Health ministry tender reform sparks debate over job losses

The Namibia Local Business Association (Naloba) warns that the Ministry of Health and Social Services’decision to stop using middlemen companies to procure medicine could cause job losses and shrink tax contributions.

Naloba, a breakaway group from the Namibia Chamber of Commerce and Industry, did not provide the exact number of people who could supposedly lose their jobs in a trade that has largely benefited politically connected individuals.

The Namibian has previously reported that a close corporation with only one employee was awarded health tenders worth N$141 million to supply medical products to the health ministry.

Health minister Esperance Luvindao has in recent months sidelined middlemen companies in favour of direct procurement from manufacturers.

Luvindao on Monday said the government could potentially save N$221 million by cutting out middlemen and buying essential medicines and clinical supplies directly from international manufacturers. The minister defended her stance in parliament yesterday.

Speaking to The Namibian yesterday, Naloba vice president Peter Amadhila said middlemen are employers in Namibia.

He said cutting them out contradicts president Netumbo Nandi-Ndaitwah’s manifesto’s promise to create jobs.

“Eliminating local suppliers who are legitimate employers is not a well calculated move. Those are relevant employers with employees that are likely to lose their jobs as a result.”

Amadhila suggested that instead of excluding suppliers, the ministry should introduce tighter controls to curb inflated invoices.

“She was supposed to have implemented a control system that curbs overpricing and inflation of invoices and payments. All those that she terms to be middlemen are mostly local entrepreneurs and this means the money will be shipped out to foreigners directly without any benefits to our people. These entrepreneurs will be forced to close down their businesses,” Amadhila said.

Nandi-Ndaitwah has previously promised Namibians she would eliminate middlemen in the supply of medicine.

The Namibian has in the past reported how businessman Shapwa Kanyama’s company, which employed three permanent staff members, won a two-year N$650-million government medical supply contract. Kanyama denied any wrongdoing.

WHOLESALERS REACT

Speaking on behalf of the wholesalers in Namibia, Namkit Medical Solutions chief executive Sebil Dhewa says Luvindao’s pejorative application of the term ‘middlemen’ fosters a public impression that wholesalers are unscrupulous actors seeking easy profit at the expense of the nation’s health.

He says pharmaceutical wholesalers in Namibia are law-abiding businesses, operating in a highly regulated environment and fulfilling an essential role in the healthcare supply chain.

“If the minister’s primary concern is indeed the overpricing of medicine, attention should be re-focused on the practices occurring at the retail level, where the most significant price inflation arises,” Dhewa says.

The chief executive says regulatory and public scrutiny would be a more effective route to fair medicine prices and improved access for all Namibians.

“Pharmaceutical wholesalers stand ready to continue engaging with the government in the spirit of transparency and partnership to ensure affordable, accessible medicines for all, and to address misconceptions with evidence and clarity,” he says.

According to Dhewa, when governments try to bypass suppliers or interfere in contracts, they risk huge financial penalties and loss of credibility.

“Governments cannot act arbitrarily without consequences. Interfering with suppliers can lead to international arbitration. Damages can run into hundreds of millions enforceable worldwide. Such cases harm a country’s reputation and investment climate for years,” he says.

LUVINDAO GETS BACKED UP

Former Cabinet minister Calle Schlettwein told The Namibian he is in support of Luvindao’s move.

He says he did the same during his tenure and it saved the government millions.

“We did the same when I was a minister of finance and it saved us half of the price charged by the middlemen and sometimes more than twice, in some cases thrice. We used the United Nations system which has no fee. Of course we also need to avoid penalties during the process but it will be avoided.

“As the state you can buy directly from the manufacturer and it is highly recommended, therefore, it is important to keep and improve the ability to help people.

“On the issue of employment, it is not much of a big risk because the middlemen as agents are not employment intensive businesses, it is rather a business based on buying and ordering, therefore, the risk is very small. As a state we must consider the risks we have and in this case we have to weigh the risk of losing a few jobs with the risk of a failing health service because of insufficient resources,” he says.

Economist Robin Sherbourne shares the same sentiment with Schlettwein.

“If middlemen are taking huge cuts, the minister’s approach may well be the best one, but I have not looked into this issue,” he says.

Former health minister Richard Kamwi says he is in support of Luvindao’s move.

“I am aware of Luvindao’s decision and the challenges of procuring medicines and clinical supplies, especially regarding middlemen. This has been a concern for quite some time. For me, the issue with middlemen is that they don’t give the Namibian people, by which I mean the government, value for money,” he says.

He recalls halting a questionable procurement deal during his tenure.

“During my tenure in office, when we decided to get some vaccines and medical supplies from Cuba, government to government, I can tell you that when I left office, it is on record that I left an ongoing case which we stopped when I came to know about it.

“When we put this into action, someone tried to change things, but fortunately I took action and it was stopped by the president at that time. Unfortunately, those people took the government to court, but I had saved more than N$200 million, which is a lot of money. So I speak from experience, and doing away with the middlemen is simply the best,” he says.

Kamwi adds: “I doubt this decision will cost the government if it is done in a more transparent manner, and the minister may not have taken such a decision without consultation. If the president and the Cabinet cleared and agreed on the decision collectively, then this is what they have agreed on.”

The ministry has in the past accused business people who benefited from the health tender system of trying to undermine Luvindao. They in turn accused the minister of disregarding procurement laws by directly contacting manufacturers.

GOING AHEAD

Luvindao on Monday said the ministry will shift to cost-cutting measures and direct sourcing as part of wider reforms to address persistent shortages of medicine in the country’s public health facilities.

She said emergency procurement protocols were activated on 13 August in response to widespread shortages of essential medicines.

“To ensure continued access to life-saving medication, the ministry is now procuring directly from international manufacturers and wholesalers under emergency provisions of the Public Procurement Act of 2015,” Luvindao said.

She added: “By going directly to the source, we can ensure that we are obtaining the best possible prices, quality and quantities, thus stabilising the stock of our medicine and essential clinical supplies over a long duration.”

The minister said offers received from 41 prequalified manufacturers and wholesalers have already shown potential savings of about N$221 million compared to prices paid through intermediaries.

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