'Severe liquidity challenges' at Gauteng Health has caused it to implement a plan that will supposedly settle all smaller confirmed invoices within 30 days, but on larger outstanding invoices, the payment period will be a maximum of four years, with no interest allowed.
Businesses supplying a variety of services to the Gauteng Health are being made to wait more than three months for payment. According to a Daily Maverick report, this is despite Treasury regulations stating that businesses who provide services to government are to be paid within a period of 30 days. “They (the Gauteng Health Department) expect you to service their orders and if you don’t they cancel their orders and blacklist you,” said one of the department's suppliers who asked not to be named. But, the report says, this is not a new problem. According to Democratic Alliance (DA) Gauteng Shadow Health MEC, Jack Bloom, this has been an issue faced by suppliers for the past three years.
Lesemang Matuka, spokesperson for Gauteng Health, blamed the non-payment on “severe liquidity challenges”. This he said was due to a “misalignment between the increase in the burden of disease, increase in population and the above average increase of medical inflation with the budget.”
The report says according to Matuka the tough economic conditions, high unemployment rate and the technical recession that South Africa experienced in 2017 had exacerbated the financial challenges that the department is currently faced with. “Due to these factors the department has been unable to stay within its allocated budget, a phenomenon that resulted in the build-up of accrued liabilities for unpaid goods and services,” said Matuka.
Bloom said the department's budget allocation was increased this year, up R4.7bn to R46.6bn. Matuka said their liabilities stood at a projected R7bn but that the department only had R1.5bn with which to settle its debt. He said a decision had been taken to “split” the available money “in the interest of saving small businesses”. “In the interest of saving small businesses, for most of whom the department is their biggest customer, the department has made an undertaking to settle all confirmed historic debt owed to these suppliers,” said Matuka.
He said suppliers who are owed R5m or less by the department will be paid first. Suppliers who are owed larger amounts will be paid over a period of a maximum of four years.
But Bloom said in the report: “This is an unacceptable and illegal arrangement as all payments should be done within 30 days.”
“This has a serious impact on business, you can never function properly. I have staff members that I have to pay and they have to take care of their families and I also have a family to take care of, so this means that my staff cannot provide for their families,” said one of the department's suppliers.
Suppliers also claim the department cancelled orders without informing them. The report says in a recent incident, a supplier wrote to Gauteng Health’s MEC Dr Gwen Ramokgopa complaining that they were only made aware that an order had been cancelled when they had arrived at Helen Joseph Hospital. “The receiving clerks’ claim it is not necessary to send out cancellation letter to suppliers for orders they intend cancelling,” said the supplier in the email to the MEC. According to the supplier his staff had been in constant communication with one of the clerks at the hospital as they had a delay of stock and they had to wait for stock to be delivered from China but were not informed of any cancellations.
The report says Matuka failed to respond to queries regarding the cancellation of orders.
Bloom said: “Service delivery is being affected as some companies refuse to deal with the department and others put up prices to cover for late payment.” According to Bloom it is also disturbing that some companies have delivered to hospitals only to be told that their orders had been cancelled.
Providing details on the department's new plan Matuka said payment to suppliers would begin on 1 April.
The report says according to the plan: as from 1 April 2018 the department will settle all confirmed invoices within 30 days of receipt of a valid invoice; no interest will be considered – only verified and reconciled outstanding balances will be considered; payment period will be a maximum of four years. This means that for a case where the department owes a supplier in excess of R10m as at 31 March 2018, then a payment plan will be signed off between the supplier which will see the department settle its debt over a period of four years; and payment instalments will be incremental, with the smallest payment to be expected by 1 April 2018.
The report says according to Matuka there will be an iron-clad approach by the department which will ensure that no deviations from the allocated budget will be tolerated.
[link url="https://www.dailymaverick.co.za/article/2018-03-29-gauteng-health-department-gives-itself-four-years-to-pay-supplier-debt/#.WsCwtExuJYc"]Daily Maverick report[/link]