RFM IN E10M MONTHLY DEFICIT, TECHNICALLY INSOLVENT - CEO

MBABANE – The Raleigh Fitkin Memorial (RFM) Hospital is technically insolvent.

This was revealed by the Acting Chief Executive Officer (CEO) of the hospital, Dr Raymond Bitchong. Being insolvent means to be unable to pay one’s debts. The doctor was responding to an application filed by the Medical and Allied Workers Union (MAWU) to stop the hospital from capping medical staff’s on-call allowances at 108 hours per month. The union also wants the Industrial Court to order the hospital to consult them genuinely about the implementation of the policy to cap the on-call allowances at 108 hours and compensating the excess hours through taking days off.  The implementation of the policy, according to the institution, was to deal with the financial crisis faced by the Eswatini Nazarene Health Institutions (ENHI) and to find optimal solutions. Dr Bitchong said the approach was to mitigate risks by invoking certain cost-cutting measures.

Subvention

He informed the court that the hospital is a Category A public enterprise that is reliant on the Eswatini Government for an annual subvention as budget support for its operations.  He submitted that in the current financial year, the institution submitted a budget subvention request of E20 million per month to government. This is the amount, according to the acting CEO, that the respondent indicated was required to support its budgetary requirements over and above the income it derived from user fees. He alleged that government did not reject the budget request, but inexplicably communicated that it would only provide a subvention of E17.6 million per month, effective from April 1, 2023. “Without notice or explanation, government failed to honour its undertaking to pay the subvention of E17.6 million per month, but instead only paid a sum of E10 million in April 2023. Effectively, therefore, from its budget support request, the respondent has incurred a deficit of E10 million per month. Even if premised on the approved budget amount as communicated by government, there was still a deficit of E7.6 million per month,” said Dr Bitchong.

The veracity of these allegations is still to be tested in court. The respondent is represented by attorneys from Robinson Bertram. Dr Bitchong submitted that the shortfall came against the backdrop of an ongoing budget deficit for the previous financial years – ‘a situation that has been prevalent for a considerable period and is well-known by all concerned within the institution’. The acting CEO stated that in light of the historical financial challenges, which he said were well-documented, the health institution resorted to measures such as non-payment of employer and employee contributions to the retirement fund scheme. The result, said Dr Bitchong, was that the scheme was in deficit. He also averred that the health institution had failed to remit the monthly pay-as-you-earn (PAYE) payments to the Eswatini Revenue Service (ERS) and as such was in arrears.

According to Dr Bitchong, the institution had failed to pay other service providers, with the result being that it continuously faced a threat of litigation. “Technically, the respondent has been in a state of insolvency for a considerable period, but owing to the nature of its operations, it simply cannot close its doors and file for liquidation. When government failed to pay the expected budget support subvention, it placed the respondent in financial dire straits and exacerbated an already precarious situation. To compound issues, government, being aware that we were not remitting the pay-as-you-earn (PAYE) to the Eswatini Revenue Service, decided that it would deduct the PAYE at source, meaning that the amount that was ultimately received by us was now less the PAYE component,” the acting CEO further stated.

Aggravated

He submitted that the institution’s perilous financial position was aggravated by another compelling situation. “I have previously mentioned that we had been failing to remit contributions towards the employees’ retirement fund. In this regard, employees who had reached normal retirement age or who were leaving service for various reasons, were now unable to access their retirement fund benefits due to the deficit in the retirement fund. The situation necessitated urgent intervention as it was becoming a serious industrial relations risk. To address the deficiency in the retirement fund, in March 2023, the respondent approached its bankers for an overdraft facility in the sum of E10 million. The overdraft facility was approved on condition that the money was repaid in full, not later than the end of July 2023,” he added.

According to Dr Bitchong, payment was made to the retirement fund, although this was insufficient to clear the deficit. He said it permitted for the exiting employees to be paid their dues. However, said the acting CEO, on the other hand, it created a further financial strain as the repayment of the overdraft necessitated the diversion of funds from other obligations towards its repayment. He told the court that this placed the institution in a situation where it was unable to meet its monthly remuneration obligations. “It was against this backdrop that the respondent in April 2023 began a process of engaging with all stakeholders, including the unions and employees, about the precarious financial position that obtains. It was evident to all at the respondent’s undertaking that unless stringent measures were taken to cut costs and improve the respondent’s liquidity, there would come a time when all activities would simply have to cease,” the doctor submitted. The matter is pending in court.

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