A forensic investigation by Gauteng’s Department of Social Development (DSD) department has found that R112m of taxpayers’s money meant for drug recovery patients was irregularly channelled into Life Healthcare Group’s bank account – but despite recommendations, four DSD officials have yet to be disciplined.
The DSD’s probe into non-profit organisations (NPOs) that it supports found director fees of nearly R9.7m were paid to just three people in one year, and salaries of R24.9m, in the 2022-23 reporting period, which is more than R4.9m “in excess” of claim forms submitted.
The investigation recommended disciplinary action against four senior DSD officials for “gross dereliction of duty” and failing to secure state money, which appears not to have happened yet.
The Mail & Guardian reports that the inquiry was conducted in the first three months of 2024: the four employees implicated are deputy director general Onkemetse Kabasia, Solly Ndweni, the chief director of NPO partnership and development research, Themba Msimanga, director for partnerships and funding, and Phumla Nkosi, the regional director for Ekurhuleni.
Life Healthcare owns the Nkanyisa Recovery Centre, an NPO funded by the provincial department since 2016 under its substance abuse prevention and rehabilitation programme. Nkanyisa has two recovery clinics, one in Randfontein in the West Rand and a second, the Witpoort centre in Brakpan, Ekurhuleni.
The Nkanyisa Recovery Centre was formerly known as Life Esidimeni, from where about 1 500 mental-health patients were removed by the Gauteng government in 2016 and taken to cheaper, unregistered and under-resourced care centres, resulting in more than 140 deaths from a range of causes including starvation and gross neglect.
Life Esidimeni, which rebranded to Nkanyisa in September last year, was found to have a bank account “only used to receive grant funding and to transfer immediately to the Life Healthcare Group bank account”.
However, “It is irregular for a government subsidy meant for the NPOs to be channelled to a private company,” the investigators wrote.
According to the 2022-23 service level agreement Nkanyisa has with the department, the Randfontein centre received R62.4m, while the Brakpan facility was granted nearly R49.9m — bringing the total amount allocated to the NPO to more than R112.2m.
But the department grants R16 000 per patient or bed occupied, meaning funding would be R8m for Randfontein, which has 500 beds, and R5.4m for Brakpan, with a capacity of 340, leaving about R98.9m spare for Nkanyisa.
That amount, said the forensic report, was funnelled into the JSE-listed company, and while Life Healthcare Group denied access to its bank statements, government subsidies were traced to its accounts.
“The NPO transfers all funds received from [the social development department] into a central bank account, and all expenditure transactions are processed from the central office,” reads the report.
These transactions included about R9.7m paid to three Nkanyisa directors — chief executive Puseletso Jaure, group risk manager Zeenath Patel and head of insurance Prathna Sookoo.
“The board of directors have permanent jobs and their participation in the work of the NPO cannot by any imagination remunerate them such staggering amounts,” the report said.
Jaure, the Nkanyisa chief executive, acknowledged that Life Healthcare was aware of the investigation, saying the company understood it as part of a wider forensic audit into NPO funding ordered by the premier’s office.
“We have fully cooperated with the independent auditor appointed by the department — we fully complied with that. Additionally, over the eight years of the [service level agreement], Nkanyisa Recovery Centre has been audited on an annual basis as well,” Jaure said.
Jaure could not comment on the report’s findings that there was price inflation on the beds Nkanyisa has, versus the funding received, but said that the facility, like “any other entity”, had to pay for food, clothing, blankets, premises, human resources payroll services and legal fees, among other costs.
“Life Healthcare provides management services to Nkanyisa for the operations of the recovery centre with what we call an ‘arm’s length cost recovery basis’. So, while our emphasis is on patient-centred and compassionate care … we are basically using Life Healthcare’s management services to support the NPO,” said the chief executive.
“We [Life Healthcare] invested in the facilities for the purposes of the service. If we don’t use [the money] we return it to the department,” she said, adding that more than 4 800 patients had come through its clinics.
Jaure “categorically refuted” allegations that government money was channelled for director fees, saying the R9.6m cited in the report “represented the salaries paid by the Life Healthcare Group and not by the NPO”.
“Nkanyisa is an NPO but has the backing and support of the management services from Life Healthcare. So, the directors are actually full-time employees of Life Healthcare [and] receive their regular salaries from their employer, the Life Healthcare Group, but they do not receive any additional compensation for their roles as directors of the NPO,” she said.
Nkanyisa was found to have breached its agreement to have a minimum occupancy rate of no less than 80% of all funded beds.
“Our examination of the number of actual beneficiaries against [targets] shows that the actual numbers are [less than] 80%. The actual beneficiary numbers fluctuate from month to month,” the investigation stated.
It added that Nkanyisa met its capacity target once in the period March to September 2022, with patients referred to the two centres by the department or other NPOs.
M&G spoke to five recovering drug addicts from Katlehong, who were referred to the Brakpan centre by the social development office in Thokoza.
All five Nkanyisa patients stayed at the Brakpan facility for less than five days each between June 2022 and February last year, and described the treatment as “uncaring and harsh”.
Three have been able to maintain sobriety, with one attributing his recovery to the South African National Council on Alcoholism and Drug Dependence (Sanca) day clinic in Palm Ridge, Katlehong, after he had ditched the Brakpan centre.
He said the Sanca day clinic was “more humane” than the “fancy” Brakpan home, and that he had learnt trade skills like welding and carpentry, which kept his mind active to help avoid relapse and which he could also use to earn an income.
Despite Sanca receiving good reviews, its staff are paid less than Nkanyisa employees. The investigative report said remuneration at other NPOs funded by the government paled in comparison to the Life Healthcare subsidiary.
“Social workers at NPOs are generally paid a net salary of R14 500. However, at Life Nkanyisa, a senior social worker earns a gross salary of R43 300 with a net salary of R29 197,” the report said.
“Social auxiliary workers are paid a gross salary [of] between R8 000 and R11 000 at other NPOs. At Life Nkanyisa, they earn R30 196, with a net salary of R21 198.
“According to the financial information received, the labour costs equate to roughly 49.7% of total NPO costs, which is more than R6m per quarter,” the report added.
It said the transactions were handled by a “cash management system used by the Life Healthcare Group”, concluding that the money to Nkanyisa was not grant funding because the NPO “issues invoices to the department” as would a service provider appointed via tender.
These views are supported by a 2023-24 document from the DSD, which said it funded “100%” of the NPO’s needs, including rental and renovations costing more than R7.9m that Nkanyisa did not use and is languishing in the listed parent company’s accounts.
“At this stage, the payment of R7 968 056.47 resembles fiscal dumping and is a direct contravention of the PFMA [Public Finance Management Act]. We still need to obtain and review [social development] internal documentation to determine how and who approved this payment.
“The department should request that the R7 968 056.47 paid to the NPO be returned,” the report recommended.
The centres were, however, found to be “well managed” and Nkanyisa had “reasonable systems and processes in place to effectively manage the affairs of the NPO”.
Social development provincial spokesperson Motsamai Motlhaolwa said the issue is under investigation, and “we are not aware of any report on the matter”.
See more from MedicalBrief archives:
Multi-million-rand Gauteng rehab centres under investigation
Mental health still last in line seven years after Life Esidimeni
Life Esidimeni inquest: MEC dodges blame for ending contracts