How medico-legal claims are crippling Eastern Cape municipalities

Rising medico-legal claims against the ailing Eastern Cape health department and year-on-year accruals are creating cash flow challenges that are crippling operations and affecting service delivery in many municipalities.

The department owed a staggering R269m to municipalities across the province, with the two metros, Buffalo City and Nelson Mandela Bay, owed a combined R88m by the end of January.

This was revealed by premier Oscar Mabuyane while responding to questions posed by DA MPL Retief Odendaal in the Bhisho legislature.

This huge debt places an unbearable financial strain on already cash-strapped municipalities and threatens the delivery of basic services such as water, sanitation and electricity.

Mabuyane said the struggling health department owed the Bay metro more than R48m, BCM R40m and the King Sabata Dalindyebo municipality just over R35m at the end of January.

It also owed R20m to the Alfred Nzo district municipality, R19m to the OR Tambo district municipality, R18.8m to the Matatiele local municipality and R16.8m to the Raymond Mhlaba municipality.

Dozens of smaller municipalities are also affected, with outstanding amounts ranging from hundreds of thousands to several million rand.

Asked by Odendaal why the department was so hugely indebted to these councils, Mabuyane said: “In addition to the medico-legal claims that must be paid by the department, they have lot of accruals due to budget [being] diverted into paying these medico-legal claims, which then affects every new year’s budget, resulting in cash flow challenges.”

Odendaal said on Thursday many of these municipalities were already under financial pressure and could not afford “to carry the cost of provincial mismanagement”.

“This debt is not a technicality. It places an unbearable financial strain on already cash-strapped municipalities and threatens the delivery of basic services such as water, sanitation and electricity.

“The premier cited redirected budgets towards medico-legal claims as the reason for the department’s ongoing cash flow crisis.

“However, this explanation offers little comfort to municipalities that are expected to continue functioning without the funds owed to them,” Odendaal said, adding that the department’s poor financial management was endangering lives.

“The bankrupt department’s failure to pay within the legally required 30-day period under the Public Finance Management Act is not just a breach of compliance. It is a moral failure with real-world consequences.

“With more than R5bn in unpaid accruals in January and growing evidence of collapse, urgent intervention is required.

“The continued mismanagement of health should not be allowed to compromise already financially vulnerable municipalities,” Odendaal said.

He reiterated the DA’s call for the department to be placed under administration.

Health spokesperson Siyanda Manana confirmed that the department owed millions of rand to municipalities, “but we are in the process of paying them because we have a budget allocated”.

Manana conceded that medico-legal claims remained a headache, saying between April 1 and 30, the department had paid more than R18m in such claims.

Asked how escalating medico-legal claims affected operations, Manana said: “Law firms get paid directly from our bank accounts because of orders of the court. As a result, it becomes difficult to pay suppliers of medicines and the National Health Laboratory Service.”

However, he denied Odendaal’s claims that the department was bankrupt, saying: “We are not broke. We are merely practising responsible financial planning.”

Manana said the department was “negotiating with our creditors to pay them in a staggered fashion, while not compromising quality healthcare”.

BCM spokesperson Bongani Fuzile confirmed on Thursday that the department was attempting to service its debt.

“We can confirm that the health department did owe BCM some amount of money, but we can also confirm today that we have received some payments from the department.

“We have received two payments of R16.3m and another of R16.7m recently, so the department has since paid over R32m to BCM,” Fuzile said.

Co-operative governance provincial spokesperson Pheello Oliphant said nonpayment to the affected municipalities, “cripples their operations and affects their revenue collection”.

He said the biggest culprits were the health, education and public works departments.

“It really cripples the financial bill of health of these municipalities; hence we have recently hosted a workshop at the East London ICC on revenue-collection strategies.

“We invited all 39 provincial municipalities in a bid to assist them and give them tactics on how they should encourage these departments and state entities to pay for services rendered,” Oliphant said.

Provincial treasury head of department Daluhlanga Majeke said a financial management plan was needed at the health department.

He said provincial government authorities had recently met health minister Dr Aaron Motsoaledi in Gqeberha where they asked that he focus on addressing the health department’s financial and leadership challenges.

Majeke said the province had a forum that sought to address nonpayment to municipalities.

Bilateral meetings were frequently held to address challenges such as nonpayment by government departments and state entities.

It was revealed in parliament in April that in the past financial year, unpaid medico-legal claims against the Eastern Cape health department stood at almost R23bn and the amount was not budgeted for.

Daily Dispatch