Netcare blames Lesotho government for its financial woes
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…after 343 nurses went on 4o days strike and ended being fired prompting end of relations with Lesotho government
By Retšelisitsoe Khabo
In a damning tell all statement released on March 24, Dr Chris Smith, General Manager Finance at Netcare, has accused Lesotho government of causing the Tšepong Consortium financial problems by failure to pay for rendered services on time.
Dr Smith said Netcare remains committed to providing Basotho citizens with the best and safest care amid the challenges faced.
In his statement, Dr Smith said the Netcare Hospital Group (Pty) Ltd (Netcare), is a major shareholder in the public private partnership (PPP) between the Government of Lesotho (GoL) and Tšepong (Pty) Ltd (Tšepong), is also responsible for managing the Queen ‘Mamohato Memorial Hospital (QMMH) and filter clinics in Maseru, Lesotho.
Dr Smith said Tšepong’s shareholders comprise Netcare, which holds a 40% interest while the remaining 60% shareholding is held by Afrinnai Health (Pty) Ltd (Afrinnai) (20% South African based), Excel Health Services (Pty) Ltd (Excel) (20% Lesotho based), D10 Investments (Pty) Ltd (D10) (10% Lesotho based), and Women Investment Company (Pty) Ltd (WIC) (10% Lesotho based).
Dr Smith said Netcare’s role in the partnership is to provide and deliver all management, clinical and related services, equipment and information technology (IT), laundry, cleaning, security and gardening services, amongst others.
Smith added Netcare is responsible for the nurses’ and emergency services training and for the establishment of relations with external training institutions to facilitate peer review and support of medical practitioners.
He said Tšepong as principal contractor of the partnership mainly has the obligation for the employment of staff members.
Smith added that Netcare has led the establishment of this pioneering partnership with government and is privileged to be serving the Basotho people through the provision of quality healthcare.
Smith said the partnership project has brought a range of specialised services to the Basotho people, unprecedented in the country’s history, and significantly elevated the range and quality of healthcare services accessible by the citizens of the Kingdom of Lesotho.
“The specialised services introduced into Lesotho by Netcare through the PPP include, the first MRI scanner, bone densitometer, emergency neurosurgical interventions, ICU and neonatal ICU service, laparoscopic surgery and endoscopy procedures.
“QMMH and the primary care services were the first to have been accredited by COHSASA (Council for Health Service Accreditation of Southern Africa). In terms of clinical services, the pneumonia death rate reduced from 34% at QEII (2011) to 5.7% at QMMH and patient satisfaction ratios which improved from 70.7% at QEII (2011) to 98% at QMMH,” he said.
Smith said the partnership has recently experienced strained relations, most particularly between Netcare and some of its co-shareholders (Afrinnai, Excel and D10) in Tšepong, as well as between GoL and Tšepong and between Tšepong and some nursing staff. He added that this has mainly been brought about by financial hardships within Tšepong as a result of non-payment or delayed payment of fees by government.
Smith adds that Tšepong is a narrowly capitalised entity without access to working capital, and therefore unable to meet financial obligations when monthly payments by government are delayed.
“During these prolonged periods of non-payment that sometimes go up to five consecutive months Netcare provided the interest-free bridge funding to sustain the financial position of Tšepong.
“When Netcare recovered amounts due to it, once Tšepong’s had the funds to settle its obligations to Netcare, the company was accused of financial impropriety which naturally is not conducive to maintaining relations, especially when Netcare’s financial assistance ensured the viability of the project,” Smith explained.
He went on to say that Netcare’s financial support of Tšepong in effect means that Netcare is a 100% contributor on the downside and only a 40% beneficiary on the upside.
Smith said shareholder relations became further strained when unconfirmed allegations were made by some of the shareholders that they have not benefited financially from the public private partnership project.
He said these utterances do not recognise that M65 million advanced by the Development Bank of South Africa (DBSA) to ensure their participation, has been settled in full.
“It also does not recognise the substantial management fees paid for procurement of equipment and Netcare’s concession to share 50% of its monthly management fees which to date, yielded the shareholders aggregated earnings in excess of M11.5 million,” said Smith.
Smith said Tšepong’s inability to declare dividends and maintain liquidity has been severely forced by the poor payment history by government and poor support, by some members of the Tšepong board, to act in the interest of the company and take action to collect fees owing by GoL.
Smith said the impasse of the Tšepong board to agree on a remedial plan to restore Tšepong as a going concern necessitated that Dr Chris Smith, Netcare’s representative director on the Tšepong Board, requested the Lesotho Commercial High Court in 2020 to place Tšepong under judicial management.
He added that Judicial management is the appropriate modality to ensure credible independent oversight of all activities to restore the going concern status of Tšepong.
Smith said the court application was unfortunately dismissed by court without giving any reasons.
Dr Smith added that Netcare has subsequently taken this matter on appeal.
Dr Smith also explained that in an earlier development, the Directorate on Corruption and Economic Offences (DCEO), wrote to Tšepong on 13 February 2020 requesting documentation relevant to the procurement of the project.
He said Tšepong replied on 14 February 2020 and the DCEO responded more than four months later (July 2020), to which Tšepong again provided further information required by the DCEO.
Smith said there has been no response from the DCEO since July 2020, and Netcare was surprised by the unannounced raid by the DCEO at the QMMH on 19 March 2021 to remove documents and computers, without any basis of contraventions of any legislation being put to Tšepong.
Smith said the incident was reported in the media and Netcare strongly disagrees with reports in the local weekly Lesotho Times issues dated (18-24 March 2021) and its sister paper Sunday Express (21-27 March 2021), amongst others, which contained a variety of unsubstantiated, factually inaccurate and inflammatory allegations by two Tšepong board members including allegations of misconduct and financial mismanagement.
He said Netcare deny all the allegations and regards them with the contempt they deserve.
He added that Netcare is confident that it has acted in accordance with both the letter and spirit of the law and ethical corporate governance and if required, will defend its position in a court of law.
Smith said the financial matters of Tšepong are externally audited by two independent audit companies.
He added that Operationally, an independent monitor provides an independent quarterly review of the operational performance of the hospital after having assessed no less than 1,000 key performance indicators.
Smith also said as a further quality safeguard, all facilities are accredited by the COHSASA where QMMH is one of only four public hospitals in Africa to have achieved such accreditation.
Smith said the main contention between Tšepong and GoL revolves around inconsistent and prolonged periods of non-payment or delayed payment of agreed fixed monthly fees.
In addition, he said that contractual disputes which emerged at the start of the project remain unresolved even though these matters have been referred for resolution through arbitration.
He said the arbitration process was interrupted when the International Finance Corporation (IFC) (advisors to government of Lesotho) was given a mandate to mediate a solution which was later cancelled by government on 17 February 2021, and the parties have again returned to arbitration for final judgement.
He said the long-lasting processes to resolve long outstanding disputes do not consider the urgency to resolve the plight of disparity in remuneration of nurses employed by Tšepong versus that of nurses employed in civil service.
Smith added that some nursing staff at QMMH participated in an illegal strike which started on 1 February 2021.
He said their grievance emerged from material salary adjustments awarded by GoL in 2013 to civil servants and nurses.
According to Smith in 2014 an agreement was concluded between Tšepong, government and the Lesotho Workers Association (LEWA) whereby government committed to review salary structures at Tšepong and to provide additional funding to restore equality between comparative nursing job grades at the different institutions.
He said the mechanism to restore equality is regulated through the PPP agreement.
Smith said government has yet to honour its 2014 undertaking, and the matter was subsequently referred for resolution through arbitration when the parties could not agree on satisfaction.
Smith said Netcare consulted with the government through Minister of Health during the strike period and submitted proposals to the Ministry for consideration.
He added that the discussions between Netcare and the Ministry were productive and on 15 February 2021 the Principal Secretary Health on behalf of the Minister of Health wrote to Tšepong requesting a board meeting on 17 February 2021 to resolve the disputes.
Smith added that on the same day, Netcare was informed that the Ministry is no longer prepared to negotiate on any of the disputes and that these should be resolved through arbitration.
Smith explained that on the 22 February 2021 a special Tšepong Board meeting, attended by Netcare, Afrinnai, D10, WIC and Excel unanimously resolved that Tšepong had no alternative options but to maintain the current terms of employment and continue with the arbitration process.
Smith said while the arbitration was still in progress, and the critical need to continue providing essential healthcare services to the Basotho, the striking staff were encouraged to return to work.
He added that the Labour Court also issued an interdict on 24 February 2021 instructing staff to return to work by 25 February 2021 or risk losing their jobs but the majority of staff continued with the illegal strike and therefore remained in contempt of court.
Smith added that the staff’s frustration is understandable but Tšepong has unfortunately been left with no option but to implore its rights to restore order through enforcement of the disciplinary code.
Smith indicated that Tšepong remains sympathetic to the rights of workers as well as the staff’s grievance but the funding required to restore equality falls outside of what is affordable to Tšepong.
He said in defiance Tšepong continuously begging staff to have faith in the arbitration process and to return to work, 265 staff members (and not 345 as reported in the media) elected not to return to work and were subsequently dismissed.
He said many nursing staff did not participate in the illegal strike, maintained faith in the arbitration process, and continued to provide services during this uncertain period. Dr Smith said hospital services have therefore continued, and the health and safety of patients remain the hospital management and staff’s priority, especially during these difficult COVID-19 times.
He added that non-critical services such as outpatient services continued without much disruption, In-patient and emergency services also continue and QMMH continued to maintain the average number of in-patients ordinarily treated per day while maintaining safe nurse-to-patient ratios.
“We commend these staff members for putting the needs of the Basotho people ahead of their own needs,” he said.
Smith indicated that the manner in which this matter has evolved is regrettable.
He continued that Media articles have suggested that Tšepong absorbs as much as 50% of Lesotho’s annual health budget but he added that this is factually incorrect but rather Tšepong only absorbs between 22% and 25% of the 2020/21 annual health budget.
Smith concluded his statement by confirming that Tšepong received a default notice from the GoL on 18 March 2021 which Netcare plans to challenge as they believe it is indeed the GoL that has defaulted.
He said Netcare also duly noted the alleged media statements by the Minister of Health that stated the intention to terminate the 18-year-long PPP agreement.
He said PPP agreement is now in its 13th year and Netcare remains committed to providing Basotho citizens with the best and safest care, and will keep engaging GoL on these issues in an effort to avoid any disruption to service delivery.