Health contracts worth R9.7bn escape full audit as NHLS procurement flaws deepen

Serious weaknesses in procurement and contract management within the department of health and its entities have raised red flags, with more than R9.7bn in contracts at the National Health Laboratory Service (NHLS) escaping full audit scrutiny.

This was revealed by the Auditor-General of South Africa (Agsa) during a briefing to parliament’s portfolio committee on health this week. The findings paint a troubling picture of weak controls, expired contracts and irregular expenditure that may have a direct impact on healthcare delivery.

Nelisiwe Mhlongo, deputy business unit leader at Agsa, told MPs the department of health had disclosed more than R5.3m in irregular expenditure that was still under assessment.

“The department paid invoices before receipt of goods and services, which is not in accordance with the service-level agreement,” she said.

“Procurement from prior years was not done through Sita [the State Information Technology Agency], while the NHLS continued using expired contracts and a catalogue system instead of going out to competitive bidding.”

Procurement failures and audit gaps

Mhlongo said the NHLS was the biggest contributor to procurement findings in the sector.

“Sufficient appropriate audit evidence could not be obtained to confirm that management complied with supply chain management prescripts,” she said, adding that the NHLS incurred irregular expenditure and possibly uneconomical procurement.

Facilities are unable to provide appropriate care when suppliers fail to deliver. Staff end up performing functions outside their scope of work, which impacts the quality of health care delivered to patients

—  Nkululeko Conco, attorney at Corruption Watch

The AG’s findings included:

• quotations were accepted from suppliers who failed to submit mandatory declarations;
• competitive bids were not advertised for the required minimum period;
• goods and services were procured without obtaining three quotations, in breach of Treasury regulations; and
• the NHLS failed to monitor adherence to contract terms or commitments effectively.

Mhlongo said the R9.7bn in contracts at the NHLS could not be fully audited because of incomplete or unreliable documentation.

The NHLS has been grappling with lingering effects of a major cyberattack in June 2024, when its IT systems were allegedly hacked by Blacksuit ransomware group. The attack forced the laboratory to shut down parts of its digital infrastructure, delete backup servers and resort to manual operations.

Patients pay the price

Anti-corruption watchdog Corruption Watch warned that procurement failures in the health sector ultimately harm patients.

Attorney at Corruption Watch Nkululeko Conco said irregular procurement or non-delivery by suppliers often translated into a lack of essential equipment and compromised patient care.

“Facilities are unable to provide appropriate care when suppliers fail to deliver. Staff end up performing functions outside their scope of work, which impacts the quality of health care delivered to patients,” Conco said.

He added that poor procurement practices also affected medical equipment maintenance and infrastructure.

“We’ve seen cases where medical equipment was procured without maintenance being included in the tender. There’s also a failure to maintain infrastructure, which further endangers public health-care users,” he said.

Conco called for greater transparency in public health procurement.

“The public should have access to information about what is being procured, from whom, for how much and how performance will be monitored.”