State owes medical device firms R1.4bn

Small suppliers suffer cash flow crunch because bills still not paid on time

The SA Medical Device Industry Association (Samed) has once again raised the alarm about the government’s failure to pay its members’ bills on time, warning that small firms are increasingly reluctant to supply the state.

At the end of May, 49 Samed members were owed more than R1.4bn by provincial health departments, the National Health Laboratory Service and the SA Military Health Service combined. More than R1.1bn of the debt was older than 30 days, in breach of the Public Finance Management Act.

“It creates massive cash flow challenges. Over 60% of our members are small to medium-size enterprises; they are not massive multinationals with huge amounts of capital flowing through the books,” said Samed board member Monica Lucas, who heads its outstanding payments project.

“Many companies ... are relying on overdrafts from the banks just to pay their suppliers and salaries,” Lucas said.

Samed members supply equipment ranging from hi-tech orthopaedic devices and implants to consumables such as gloves and syringes.

Some Samed members had decided to stop supplying the government and focus entirely on the private sector, Lucas said. “As a whole, the private sector [pays] within 30 days. It is a far more secure customer base from a risk perspective,” she said.

The extent of the debt reported by Samed members has risen in the past year from the R1.1bn reported by 39 companies in May 2024.

Many companies ... are relying on overdrafts from the banks just to pay their suppliers and salaries Monica Lucas Samed board member

The worst offender remains the Gauteng health department, which owes medical device suppliers more than R650m, of which more than half (R379.7m) is debt older than 120 days, Samed data shows.

A year ago the Gauteng health department owed Samed members R493m.

Lucas said payments from the Gauteng health department had worsened after the provincial treasury introduced a new payment system intended to improve financial controls. Samed had requested a meeting last week at which provincial officials committed to resolving the problems, she said.

The Gauteng health department conceded its debts to medical device suppliers had grown in the past year, saying it was partly due to technical issues related to the new financial management system.

“Its implementation has faced teething issues, including integration delays and challenges with invoice verification. These have temporarily contributed to longer payment cycles,” said the Gauteng health department’s head of communications, Motalatale Motala.

The Treasury was working with departments and service providers to stabilise the system and improve turnaround times, he said.

The current delays were also due to historical accruals and financial constraints, he said.

The 2024/25 financial year had seen increasing demand for services and inflationary cost pressures without a proportional budget increase.

“The department is currently implementing a phased payment plan in consultation with the provincial treasury to address the growing debt,” Motala said.

The National Health Laboratory Service, which owes three Samed members more than R44m, said it sought to process all supplier payments timeously, but “occasional delays might arise to the comprehensive due diligence, document verification and regulatory compliance required” in its operations.

“These measures are essential, not only for maintaining the integrity of our processes, but also for serving the public interest,” it said.

Samed data shows the scale of the debt owed by other provincial health departments was much smaller than the amount owed by Gauteng.

The next largest debtor province was KwaZuluNatal (R163m), followed by the Free State (R148m), North West (R138m), the Western Cape (R78.4m), the Eastern Cape (R52.8m), Limpopo (R25.8m), the Northern Cape (R27.6m) and Mpumalanga (R20m).

The SA Military Health Service owed Samed members R47.6m.