Health and Child Care Minister Dr Obadiah Moyo recently announced that the ministry will no longer rely on middlemen suppliers for critical drugs as they are unreliable and wantonly inflate prices.
Effectively, the ministry will buy the critical drugs directly from manufactures, thereby saving millions of dollars in foreign currency and improve essential medicines availability. This move was overdue and is in keeping with the dictates of the Public Procurement and Disposal of Public Assets Act.
The Act advocates for transparency, and value for money initiatives by procuring entities.
From a procurement professional point of view, buying directly from manufacturers is procurement best practice and in most cases passes the transparency test.
Certainly, the ministry is on-side in as far as the Act is concerned.
According to the PPDPA Section 30 (1) a procuring entity shall employ the competitive bidding method of procurement described in Section 31 of the same Act, except where; paragraph (b) the direct procurement method is to be employed in terms of Section 33 and Section 30 (2), which states that where "a method of procurement other than competitive bidding is used, the procuring entity shall include in the record of the procurement proceedings a written justification of the decision to utilise the procurement method, including the grounds for taking that decision."
Section 33 explains the direct procurement method and sub-section (2) (b) states that "where, for technical or artistic reasons, or for reasons connected with protection of exclusive rights, the contract can be performed only by a particular supplier and where no reasonable alternative or substitute exists".
Contrary to the notion that competitive bidding is the procurement method of choice, where there are no reasonable alternatives or close substitutes, the direct procurement method should be suitable method.
Most essential drugs are imported into the country and require a lot of foreign currency. The middlemen that were being used charge inflated prices because they source foreign currency on the parallel (read black) market).
The use of middlemen in the public sector is rampant and results in billions of dollars being paid for imported goods to non-value adding suppliers.
The continued use of middlemen by Government ministries, State-owned enterprises and departments is complicit promotion of trading of currencies on the black market.
The careful application of Section 33 of the Public Procurement Act by procuring entities will go a long way in preserving the precious foreign currency the country generates.
Another important implication of the move taken by the Ministry of Health and Child Care is elimination of corruption.
Millions of dollars being paid to suppliers, who are neither manufacturers nor licensed dealers, is a serious corruption red flag. It is also worth noting that the use of a different procurement method where direct procurement method is most suitable is a breach of the procurement law. Procurement entities have the responsibility of identifying and applying appropriate procurement methods.
Therefore, the decision by the ministry to choose the direct procurement method for essential medicines is justified by the fact that the method can be immune to manipulation if applied diligently.
Indeed, where the quantities or costs do not make economic sense to import directly from the manufacturer, other procurement methods may be preferred.
By buying directly from manufacturers, the ministry will guarantee price, quantity and quality benefits on supplies. Middlemen suppliers are notorious for varying prices, quantities and quality in order to maximise on the total contract price.
The ramifications of such practices are inflated poor quality goods being delivered that negatively impact on service delivery.
By buying directly from manufacturers the ministry will acquire drugs that have a longer shelf life, which bodes well with the ministry's objective of providing sustainable and affordable healthcare services to the nation.
We implore other critical Government departments in agriculture, mining and energy sectors to follow suit and help the country achieve its Vision 2030 objectives.
Bongani E. Mushanyuri (PhD) is a supply chain management specialist with the Bindura University of Science Education (BUSE).