A service provider supplying South Africa’s provincial state hospitals is suing the government in a bid to recover R360m in unpaid invoices, some from eight years ago.
The legal suit adds more woes to the health department after the auditor-general recently put eight provinces in the red for R24bn in unpaid bills.
Economist Prof Alex van den Heever has warned that the public health sector trend of non-payment bankrupts businesses and could lead to companies refusing to do work for the state.
Afrox, which supplies medical gases to state hospitals nationally, has turned to the high court in Pretoria to force the provincial health department to pay R360m with accumulating interest.
The company, which has a supply agreement with National Treasury from 2017 to supply medical gases to hospitals, accuses all nine provincial health departments of being bad payers and pins its litigation on breaches of the Treasury’s regulation of a maximum 30-day waiting period for payment.
The Eastern Cape health department, which has a budget of R31bn in 2025/26, owes the highest amount of R90m, with some unpaid invoices dating back to 2017.
The 2024/25 auditor-general’s health departments report showed the Eastern Cape had R7bn in accruals (incurred expenses not paid).
“Negotiations are under way with the service provider to finalise a suitable payment plan,” Eastern Cape health spokesperson Camagwini Mavovana told Business Day.
Mavovana did not answer questions as to what happened to funds budgeted for the tender or how the department failed to pay the service provider for some of the purchases from 2017.
The Gauteng health department faces a claim of R57m. Its accruals in 2024/25 amounted to R8bn, making it the province with the highest unpaid bills carried to another financial year. In the current financial year, the department was allocated R67bn.
The company also claims the Free State has a debt of R28m, KwaZulu-Natal R34m, Limpopo R24m, Mpumalanga R15m, Northern Cape R64m, North West R31m and the Western Cape R15m. The Western Cape province is opposing the application.
“There is significant financial mismanagement in the provinces, which appears to be from the central cause of failed leadership. The leadership is not focused on service delivery and financial management but political appointments,” Van den Heever said.
Van den Heever, an academic at Wits specialising in health economics, previously worked in Gauteng’s department of health and described its mounting bills as worrisome.
“Gauteng was responsible for Tembisa Hospital, where almost R3bn was stolen. The department prioritised payments to corrupt individuals over actual service providers,“ he said.
“It is an indication when you have that level of corruption, it crowds out the available budget, and the department has been building larger and larger unpaid bills,” he said.
Political appointments
Van den Heever blamed the non-payment culture in the public health sector on political appointments.
“It appears there is no financial discipline in these provinces. Eastern Cape has had billions of rand in unauthorised expenditure.
“There is a correlation between poor financial management and poor health outcomes. This is a problem they are facing across the board. The Western Cape tends to have the lowest levels of accruals.”
He said the non-payment was costly for small businesses. If more companies turn to courts for payments, the departments could be stripped of assets should they fail to pay.
Some of the companies not paid by the departments are small businesses, and they go bankrupt.
“The businesses can send the letters of demand to provincial departments until they are blue in the face.
“This is not a poor health department; they get a massive allocation of around 4% of the GDP. There is no explanation for this other than gross incompetence and mismanagement.”
DA MPL in Gauteng Jack Bloom said the province has a “chronic problem” of poor financial management, adding that Afrox is among hundreds of service providers not paid.
“They have a pathetic record of not paying suppliers on time. The root cause of the problem is terrible financial management. There was a report last year that the department should be put under administration,” he said.
“The interesting part is that the department underspends every year. This financial year they have a projected underspending of R725m, which includes grants. It is dismal management.”
Bloom said companies have no choice but to resort to litigation.
“Afrox is an essential supplier to hospitals. It cannot stop the supply of gas to hospitals. There are companies who cannot stop supplying because if they stop, patients will die. That is the reality.”
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