‘The proposal is ridiculous’: Why PIC money can’t be used to build public hospitals and fund NHI

Despite what Health Minister Dr Aaron Motsoaledi says, experts believe that money from the Public Investment Corporation (PIC) cannot be used to build hospitals and by implication fund the National Health Insurance (NHI), because firstly, the money does not belong to government and secondly, the hospitals will not be an asset that can be sold for a profit.

DA MP Michéle Clarke asked Motsoaledi recently in parliament whether he discussed the possibility of using PIC funding to build public hospitals with the Cabinet and if there is an agreement in place with the PIC to fund the building of public hospitals.

The health department is preparing to implement NHI after President Cyril Ramaphosa signed the NHI Bill in May.

The PIC is an asset management firm wholly owned by government with R2.7 trillion of assets under management.

Motsoaledi responded in writing, saying the idea of the PIC funding the building of public hospitals started more than a decade ago, after the department of health realised that private hospitals have good facilities because among other reasons they are funded by the PIC.

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Motsoaledi: PIC already funds private hospitals

“We wanted the same treatment for the public healthcare sector. We did approach the PIC then, not now, and had a series of meetings with them, where we made this proposal. Unfortunately, at the time, National Treasury was not party to these discussions.”

He wrote, in the first Cabinet lekgotla of the government of national unity (GNU) in July, Treasury hinted that the PIC is among the sources of funding for infrastructure for the public health sector.

Motsoaledi then asked Treasury if it had changed its mind as he already asked for it before. The response was that a meeting must be convened to discuss this. According to Motsoaledi’s answer, the meeting was held between the department and Treasury on the 30 September and it was resolved that a follow-up meeting will be held. “This is therefore work in progress,” he said.

However, Prof. Alex van den Heever, chair of Social Security Systems Administration and Management Studies at Wits, and Prof. Jannie Rossouw, visiting professor at the Wits Business School, believe it will not be a good idea to fund building hospitals and by implication, NHI, with PIC money.

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PIC can only invest where it will get a return

Van den Heever says the PIC has to invest money in areas that derive a financial return and this does not happen with public hospitals. “The PIC already invests partly in government bonds, which is where government borrows money for investments. In addition, the PIC must generate a return to be able to provide benefits for pensioners.

“It is not a discretionary slush fund for arbitrary government projects. The PIC invests its money on behalf of the Government Employees Pension Fund (GEPF). It does not own the funds. It is an agent of the GEPF. This is not government money – it belongs to government employees and pensioners.”

Van den Heever says the PIC should not even entertain this possibility seeing that the department of health has been unable to come up with a budget for NHI. “The proposal is ridiculous.”

Should Motsoaledi not wait for more GNU discussions before deciding to ask for PIC funding? Van den Heever says there is no money and therefore even the GNU will not be able to help. He says he also does not know of another government initiative that the PIC funded that actually worked.

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Irregularities with procurement of public hospitals

Van den Heever points out that we have already seen gross irregularities in the procurement of public hospital facilities. “The head of the national department of health is even under investigation by the Hawks for allegedly taking kickbacks for a hospital upgrade.

“Clearly there are significant problems with corruption associated with any public procurement process. All public procurement therefore needs to be kept separate from the political appointments in government and be made fully transparent.”

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Money doesn’t belong to PIC and government

Rossouw echoes Van den Heever’s sentiments. “Motsoaledi just referred to talks about talks. Anyway, the PIC is an investment agency, not a development agency. What is the profit it will be able to show from building public hospitals? The PIC will not receive an asset that can be sold to make a profit.”

He says it is a “crazy idea” and that it is clear that government fails to understand that they do not own the PIC’s money and that the PIC does not even own it – the government pensioners and employees do.

“The PIC must act in the best interests of its members and South Africa. The PIC must not even consider funding the building of public hospitals. Motsoaledi should approach the Industrial Development Corporation (IDC) or the Development Bank.”