Political Analysis

October 18th, 2012

Health Minister Aaron Motsoaledi has stated that tender-based procurement for the Department of Health needs to be reduced. It is his contention that these tenders are destroying the public health care system, and proposes that the majority of work should be carried out in-house. It remains to be seen whether or not the tender process will be separated from the healthcare system, and what repercussions might follow such a decision.

South Africa spends relatively more on health care than many other countries, considerably more than the expenditure recommended by the World Health Organization, yet health services are poor, and patient care is on the decline. With the discrepancy between healthcare spending and results being so significant, it is clear that the Department of Health is not performing adequately.

Motsoaledi claims the problem can be attributed to uncontrolled commercialism; the procurement of even basic essentials is deferred to the tender process, drawing out transaction periods and inflating prices at both the private and public level; Discovery Health and various other medical aid agencies have been forced to hike premiums and reduce coverage in efforts to keep up with inflated healthcare costs in the country. According to the annual budget, the Department of Health spent R6 billion of the R121 billion on security companies, further highlighting the peculiarity of the extant procurement process and the transactions that it foresees.

Motsoaledi proposes to cut costs by implementing an employment system that calls for contracts directly between the Department of Health and prospective employees, instead of contracting jobs through tenders to private contractors. The system will include staff training, however, which will itself require contracting to external bodies; without drastic re-imagining, the healthcare system cannot operate without some form of tender procurement being issued.

By internalising skills and resources, and reducing the concentration of tenders in the procurement process, the Department of Health will reap greater returns on transactions characterised by faster turnaround and lower margins for non-value-adding services, thus increasing the yield of productivity per Rand, which will in turn lead to superior healthcare and lower rates across both the private and public markets.

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