A not-to-be-missed BEE opportunity in the public health sector

The Health Sector Charter originally proposed by the Department of Health (DOH) failed to grasp the opportunity to empower the large number of employees in the public sector. If press reports are correct, this situation continues.
In giving evidence to the Health Charter committee, the FMF pointed out that the government could transfer ownership and control in the state institutions (hospitals, clinics, laboratories etc) to public health sector workers on a preferential basis, ensuring equity between public and private sector employees. This would bring about BEE on a grand scale, with the added advantage that it would be free of the undoubted economic harm that is caused when private owners are coerced into parting with their assets, invariably on less than favourable conditions. It would also help these facilities to keep staff. If correctly structured, it could even lure some former staff members back from overseas.
Government could at the same time respond to the criticism that the favoured few are being unjustly enriched by selling shares in hospitals and clinics to interested patients in surrounding ‘catchment’ areas at nominal prices. Patients would then have an interest in providing voluntary support to staff members of these facilities.
The very large facilities, such as major hospitals, could be split according to their functional divisions and transferred to separate companies to make the operations more manageable. The facilities would continue to carry out the same functions, serving largely the same people, under contract to the government. Such a process would provide equity in the asset empowerment process between private and public employees, and to surrounding communities, and have other substantial advantages.
The Health Charter requires private firms in the health sector to rapidly increase the number of black executives and other staff members as a percentage of their total employees. In order to fulfil these requirements, the private heath sector firms will, in the next few years, have to frantically recruit additional black staff. In sectors of the economy owned entirely by private firms, the firms are compelled to poach from each other. Salaries of black executives, especially, are then driven up higher and higher. Some exploit the situation to the utmost, creating the phenomenon of the ‘two month executive’; one month to spend looking for an even higher paid job and the next serving notice. However, in the health services sector of the economy, where there are government employees with some or all of the necessary qualifications, private firms under pressure to fill their BEE quotas will hire people away from a public sector that is already short-staffed. Giving ownership rights to public health sector employees in the facilities in which they are employed will be one way of keeping them.
Current state health sector employees, as owners, would have very different incentives to those they have as employees. At the outset, every facility transferred to BEE owners would be transferred together with a reasonably long-term government contract to supply services to existing patients. Thereafter, contract renewals would be subject to performance and normal tender procedures. In hiring contractors, the DOH would set strict requirements for the quality of care, insert provisions for the cancellation of contracts if the requirements are not met, and carefully monitor compliance. The dynamics within the facilities would change dramatically due to the fact that each facility would be competing with all other similar facilities for government contracts.
Employees as shareholders would not be as easily enticed away as workers who have no ownership rights. Salaries within the new companies would be dependent on profitability and it would be in the interests of owner-employees to reduce waste, increase efficiency and increase quality of care. In addition to their contract patients, they would be attempting to attract additional paying patients in an effort to increase turnover and profitability.
Competition with all other providers for retention and acquisition of contracts and paying patients would achieve what threats and pleas do not achieve; improve the quality of service provided by health-care workers. By transferring assets to its employees the DOH would therefore simultaneously bring about BEE, and improve access, equity and quality.

Author: Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the authors. The views expressed in the article are the authors' and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 27 June 2006 FMF Policy Bulletin/ 17 November 2009

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