The department said it would be sitting with accrued liabilities of about R7billion as at March 31 this year.
It is now proposing that suppliers owed in excess of R10million enter into a payment plan which will enable the department to settle the debt over a period of time, to a maximum of four years.
Suppliers will have to sign legally binding contracts which stipulate, among other things, that the payment period be a maximum of four years and that no interest will be charged on the outstanding balances.
“Savings realised during the 2018/2019 and re-prioritised funds will be used to fund accruals, and where necessary, provincial Treasury will be called to assist. It is business unusual at the Gauteng Department of Health and we hope that our suppliers, who are our valued stakeholders, will walk with us on this journey to financial recovery,” health spokesperson Lesemang Matuka said.
He said the provincial Treasury had made R4.8bn available to settle accrued liabilities over the medium term expenditure framework.
“Some R1.5bn of these funds will be made available in the new financial year - 2018/2019. With the projected accrued liabilities of at least R7bn as at March 31, 2018, a decision had to be made on how to split the R1.5bn available.
“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. These are suppliers that are owed R5m and less,” he said.
Matuka said that since April 2017 to March 2018, the department had paid R17bn to 7513 suppliers.
He said the department was facing severe liquidity challenges due to the misalignment between the increase in the burden of disease, increase in population and an above average increase of medical inflation.
Matuka said due to the tough economic conditions, the high unemployment rate and the technical recession, more citizens became uninsured and had to use public healthcare facilities.
“The department has thus been unable to stay within its allocated budget, a phenomenon that resulted in the build-up of accrued liabilities for unpaid goods and services,” Matuka said.
Company owners, who spoke to The Star and asked to remain anonymous for fear of reprisal, said the issue of payment was affecting their businesses.
The owner of a surgical equipment company said they were owed R23m.
“The money owed to us dates back about two years. The department makes payments, but in small portions. The payments do not even make a difference to the money they owe us.
“The department cannot say they will pay us over four years because we also have suppliers to pay. Where are we supposed to get that kind of money if they don’t pay us on time?” the owner said.
An official from another medical supplies company that is owed about R300 000 said the department told them that the next pay run would be in April but there was no date given.
“When the department does not pay us we cannot pay creditors or our staff salaries. We get handed over by suppliers to lawyers demanding payments for credit outstanding,” the official said.
Both companies are still providing services to the department.
DA Gauteng health spokesperson Jack Bloom said what the department was doing was “an unacceptable and illegal arrangement, as all payments should be done within 30 days, according to Treasury regulations. It is also disturbing that some companies have delivered to hospitals, only to be told that their orders had been cancelled.
“Service delivery is being affected as some companies refuse to deal with the department and others put up prices to cover for late payment," Bloom said.
The health department's budget increased from R41.9bn last year to R46.4bn this year, he pointed out.