Text: Chris Bateman. Article from the May 2012 issue of Noseweek Magazine.

A slick national pilot programme for ethical – plain honest – procurement and monitoring, kicked off last month in the Eastern Cape health department. Backed by a high-tech group of national government agencies, proponents of the project claim it will cut fraud and wastage by up to 80%.

The Eastern Cape department, chosen for its unrivalled success in corruption-busting and steady return to functionality, has been led for two years by canny former Port Elizabeth businessman, Dr Siva Pillay, (See noses 142 and 144). It may prove the crucible for some sorely needed national alchemy, if talking to Pillay and some of his value-driven “social compact” practitioners is anything to go by.

Coming off a R424-million budget cut (2012/13), Pillay initially appears a bit too sanguine for someone upon whom so much depends – until he starts to outline how and where his “working smarter” approach has already saved well in excess of this amount. His results led to Finance Minister Pravin Gordhan and SARS Commissioner Ivan Pillay (formerly SARS head of compliance) setting up a multi-agency task team to help overhaul the Eastern Cape health department’s procurement of equipment and services.

The scale of the fraud and corruption ranges far and wide — from 174 spouses of health department staff linked to companies illegally paid some R9m; to 780 staffers and their spouses illegally drawing social grants and housing subsidies; R19m of unaccounted assets that were transferred from head office to districts; to no less than R450m in ghost contracts. One member of the special multi-agency work group (Mawg), lists a constraint to their investigation as the wholesale theft and sale of documentation to a recycling company.

The team — consisting of the Hawks (Priority Crimes Unit), the Special Investigations Unit (SIU), the Assets Forfeiture Unit, the national and provincial treasuries, SARS, and backed by PricewaterhouseCoopers and other top private auditing companies – will use 14 interlinked “hubs” across the province to reform the entire supply chain management system.

Strict controls are saving billions for the Eastern Cape

The new filters will begin with “declaration management”: (tender-holders or applicants will be required to declare all family/personal relationships); Companies and Intellectual Property Commission (CIPC) searches; cross-checks with Persal (the personnel salary system); and with Home Affairs identity documentation. All of this is linked to the existing supplier databases.

The qualifications of each and every supplier will be verified painstakingly. The Mawg will then move on to the “top 100″ items being procured, putting in place “demand planning and management” to create new or revised procurement plans, while dodgy existing contracts are earmarked for cancellation or renegotiation of terms and conditions.

The 14 hubs will be spread out across the health districts, metro complexes, head office (including pharmacy) and regional hospitals to act as a filtering system to increase the integrity and quality of supply — and thus root out corrupt officials and privateers milking the system.

As of June, the hubs should be connected via a new Virtual Private Network, (VPN) enabling instant electronic access to data and vastly enhanced patient tracking and management — something that the IT-sawy Pillay initiated soon after taking office.

The VPN, backed by a redundancy network — a virtual provider system that kicks in in the event of a data or software malfunction – will also link the 60% of hospitals currently without connectivity to the province’s 865 clinics and 92 community health centres.

In his two years as Director General of Health, Pillay has forced the resignation and/or disciplinary hearings or criminal charging of more than 1 200 people – most are health department staff accused of helping themselves to money for intended patient care.

Pillay has forced disciplinary hearings and criminal charges

Last year alone Pillay’s core provincial turnaround team recovered R89m following disciplinary hearings and sackings in connection with crimes such as fraud, being drunk on duty and assault.

By uncovering ghost contracts and stopping payments, Pillay has recovered a whopping extra R450m.  His success can be attributed to a pragmatic approach. For example, the directors of a company that had billed R26m for non-existent maintenance were told; “Walk away without payment and we won’t charge you criminally. They walked. Scores of very senior staff resignations were impelled by this principle, saving months of salaried and expensive arbitration and speeding up management change. (The most recent tally of health staff suspended on pay was down to 56.)

All of this even before the national task team kicks into high gear. Pillay has taken on the unions, finally reaching settlement over the 1000 staff irregularly promoted (beyond their qualifications) when the former homelands (Ciskei/Transkei) were united in 1994. From March 31st this year, all reverted to their old lower gradings, plugging a protracted R80m per annum illicit salary black-hole.

A wildcat strike by 220 nurses at the Nelson Mandela Academic Hospital complex in March (in alleged breach of court undertakings) was met with disciplinary notices served on 120 of them. The message to their union: “we play by the book, but bring it on”.

Asked about the differences between the new task-team checks and balances, compared to the systems he initially encountered, Pillay replied: “None of this was happening before. It was all paper-based. I was flying this plane blind. For the first time we’re now getting quality information which helps us manage managers. Before that, there were millions of transactions and I didn’t know what was going on. Basically we’re increasing visibility with a system of checks and balances and controls and monitoring”.

The first region to have come under the spotlight is the province’s heartland, the Amathole District (population 1.7m), embracing the East London Hospital Complex, King William’s Town, Mdantsane and the administrative capital, Bhisho. Early days, but by March, the amount of goods and services “required” had already decreased marginally — showing a clear trend – leading Pillay to believe an iceberg of non-existent services is emerging.

Actuaries conservatively project more than R200m in savings effected by the new combined task team will exceed R200m in general health services and R250m in medicines (leakage, expiry, rotation and patient wastage) in the first year alone.

Besides Pillay’s successes so far in recovering taxpayers’ money, what bolsters his confidence in the medicines projection is what he already knows about his anti-retroviral drug supplies (ARVs). “I have 179 000 patients on ART but when I look at the number of ARVs I bought, it’s for about 200 000 (patients). You have to ask where the rest of the drugs are going. And I don’t even have the hypertension and diabetes figures yet!” The pharmaceutical benefit management system will stop the leakage and address mismanagement, dysfunction, corruption and wastage by patients, he believes.

When Pillay’s health budget was presented to the Eastern Cape legislature on March 20th this year, he was criticised in the media after publicly calculating that he’d need an impossible extra R9 billion to fill 27 267 vacant posts. He revealed that vacancy rates in critical posts had shot up from 28% (09/10) to 44% (10/11). However his central point was missed (by all but Gordhan, whose mid-term budget allocation will probably mitigate the initial cut): the earth-shaking staff-vacancy gap was politically created – by a rapid and ambitiously expanded service-delivery platform that quickly reached “unsustainable proportions”

Pillay’s first crack at radically rationalising this platform and its attendant equipment and human resources focuses on pure functionality.

“Our district hospitals have turned into glorified clinics, in spite of them putting in for expensive equipment they’ll never use (the standard hospital management argument to justify the purchases being that this will attract clinical staff). Of the 66 district hospitals, only 11 are fully functional. So we’ve concentrated our resources on 28 to get them fully functional. It’s simple arithmetic; consolidate and make things work properly,” says Pillay. He cites linear accelerators, one of each wanted by Umthatha and Livingstone hospitals (to match the one at Frere Hospital). “I asked them how many cancer patients we have, and it turns out we don’t need three accelerators. That alone saved R34 million”.

Pillay has faced threats and danger: he was confronted by a gunman in a deserted Bhisho parking lot last year, and managed to escape only by releasing his two highly trained Alsatian dogs that he fortuitously had with him in his bakkie.

Pillay has the enthusiastic Dr Andrew Crichton analysing – for the first time ever — the HR needs of 28 health sub-districts, based on the rationalised service-delivery platform. Crichton has set up sub-district “social compact committees” to help identify pupils between grades nine and 12 for streaming into health professions bursaries tailored to each district’s needs. Using the HR supply streams of community-service conscripts, foreign qualified workers, standard recruiting practices (e.g. the provincial health website) and bursars, he aims to balance recruitment with local needs. Bursars will be filtered by their relevant subject marks, a family income below R6 500 per month, and students who are already studying but financially constrained; with involvement in community projects being a pivotal criterion.

“We want to move beyond the desperation of poverty to the values of ubuntu and commitment, compassion and solidarity. If you’re not already showing commitment to serving the community, then we know you’re not a good bursar,” Crichton added.

A huge critic of the approach that uses “chasing-of-numbers-and-ratios” and “teaching-for-export” to solve South Africa’s human resources crisis, the educationist outlines four value-driven processes: seeking out people aligned to your needs; developing them to be capable; engaging them to perform; and inspiring them to commit. He believes that using value systems as standards of judgement instead of just targets, “changes the entire picture”.

“In the past it was assumed that if you were poor and black, you had the right attitude. Telling us that 40% of rural recruits will return to us spells failure. It’s about who we bring into the system, not how many. Thus are change-agents created,” says Crichton.