, and it had even been indicated that the intervention had come late -- it should have been executed earlier. This was because, in the modern world, it was unacceptable that a country's resources were exploited under force of arms by illegal migrants.

The Chairperson urged the SANDF to communicate this Operation to communities around these mining areas experiencing this problem. The message is that if these illegal miners did not leave on their own, they would force the security forces of SA to remove them. This message must be clear. The Chairperson said this was the first Operation he was aware of targeting a specific group to say “if you don’t leave, you will be removed”. He urged for the message to be distributed physically, through pamphlets in the local language. These pamphlets can even be dropped from the air. This Operation was important because it could not end until the job was completed. The success of this Operation was also important for ensuring there is public confidence in the SANDF.

Minutes were deferred to the next meeting.

The meeting was adjourned.