South Africa’s PPE shortage – what can we learn?
Within the first week of South Africa’s lock down in response to the Covid-19 crisis, at the end of March, health care professionals were warning that locally available supplies of personal protective equipment (PPE) were inadequate. This was a crisis which impacted largely on the public sector. By late March, major private hospital groups (Life Healthcare, Mediclinic and Netcare) were able to state in late March that they did not anticipate running out of PPE; all had by then taken extra steps to secure supply.
The public sector response – a ZAR25.5 billion emergency procurement programme – has been mired in controversy. When it was announced in Finance Minister Tito Mboweni’s supplementary budget in June, Wits University public health specialist Alex van den Heever suggested that because there was inadequate clarity on spending rules ‘it is likely to be spent inefficiently’.
This turned out to be an understatement. The emergency funding sparked what the Auditor-General described as ‘price gouging, unfair processes, potential fraud, supply chain management being side-stepped … delays in delivery and quality concerns’.
The matter became a public scandal and major line of cleavage within the ruling African National Congress (ANC). Parliament’s Standing Committee on Public Accounts (Scopa) heard in August that 600 ‘questionable tenders’, worth over ZAR5 billion were to be investigated.
The private sector also responded to the perceived crisis, initially by raising funds for importing three million masks and other PPE from China in April. This became an on-going programme accompanied by calls from organised business to support an increase in local manufacturing of PPE. Business for South Africa (B4SA) said in May that only 28 percent of its initial order was sourced within South Africa. It expected however that 60 percent of the second phase would be procured from ‘local and/or black owned suppliers’.
A great deal of publicity has been given to pivots into the PPE production by other manufacturing sub-sectors. The automotive industry retooled with United States (US) foreign aid support to manufacture ventilators as part of an initiative driven by the Department of Trade, Industry and Competition (DTIC). In late August, the Industrial Development Corporation told Parliament that it had approved 12 applications from manufacturers, valued at ZAR476 million.
With hindsight, it is now evident that the shortage was poorly understood at the outset. The narrative, promoted by government and Business for South Africa (B4SA), is that South Africa is a relatively under-capacitated developing country which simply does not manufacture enough PPE to meet local emergency demand.
While complaints about PPE shortages have continued throughout the lock down, this narrative is almost certainly incorrect. The shortfalls have been a product not of inadequate manufacturing capacity but of poor distribution, management and a strategic approach inadequately informed of and engaged with the local manufacturing capacities in the area. The distribution problem was recognised by the Minister of Health early in the crisis but decision-makers were slow to recognise the potential of local industry.
The capacity of South African manufacturers is demonstrated by the massive surge in PPE exports from South Africa in the first three months of 2020, before the initial lock down. Figures from the DTIC show that exports of medical and industrial facemasks for January to March this year were valued at ZAR524 million, a tenfold increase on the R58 million for the corresponding period in 2019.
South Africa’s PPE manufacturers have responded to new business opportunities. The global crisis opened up new markets in countries where the onset of Covid-19 came earliest, especially China and the logistics hub of the United Arab Emirates. The value of exports climbed from about ZAR22 million in December 2019 to ZAR284 million in February 2020. Companies, including 3M, Dromax and Drager were nimble and effective seizing these opportunities and getting into new markets.
South Africa’s capability in this area should not be surprising. PPE is typical of the low-tech labour-intensive products in which the country should enjoy comparative advantage. The industry is built not only on supply to the health sector but also PPE equipment sold into the mining industry. A study last year by the Commonwealth Secretariat found that South Africa was the world’s sixth biggest exporter of PPE to less developed countries, ahead of the US and Germany.
Controls were introduced effectively banning PPE exports when South Africa’s borders were sealed on 27 March. But because PPE had been declared an essential good in terms of the State of Disaster regulations, imports were still allowed. At the same time, the South African Revenue Service (SARS) announced that imported essential goods were exempted from Value Added Tax (VAT) which would however still apply to local manufacturers. At a stroke, a globally competitive local industry whose products were suddenly desperately needed within South Africa was rendered less competitive against imports.
In early September, the social partners at the National Economic Development and Labour Council (Nedlac – a tripartite organisation with government, business and labour representation) stated that they had ‘noticed that corrupt practices in respect of the buying of PPE often goes hand in hand with the purchase of imports and eschewing local manufacturers who have proved during the pandemic to be able to deliver quality products at lower prices than imported ones’.
The really deep problem is that quick-breaking disasters need to be met with decisive executive action. The rapid imposition of one of the world’s harshest lock downs had the appearance of such decisiveness. But the reality was that the range of ‘peak’ tripartite players in South Africa were engaged in slow-moving processes designed to build long-term social consensus. None are adequately enmeshed in real economy manufacturing detail. The result was a flood of overpriced imports and a looting spree in the provision of PPE. Had the right decisions been made, this could have been averted and the country could have been a good practice exemplar.
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