Parliament, Thursday, 19 February 2026 – The Portfolio Committee on Health has expressed concern over the lack of due diligence conducted by the Department of Health when awarding a tender to two pharmaceutical companies. During a briefing on Tuesday with the Minister of Health, Dr Aaron Motsoaledi, and the Department of Health, committee members dissected the tendering process that resulted in the placement of two ARV suppliers under business rescue.
Responding to the presentation, the committee questioned the establishment of a state-owned pharmaceutical company. Members noted that there had been discussions about this initiative and inquired when it would be established, as this could ensure a secure supply of various products.
The Minister stated that a resolution on the matter was passed in 2007 and it is the responsibility the of the Department of Health to establish it. The Auditor-General questioned the department’s ownership of Biovac, which produced vaccinations, to the benefit of the department. The AG suggested that ownership of Biovac should be transferred to the Department of Science and Technology, which was executed.
Committee members urged the government to revisit the matter of a state-owned pharmaceutical company and requested regular updates on progress.
On the issues pertaining to localisation, the committee stressed that government sector master plans and the Public Finance Management Act (PFMA) highlight building resilience through local manufacturing. The committee expressed its disappointment that a R15,5 billion tender was awarded to foreign multinationals based in India, sidelining South African companies.
Members pointed out that despite a cabinet resolution in 2007 to halt the creation of the pharmaceutical company known as Ketlaphela, nearly 19 years later, there is still no localisation or establishment of a state pharmaceutical company.
On the issue of evaluating company financial statements and balance sheets, committee members disagreed with the department’s assertion that reviewing companies’ financial capacity is not a requirement. Members said the PFMA allows for financial statements and balance sheets to be reviewed, and this is essential for assessing a company’s capacity to deliver on the tender it is bidding for.
The department submitted that there has been no impact on patients due to the companies being placed under business rescue. Members sought clarity on how the impact is defined and measured at the facility level and what evidence supports this assurance beyond national stock-outs. The Minister assured the committee, stating, “We believe that there is no impact on patients because we know our patients who are getting ARVs. We know where they get them.”
The department indicated that it is procuring at least 70% of its ARVs from local manufacturers. However, committee members questioned this, estimating that 70% of ARVs are imported, while only 30% are produced domestically. This assessment is based on several factors, including referencing Tenofovir Dolutegravir and Lamivudine (TDL), which accounts for 80% of the contract value.
For the 84s pack size, members noted that Emcure (India) won 15% of the tender, but trade data from Indian customs indicates that Emcure imports its ARVs into South Africa. In the last three-year contract, which ended two months ago, Emcure imported $43 million (R1.6 billion) worth of ARVs, yet the department lists Emcure as local. Similarly, the department lists Innovata, Barrs, Aurobindo and Viatris as local manufacturers, despite evidence that they are importing ARVs into South Africa. Furthermore, Barrs, having gone into business rescue, has been acquired by Hetero, which will import ARV products into South Africa.
Members requested an explanation of how the department arrived at the minimum of 70% local procurement when import data for the mentioned suppliers indicates otherwise. The committee sought documentation proving that these manufacturers are indeed producing ARVs in South Africa. Additionally, members inquired why local producers like Sunpharma, Cipla and Adcock Ingram were excluded in favour of importers, and why the department did not maximise the capacities of both Aspen and Cipla, which could provide three million monthly patient treatments when both companies are competitive.
Members questioned why the department would award a new contract to Innovata after previously excluding it from a contract due to legal proceedings. Questions posed to the department sought to clarify how it applies local preference in its tender process and what percentage premium, if any, is applied for local manufacturing. The committee was of the view that South Africa’s fiscus might have benefited from a small premium to award contracts to local producers, like Pharmacare, instead of companies based overseas.
The department said the tender was intentionally awarded to multiple suppliers as a risk mitigation strategy, but members found this assertion questionable. They urged the department to explain the rationale behind awarding contracts to suppliers with common shareholdings, as this does not seem to constitute effective risk mitigation. The committee requested a breakdown of how the department conducts its due diligence, particularly in confirming the shareholding of these companies and verifying whether manufacturers claiming to produce ARVs in South Africa are genuinely doing so.
Members noted with concern that due diligence appears to have been predominantly desktop-based, limiting the capacity accuracy of local assessments. Committee chairperson, Ms Faith Muthambi said, “It would appear that the country has at least four million monthly patient capacity for TDL and yet less than 50% of this has been awarded domestically”.
Members stressed the need for greater transparency and accountability in the tendering process. The committee requested written responses be submitted for questions that the department could not respond to due to because of time constraints, particularly the one referring to due diligence.
The committee welcomed the Minister’s commitment in addressing the matter. The Minister said he would welcome recommendations made by the committee. Ms Muthambi said the committee will discuss and find a way forward and the suggestions of committee members. “That’s something the committee needs to seriously discuss. Members shared some feedback regarding the overall reviewal of the entire process.”
ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON HEALTH, MS FAITH MUTHAMBI.
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