The Department of Health’s tardiness in settling its bills to hospital equipment suppliers is leading to a massive rise in small companies’ overdrafts and loans, heightened stress, and, in some cases, may result in business closures.
The SA Medical Technology Industry Association (Samed) said R1bn was owed to 50 of its members – more than half of the amount outstanding beyond 120 days – for supplies ranging from orthopaedic equipment and CT scanners to basics like syringes and gloves.
One of the member businesses of the Medical Device Manufacturers of South Africa (MDMSA), run by a KwaZulu-Natal family, told News24 the Department of Health owed it several million rands.
More than 50% of the money has been outstanding for more than 90 days, having a huge impact on the company’s cash flow.
“We are owed a hell of a lot of money, and it’s crippling our business – we had to get our bank to extend and increase an overdraft because we have to keep supplying, but we just don’t get paid. We have no problems with the private sector – we get paid on time. Within thirty days, the money is in our account.”
The company said the Gauteng Department of Health accounted for more than 50% of the outstanding amount.
“Two years ago, Gauteng was the best-paying province out of everyone. We don’t know what changed there.”
Unfortunately, they could not stop supply due to the fear of losing the orders. “If we don’t supply the product and another firm steps in, then we lose out.”
Despite the challenges, the company has continued to fulfil orders as it struggles to retain its workforce of 30 employees.
Financial strain, health impacts
Another Samed member who imports and supplies a range of medical products said the government arrears to his firm amounted to R8m, forcing him to extend his overdraft from R50 000 to R1.5m.
He has to find an additional R19 000 every month to service that overdraft.
“But I can’t even pay that on a monthly basis because there is no money coming in,” he said.
He added that only the Western Cape remained reliable for payments – a lifeline that has kept the business afloat.
Situation ‘untenable’
Samed executive officer Tanya Vogt said a recent KZN Department of Health circular had notified members about necessary cost-cutting measures.
“They actually specified that only emergencies will be dealt with and that planned procedures for patients must be delayed and postponed to the next financial period,” she said.
Samed was also told that the Gauteng Department of Health had told some members there was insufficient budget in the current financial year and that they had to suspend payments.
Vogt said the matter could be resolved if the government applied a greater sense of urgency and stronger resolve for increased accountability and dynamic and coordinated action.
Samed had approached the Ministers of Health, Finance and the Department of Trade, Industry & Competition to prioritise the matter, she added
Health spokesperson Foster Mohale said the department was aware of the debt in various provinces, and had urged provincial departments to enter into payment agreements with suppliers to settle the outstanding amounts.
He said the issued was “currently being managed by chief financial officers working with their counterparts at the national office”.
See more from MedicalBrief archives:
State owes medical device manufacturers R1bn
Gauteng Health worst for non-payment of creditors
Rampant stealing by officials will collapse SA’s health system — Heywood