2017/18 ANNUAL REPORT · External auditors SizweNtsalubaGobodo Grant Thornton Inc Bankers First...

2017

/18National Health Laboratory Service

ANNUAL REPORT

2017/18

National Health Laboratory Service Annual Report 2017/18

Part A: General Information.....................................................................................................................

General Information ....................................................................................................................................................................................

Abbreviations and Acronyms.................................................................................................................................................................

Foreword by the Chairperson................................................................................................................................................................

Acting Chief Executive Officer’s Overview.....................................................................................................................................

Board Members...............................................................................................................................................................................................

Statement of Responsibility and Confirmation of Accuracy for the Annual Report............................................

Strategic Overview........................................................................................................................................................................................

Legislative and Other Mandates...........................................................................................................................................................

Organisational Structure............................................................................................................................................................................

Part B: Performance Information.............................................................................................................

Auditor’s Report: Predetermined Objectives.................................................................................................................................

Situational Analysis ......................................................................................................................................................................................

Performance Information by Programme......................................................................................................................................

Business Unit Performance......................................................................................................................................................................

Performance Information by Regions...............................................................................................................................................

Performance Information by Subsidiary..........................................................................................................................................

Performance Information by Institutes.............................................................................................................................................

Part C: Governance.....................................................................................................................................

Board Composition.......................................................................................................................................................................................

Committees of the Board..........................................................................................................................................................................

Portfolio Committee.....................................................................................................................................................................................

Company Secretary.......................................................................................................................................................................................

Remuneration of Board Members.......................................................................................................................................................

Risk Management..........................................................................................................................................................................................

Report of the Audit and Risk Committee .......................................................................................................................................

Part D: Human Resources..........................................................................................................................

Executive Summary.......................................................................................................................................................................................

Human Resources Oversight Statistics..............................................................................................................................................

Part E: Financial Information....................................................................................................................

Chief Financial Officer’s report ..............................................................................................................................................................

Summary of Group salient information ..........................................................................................................................................

3

4

8

11

14

17

18

20

22

24

25

28

42

90

145

146

152

157

167

167

168

168

172

175

176

181

183

CONTENTS

ANNUAL REPORT 2017/18

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General Information

PART A


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Registered name of the public entity National Health Laboratory Service (NHLS)

Legal form Schedule 3A public entity

Practice number PR5200296

Registered office address 1 Modderfontein RoadRietfonteinSandringhamJohannesburg, 2000

Postal address Private Bag X8Johannesburg2131

Contact telephone number 011 386 6000

Email address [email protected]

Website address http://www.nhls.ac.za

Company Secretary Adv. Mpho Mphelo

External auditors SizweNtsalubaGobodo Grant Thornton Inc

Bankers First National Bank Limited, Rand Merchant Bank Limited, Investec Limited and Nedbank Limited

General Information


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AAR Academic Affairs and Research

AARMS Academic Affairs, Research and Management System

AARQA Academic Affairs, Research and Quality Assurance

ACTG AIDS Clinical Trials Group

AG Auditor-General

AFP Acute flaccid paralysis

AIDS Acquired Immune Deficiency Syndrome

ARC Audit and Risk Committee (ARC);

ARMS-PCR Amplification refractory mutation system polymerase chain reaction

ART Antiretroviral therapy

ASLM African Society for Laboratory Medicine

ARV Antiretroviral

BLUC Blood and Laboratory User Committee

BRICS Brazil, Russia, India, China and South Africa

CANSA Cancer Association of South Africa

CAPRISA Centre for the AIDS Programme of Research in South Africa

CCCP Cervical Cancer Control Policy

CCHF Crimean-Congo haemorrhagic fever

CCMT Comprehensive Care Management and Treatment

CDC Centers for Disease Control and Prevention

CDW Corporate Data Warehouse

CED Centre for Enteric Diseases

CEO Chief Executive Officer

CEZPD Centre for Emerging Zoonotic and Parasitic Diseases

CHARM Centre for Healthcare-Associated Infections and Antimicrobial Resistance

CHC Community Healthcare Centre

CHIVSTI Centre for HIV and Sexually Transmitted Infections (STI)

CM Cryptococcal Meningitis

CMJAH Charlotte Maxeke Johannesburg Academic Hospital

CMSA College of Medicine of South Africa

CMV Cytomegalovirus

CNS Central nervous system

COBIT Control Objectives for Information and Related Technologies

CPD Continuing professional development

CPP Comprehensive prevention package

CPUT Cape Peninsula University of Technology

CRDM Centre for Respiratory Diseases and Meningitis

CTB Centre for Tuberculosis

CQI Continuous quality improvement

CRC Colorectal cancer

CSF Cerebrospinal fluid

CSIR Council for Scientific and Industrial Research

CVD Cardiovascular disease

CVI Centre for Vaccine and Immunology

DAAF Department of Agriculture Forestry and Fishery

DBS Dried blood spot

DCS Department of Correctional Service

DCST District Clinical Support Team

DGGE Denaturing gradient gel electrophoresis

DGM Dr George Mukhari Hospital

DoH Department of Health

DST Drug susceptibility testing

DST Department of Science and Technology

EAP Employee Assistance Programs

ECC Expert Chair Committee

ECHO Project Extension for Community Healthcare Outcomes

ECM Enterprise Content Management

EE Employment equity

EFI European Federation of Immunology

eGK Electronic Gatekeeping

EID Early Infant Diagnosis

EOC Emergency Outbreak Centre

EQA External quality assurance/assessment

EXCO Executive Management Committee

ESBL Extended-spectrum beta-lactamase

EU European Union

Abbreviations and Acronyms


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FA Fanconi anaemia

FBC Full blood count

FISH Fluorescence in situ hybridisation

FNA Fine needle aspiration

FSASP Federation of South African Societies of Pathology

GC-MS Gas chromatography-mass spectrometry

GDD Global Diseases Detection

GDoH Gauteng Department of Health

GEMP Graduate entry medical programme

GERMS-SA Group for Enteric, Respiratory and Meningeal Disease Surveillance in South Africa

GDH Glutamate dehydrogenase

GLASS Global Antimicrobial Resistance Surveillance System

GSH Groote Schuur Hospital

GXP GeneXpert

HA Haemophilia A

HAART Highly active antiretroviral therapy

HBV Hepatitis B virus

HBC Hepatitis C virus

HCT HIV Counselling and Testing (HCT)

HCW Healthcare workers

HEU HIV Exposed uninfected

HHV Human herpesvirus

HIVDR HIV drug resistance

HLA Human leucocyte antigen

hMPV Human metapneumovirus

HOD Head of Department

HPCSA Health Professions Council of South Africa

HPV Human papillomavirus

HSS Health Systems Strengthening

HTA Health technology assessment

HVTN HIV Vaccine Trials Network

IALCH Inkosi Albert Luthuli Central Hospital

ICU Intensive Care Unit

ILDAC Integrated Laboratory Data Analysis for Care

ILI Influenza-like illness

ILO International Labour Organization

IMD Inherited metabolic disease

IMDRF International Medical Devices Regulatory Forum

IPC Infection prevention and control

IPR Intellectual Property Rights

IQC Independent Quality Control

IRMA Immunoradiometric assay

ISO International Organization for Standardization

ITGC Information Technology Governance Committee (ITGC);

ITIL Information Technology Infrastructure Library

KEH King Edward VIII Hospital

KIDCRU Children’s Infectious Diseases Clinical Research Unit

LA Learning Academy

LAN Local area network

LBC Liquid Based Cytology (LBC).

LFT Liver function test

LIS Laboratory Information System

LPA Line probe assay

LSHTM London School of Hygiene & Tropical Medicine

LTI Laboratory for Tissue Immunology

MCDS Minimum Clinical Data Set

MCWH Maternal Child Women’s Health

MDO Missed diagnostic opportunity

MDR-TB Multidrug-resistant tuberculosis

MIC Minimum inhibitory concentration

MGIT Mycobacterium growth indicator tube

MLPA Multiplex ligation-dependent probe amplification

MOU Maternity Outpatient Unit

MRC Medical Research Council

MRSA Methicillin-resistant Staphylococcus aureus

MSSA Methicillin-susceptible Staphylococcus aureus

NAAT Nucleic acid amplification test

NAPC National Academic and Pathology Committee

NAPHISA National Public Health Institute for South Africa

NEPAD New Partnership for Africa’s Development


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NGO Non-Governmental Organisation

NGS Next generation sequencing

NHA National Health Act, no. 61 of 2003

NHI National Health Insurance

NHLS National Health Laboratory Service

NIAID National Institute of Allergy and Infectious Diseases

NICD National Institute for Communicable Diseases

NIH National Institutes of Health

NIOH National Institute for Occupational Health

NIPMO National Intellectual Property Management Office

NMC Notifiable medical condition

NMCSS Notifiable Medical Conditions Surveillance System

NNRTI Non-nucleoside reverse-transcriptase inhibitor

NPO Non-Profit Organisation

NPP National Priority Programmes

NPPU National Priority Programmes Unit

NQF National Qualifications Framework

NRF National Research Foundation

NRP National Research Priority

NTT National Task Team

OEHS Occupational and Environmental Health and Safety

OHASIS Occupational Health and Safety Information System

OHS Occupational Health and Safety

ORU Outbreak Response Unit

OTT Office of Technology Transfer

PAHWP Pan African Harmonisation Working Party

PathRed Pathology Research and Development

PBMC Peripheral blood mononuclear cell

PCR Polymerase chain reaction

PI Protease inhibitor

PIVOTAL Professional, Vocational, Technical and Academic Learning

PFGE Pulsed-field gel electrophoresis

PFMA Public Finance Management Act

PHC Primary Healthcare Facility

PLG Panleucogated

PMTCT Prevention of Mother-to-Child Transmission

POCT Point-of-Care Testing

POPI Protection of Personal Information

PRF Poliomyelitis Research Foundation

PTS Proficiency testing schemes

QA Quality assurance

QCA Quality Compliance Audit

QCI Quality Control Initiative

QF-PCR Quantitative fluorescent polymerase chain reaction

RA Rheumatoid arthritis

RACL relational algebraic capacitated location

RCCH Red Cross Children’s (Memorial) Hospital

RDC Research Development Committee

RDTMP Research Development Training and Mentorship Programme

RFLP Restriction fragment length polymorphism

RHRC Remuneration and Human Resources Committee

RIA Radioimmunoassay

RIF Rifampicin

RSV Respiratory syncytial virus

RT-PCR Real-time polymerase chain reaction

RTQII Rapid Test Quality Improvement Initiative

SAAVI South African AIDS Vaccine Initiative

SABMR South African Bone Marrow Registry

SADC Southern African Development Community

SAIOH Southern African Institute for Occupational Hygiene

SAMRC South African Medical Research Council


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SANAS South African National Accreditation System

SANDF South African National Defence Force

SAPHRA South African Health Products Regulatory Authorities

SAPS South African Police Service

SARI Severe acute respiratory infection

SASOHN South African Society of Occupational Health Nursing Practitioners

SASOM South African Society of Occupational Medicine

SAVP South African Vaccine Producers

SAVQA South African Viral Quality Assessment

SCC Staphylococcal cassette chromosome

SDG Sustainable development goal

SLA Service level agreement

SLE Systemic lupus erythematosus

SLIPTA Stepwise Laboratory Quality Improvement Process Towards Accreditation

SLMTA Strengthening Laboratory Management Towards Accreditation

SME Sub-acute measles encephalitis

SNP Single nucleotide polymorphism

SOE State-owned enterprise

SPI-RT Stepwise Process for Improving the Quality of HIV Rapid Testing

STEA Scientific travel and events attendance

STI Sexually transmitted infections

TAT Turnaround times

TB Tuberculosis

TMS Tissue microarray analysis

T-RFLP Terminal restriction fragment length polymorphism

TTAC Technologist and Technician Advisory Committee

UCT University of Cape Town

U&E Urea and electrolytes

UFS University of the Free State

UKZN University of KwaZulu-Natal

UoT University of Technology

US Stellenbosch University

UTT Universal Test and Treat

VDVP Vaccine-derived polio virus

VOIP Voice over internet protocol

WHO World Health Organization

Wits University of the Witwatersrand

WSP Workplace Skills Plan


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Introduction

South Africa’s health system consists of a large public sector that serves the poorer majority of South Africans and a private sector serving largely the 17% who have medical insurance. The core mandates of the National Health Laboratory Service (NHLS) are to provide a pathology and laboratory service for public sector users, as well as to train professionals for and to research in the field. To meet its mandate, the NHLS has approximately 266 laboratories cross the country, ranging from highly sophisticated central academic laboratories to laboratories in the most distant rural hospitals. The NHLS provides a huge volume of cutting edge HIV and tuberculosis (TB) services, which form the backbone of our country’s highly acclaimed services that are bringing down these disease burdens for our country.

Being part of the public health sector poses a huge challenge to the NHLS to offer value for money, as the public health sector only accounts for approximately 40% of all expenditure on health. While this amounts to around 11% of the government’s total budget, funding is tight, especially given the heavy national burden of disease for which treatment and care must be provided by the public sector. This means the more efficient the NHLS is, the less of their budgets will the provinces need to use on laboratory services. The NHLS is proud

Foreword by the Chairperson

of the fact that its basket of tests continues to be substantially cheaper than the private sector in spite of the additional costs associated with providing services in rural areas. The NHLS is also proud of the quality of its service and its turnaround times.

Not surprisingly, the NHLS is the biggest provider by far of diagnostic laboratory services for the country. This annual report shows volumes of tests we provide to support clinicians, strategic planners and decision-makers in the public health care sector.

As the Chairperson of the NHLS Board, I am proud to have been afforded the opportunity to lead an organisation making such a valuable contribution to our country.

Strategic Overview

The NHLS has a mammoth task to perform, and has been entrusted with far-reaching and live-saving responsibilities. This annual report provides a picture of the services provided, including in each province, as well as the performance of the NHLS. The NHLS operates under the umbrella of 5 programmes, as the foundation to meet the challenges it set itself in its strategic plan and its annual performance plan. These are: Laboratory Services; Academic Affairs, Research and Quality Assurance; Surveillance of Communicable Diseases; Occupational Health and Safety; and Administration.

Laboratory Services – This is a core function and the largest component of the NHLS: to provide cost-effective and efficient health laboratory services to the country’s public healthcare sector, and other stakeholders on request. This can only be achieved if the NHLS’ delivery machine - its network of laboratories - is effective in carrying out this mandate. Hence the focus of this programme is to ensure that NHLS laboratory services can be accessed as widely as possible by the population and by clinicians, improve the quality of services rendered, enhance operational efficiency and ensure that its laboratories are on par with the best in the world. The indictors that measure this performance show that, in spite of setting standards higher, most of the targets were achieved. However, there is room for improvement going forward, including determining the optimum platform and balance of services to offer even better value for the public funds entrusted in us.

Academic Affairs, Research and Quality Assurance – In addition to the ongoing quality assurance programme, during the year, many laboratories went through stringent quality compliance audits, and significant improvements were recorded. The project to achieve national coverage, particularly by academic and provincial tertiary laboratories providing pathologist cover has also experienced steady improvement. Our partnership with Universities and Universities of Technology received considerable attention. The NHLS continued to

Chairperson: Prof. Eric Buch


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support training of pathologists, medical scientists and laboratory technologists. While the registration rates improved, the pass rates still need to receive ongoing attention by the NHLS and universities. The improved focus on the NHLS research mandate is starting to bear results. In addition to a host of publications and research reports that added to the global body and national body of knowledge and supported our contribution to service provision, four research outputs translated into improved diagnostic practices.

Surveillance of Communicable Diseases – This vital national and continental function is performed by one of the institutes of the NHLS, the National Institute for Communicable Diseases (NICD). Its specialised laboratory and public capacity has attained global recognition and it serves as a reference laboratory for the public and private sectors in South Africa and Africa. This year we saw the NICD lead the investigation into the largest ever recorded outbreak of listeriosis, for which its state-of-the-art ability to perform pathogen whole genome sequencing provided key scientific evidence to identify the source. This event demonstrated the importance of collaborative efforts with relevant stakeholders, as well as the epidemiological and laboratory capacity needed to cope with outbreaks of this magnitude. However, such high profile activities should not mask the exceptional ongoing work of the Institute’s seven centres and other entities who met their targets. The re-engineering of the notifiable medical conditions (NMC) surveillance systems and the launch of a mobile application for real-time reporting of cases was another highlight that will greatly improve early detection and response to outbreaks that pose a threat to public health.

Occupational Health and Safety (OHS) – The National Institute for Occupational Health (NIOH) continues to play a vital niche role in Occupational Health and Safety (OHS). A focus of the past year was engaging directly with workplaces and with communities around workplaces to profile OHS prevention and health promotion and to implement the National Strategic Plan on HIV, TB and STIs. As a World Health Organization (WHO) Collaborating Centre the NIOH is the global lead for the WHO project on the informal economy and vulnerable workers. The NIOH also delivers a Gender@Work Programme and a Workplace Ethics and Trust Project. While delivering for South Africa, the NIOH also collaborates globally, including on nanotechnology research. Its specialised laboratories provide services throughout the continent. An occupational health and safety information system (OHASIS) was implemented, extensive OHS train-the-trainer courses were provided for several NEPAD countries and health workforce training was delivered in Southern Africa through the WHO/IInternational Labour Organization (ILO) HealthWISE programme. In South Africa the NIOH supports the training of the next generation of OHS professionals through engagement with multiple academic and civil organizations. The NIOH met all its key targets and we look forward to another productive year.

Administration – In spite of challenges, including those leading to the suspension of the CEO, and other managers, the NHLS improved on all the functions and processes that enable it to carry out its mandate more effectively and efficiently – Finance, Human Resources, Information Technology and Governance. As can be seen in this report, the NHLS managed to improve its current ratio quite significantly, putting the organisation in a more liquid position than before. While expenses increased due to higher than inflation costs of staff, equipment and consumables, this was offset by a higher turnover than budgeted, due to increased test volumes. The long-standing problem of creditor days was reduced and the organisation paid its suppliers on a regular basis. Our supplier relationships improved, except for those with whom we had contractual disputes. On-time payment by provinces also improved, although there were some difficulties towards the end of the financial year. While we continued to experience challenges in our Information and Communications Technology (ICT) environment improved policies and systems were being put in place to radically modernise the NHLS ICT infrastructure to deliver an integrated support to the business of the organisation. Human Resources (HR) practices were also focussed on driving organisational practice to be on par with the best in the industry. Ensuring the development and retention of a skilled and sustainable human capital for the NHLS is crucial to advancing the NHLS value proposition.

Strategic Relationships

The value of strategic relationships for the NHLS in the public healthcare sector cannot be underestimated. I am therefore appreciative of all the meaningful relationships and support that the NHLS has enjoyed during the period under review, starting with the Minister and Director General of Health. Positive relationships and partnerships were fostered with the National and Provincial Departments of Health, other government departments, universities and universities of technology, research institutions, non-governmental organisations (NGOs), professional associations and industry bodies. Internationally, the NHLS retained its strong historical partnerships with the World Health Organization (WHO), Centres for Disease Control (CDC) and the African Society of Laboratory Medicine (ASLM). All these partnerships continue to impact positively on the work of the NHLS, and its ability to execute its mandate. The NHLS leadership and management teams will continue to cement and strengthen these relationships in the interest of enriching the public healthcare system and our other mandates.


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The NHLS Board

The NHLS Board continued to deliver diligently on its governance mandate, setting the strategic direction, policies and budget; enabling delivery on the strategic and annual performance plan, improving the financial and human resource status, and providing oversight of and direction to the executives. During the year under review the Board not only facilitated stability but enabled significant advances. The Board will continue to perform its oversight and strategy function until the NHLS is a well-oiled organisation, delivering optimally now and ready to meet the challenges of the future.

The year ahead

The Board has much to attend to in the next financial year. It starts with striving to ensure that there is stability in the top echelons of the organisation and that our workforce is well looked after and that morale and motivation are high. There is still work to do in achieving the financial position we aspire to, while resources are mobilised to invest in equipment and infrastructure and continue to keep our annual tariff increases down. Preparations to change our financial model from a fee for service basis to a modified capitated reimbursement model will gain momentum. To offer even better value for money, we not only have to further improve the efficiency of what we are doing, but also determine the best national platform – the optimum configuration, size, service offering and opening hours of our different laboratories and services. Accelerating laboratory quality accreditation is vital for users to feel that our standards of service are guaranteed. The academic platform will continue to receive support for its vital role, with special attention to the retention of senior pathologists and the pass rate challenges faced by registrars (pathologists in training). Improved grant management is essential to retain confidence of our funders.

The year ahead is likely to see approval of the NHLS Amendment Bill and the establishment of the National Public Health Institute of South Africa (NAPHISA), once the NAPHISA Bill has been passed. Together they will herald major changes for the NHLS. The Board is planning for this future. The publication of the draft National Health Insurance (NHI) Bill also heralds major changes for the NHLS of the future. Further work on how to operate and for the NHI to deliver will be undertaken.

Conclusion and Acknowledgements

The year has seen many challenges but also successes. The NHLS ends the year stronger than it started it. This would not have been achieved without the committed service of staff of the NHLS and the Executive Team. Particular thanks are due to Professor Shabir Mahdi and Dr Kamy Chetty, for availing themselves to act as the CEO and for the vital contributions they have made. Thanks are also due to other staff who have acted in executive positions during the year and to Prof Lynn Morris for acting as and then accepting the position of Interim Director of the NICD and Dr Sophia Kisting for agreeing to a further period as Executive Director of the NIOH.

My sincere gratitude and that of the entire Board goes to the Minister of Health, Dr Aaron Motsoaledi for his unwavering backing of the NHLS, his commitment to a successful NHLS for the public healthcare system, and his commitment to clean governance. I am thankful to the Director-General of Health, Ms Malebona Precious Matsoso for being a pillar of support and wisdom. Our appreciation goes to the Members of the Executive Council (MECs) for Health and Heads of Provincial Health Departments who have recognised the national asset the NHLS is and, in spite of financial challenges have prioritised payments to the NHLS.

In conclusion, I would like to thank my fellow Board Members for their expertise and strategic counsel that they have brought to the organisation, and for serving with great dedication, including on the various sub-committees of the Board, to ensure that we provide a full oversight function over the NHLS. Many serve on the Board without remuneration and others for a fraction of what they would receive in a comparable private sector organisation. I am sure that the public, who depend on the NHLS for affordable and accessible laboratory and pathology services to support their health care, join me in acknowledging their service.

Prof. Eric BuchChairperson


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It gives me great pleasure to present the NHLS Annual Report for the 2017/18 financial year. Despite all the challenges that the organisation went through last year, the NHLS was able to deliver on its mandate in support of the country’s increasing demands on the public healthcare system. Below are some of the notable achievements that I wish to highlight:

Financial Overview

One of the key historical problems that the NHLS has always encountered over the years is under-payment by some of the Provincial Health Departments for their consumption of NHLS diagnostic laboratory services – which had unfortunately left the organisation under severe financial stress over a prolonged period of time. However, during the period under review, the provinces acknowledged that a financially healthy and stable NHLS is for the benefit of the entire public healthcare system. The fact that the NHLS provides its services to over 80% of the population is a reality that cannot be ignored.

Acting Chief Executive Officer’s Overview

After extensive negotiations with all the key stakeholders, most of the provinces have now substantially reduced their historic debt and have been adequately paying for their current consumption. This has assisted in improving the financial position of the NHLS, and has enabled the organisation to meet some of its financial obligations.

Despite the above, as at 31 March 2018, the NHLS was still owed R5.4 billion, (from provinces) with KwaZulu-Natal and Gauteng owing the NHLS a combined amount of R4.5 billion or 84% of the outstanding debt. However, a settlement agreement has already been reached with Gauteng province, and negotiations are currently underway to reach the same with KwaZulu-Natal. Nonetheless, we will continue engaging with all the provinces to ensure regular payment. As long as the provinces continue to do this, the financial position of the NHLS will stabilise. For this I would like to thank the Minister and Director-General of Health as well as the NHLS Board, especially the Chairperson of the Board, who played a leading role in committing the Provinces to pay for services rendered to ensure that the NHLS remains a going concern.

Revenue and other income grew from R7.3 billion to R8.2 billion, with the provinces accounting for 78% of the total revenue generated. The increase in revenue was largely due to the increases of Viral Load, Creatinine Automated, Profile Discrete Analyser U & E, EXF Cytology (Gynae) 1st smear and HIV PCR laboratory tests.

Production costs, which include direct labour and materials, increased by 8% from R5.8 billion to R6.2 billion. This increase can mainly be attributed to increases in labour, volume, price increases and fluctuations in the exchange rate. Labour comprised 42% of the total revenue compared with the 46% in the previous financial year. Average test revenue per capita increased by 1.0%, compared with the 5% increase recorded in the previous financial year.

The NHLS was able to generate a surplus for the year amounting to R1.3 billion compared to a restated R1.9 billion deficit in the previous financial year due to the reversal of the provision of doubtful debt.

Cash flow amounted to R8 billion compared with R6.7 billion in the previous financial year. Of this R8 billion, R3.3 billion was utilised for personnel costs and R3.7 billion for goods and services. Creditor days were also reduced from 75 days to 51 days during the year under review. Whilst debtor days has not dramatically decreased, there is continuous improvement in the collection of debt.

Although the financial position of the NHLS might have improved, the organisation is still in a tight financial corner. Management has therefore committed itself to implementing prudent financial practices to ensure that costs do not escalate. A cost containment strategy has already been developed and it will be driven from my office and the office of the Chief Financial Officer (CFO). Various and critical cost saving measures have already been identified and will be implemented in the coming financial year.

Acting CEO: Dr Kamy Chetty


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People Management

During the year under review NHLS employees belonging to organised labour embarked on industrial action. The issues related to salary increases, insourcing of contracted workers, proficiency and progression. Instability at top leadership level also contributed to delays in implementing these projects. Nonetheless, through meaningful engagement with all stakeholders, there is now renewed commitment to implement and finalise outstanding issues.

Despite these challenges, the NHLS continues to be the employer of choice within the laboratory medicine industry. This is attested by the fact that our staff turnover remained at 6% during the year. This provides the NHLS the opportunity to nurture talent and grow our skills pool in a stable environment where employees are committed to working for the organisation.

Management will continue to engage with organised labour and employees to improve the labour relations environment within the NHLS, to create a climate of improved service delivery and internal operational efficiencies.

Operational efficiency

Improving operational efficiency across the business was one of our core focus areas during the period under review. We established a task team on Operational Efficiency to identify areas where operational efficiency could be improved. Further work will be undertaken to implement some of the recommendations. Some of the areas identified are: referral patterns to the nearest laboratory, transport routes, Information Technology (IT) downtime, lack of communication when orders are rejected and standardisation of instrumentation across tiers of laboratories.

Improvements in systems

Our IT infrastructure is a critical enabler of our business operations, particularly the laboratory environment. Due to many years of under-investment in this area, some of our IT infrastructure had become obsolete and aged way too much to continue supporting the business.

During the year we therefore initiated a number of interventions to improve the overall IT environment of the NHLS. Some of the key projects that were initiated during the year include:

• Local Area Network (LAN) upgrade project was initiated in December 2017 to refresh the following sites: Sandringham, Braamfontein, Chris Hani Baragwanath Hospital and Charlotte Maxeke Johannesburg Academic Hospital.

• In an effort to address network connectivity challenges and increase network bandwidth at various laboratories across the country, the NHLS has requested to participate in the SA National Research Network (SANReN), which provides high-speed communication links to organizations which undertake research.

• Desktop Operating Systems and Email were upgraded to Windows 10 and Exchange 2013 respectively. • A number of business modernisation projects aimed at digitising and transforming the NHLS into an intelligent organisation have

been identified and will be implemented in the 2018/19 financial year.

• A project was initiated to upgrade TrakCare Laboratory Information System (LIS) from version L6.10 to the latest version 2016.4, which is more user-friendly.

• The NHLS, on the request from the Department of Health (DoH), implemented measures to reduce the inappropriate requesting and repeat of laboratory tests in the form of Electronic Gate Keeping (eGK). A set of rules were configured on the Laboratory Information System (LIS) against which test requests are evaluated and rejected.

• A new module on Contracts Management was purchased and will be implemented on Oracle.Control and management of outbreaks

The National Institute for Communicable Diseases (NICD), an institute of the NHLS, continued to play a critical role in the surveillance, monitoring and reporting of threats posed by the outbreak of communicable diseases. Most notable during the year was the outbreak of listeriosis, which the NICD has been commended for managing very well. The outbreak was an important learning curve for all of us, and has given us the opportunity to improve our internal systems and processes for future outbreaks of any other diseases.

Equally important is the role played by the National Institute for Occupational Health (NIOH), which continued to have greater impact on occupational and environmental health and safety, particularly on the workplace.


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The year ahead

The year ahead is going to be interesting and challenging. We need to continue strengthening the NHLS’ capability to deliver on its mandate, and this will entail holistic approach which looks at people, processes and systems, infrastructure and more importantly, customer service.

In the future, exciting opportunities are also in the pipeline for the NHLS. These will be realised once the NHLS Amendment Bill is implemented. The NHLS Amendment Bill amends the governance structure of the NHLS and allows for the Ministers of Health and Finance to determine the financing strategy to ensure adequate and sustainable funding of the NHLS. The same applies to the National Public Health Institute of South Africa (NAPHISA) Bill, which, once implemented, will result in the NICD and NIOH leaving the NHLS to form part NAPHISA.

Also, the NHLS needs to continue being at the forefront of advancements in the field of laboratory medicine as it continues to develop high-tech laboratories of the future. The impending implementation of the National Health Insurance (NHI) Fund also necessitates the NHLS to be fully prepared to support the NHI. I am confident that the NHLS is ready for all the challenges and opportunities that the future will bring.

Acknowledgements

In conclusion, I would like to thank the Board of the NHLS, and in particular the Chair Prof Eric Buch, for their support and guidance during the year under review. I would also like to thank Prof Shabir Madhi who acted as CEO for the first six months of the period under review. My gratitude also goes to the Executive and Senior Management teams for their commitment to continue focusing on our journey to renew and revitalise the NHLS to become a customer-centric organisation and execute its mandate with high degrees of excellence.

The employees of the NHLS also deserve commendation, as they are the foot soldiers who make things happen on the ground. Without them, their skills and expertise, the public healthcare system in South Africa would be incomplete. As we strive to raise the bar on operational efficiency and effectiveness, I know that I can rely on the innovative ideas and outstanding expertise of NHLS employees. Lastly, my sincere thanks to all the Unions represented at the NHLS, for their contributions towards creating a stable work environment.

I believe that the NHLS plays an important role in the country’s public healthcare system, and that it will continue to do so for many years to come. With its network of laboratories country-wide, improved technology and the growing talent of its people, the NHLS is well-positioned to deliver on its mandate.

Dr Kamy Chetty Acting Chief Executive Officer


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Board Members (Present)

Dr Tim Tucker

Chairperson: Prof. Eric Buch

Prof. Larry Obi

Dr Balekile MzangwaDr Gerhard Goosen

Vice Chairperson: Dr Sibongile Zungu Acting CEO: Dr Kamy Chetty

Prof. Haroon Saloojee Prof. Mary Ross


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Ms Nelisiwe MkhizeMs Sphiwe Mayinga

Mr Ben Durham

Ms Nicolene Van der Westhuizen

Dr Zwelibanzi Mavuso Mr Michael Shingange

Mr Ian van der Merwe Dr Monde Tom


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Board Members (Past)

Prof. Barry Schoub(20 April 2017 - 29 April 2018)

Prof. Willem Sturm(27 August 2015 - 1 September 2017)

Mr A Venter(2 January 2015 - 2 January 2018)

Mr Michael Manning(30 April 2015 - 30 April 2018)

Mr Stanley Harvey(1 February 2015 - 1 February 2018)

Ms Ntombi Mapukata(1 February 2015 - 1 February 2018)

Mr Lunga Ntshinga (Deceased: 13 August 2017)

Acting CEO: Prof. Shabir Madhi (24 February - 31 August 2017)


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To the best of our knowledge and belief, we confirm the following:

• All information and amounts disclosed in the NHLS Annual Report are consistent with the Annual Financial Statements (AFS) audited by Sizwe NtsalubaGobodo Inc Grant Thornton inc.

• The Annual Report (AR) is complete, accurate and free from any omissions.• The AR was prepared in accordance with the Annual Report Guidelines as issued by National Treasury.• The Annual Financial Statements (Part E) were prepared in accordance with the Standards of Generally Recognised Accounting

Practice (GRAP), applicable to the NHLS.

• The Accounting Authority is responsible for the preparation of the AFS and for the Judgements made in this information.• The Accounting Authority is responsible for establishing and implementing a system of internal control, designed to provide

reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the AFS.

• The external auditors are engaged to express an independent opinion on the AFS.In our opinion, the NHLS AR fairly reflects the operations, performance information, human resources information and financial affairs of the NHLS for the financial year that ended 31 March 2018.

Yours faithfully

Dr Kamy Chetty Prof. Eric Buch Acting Chief Executive Officer Chairperson of the Board

Statement of responsibility and confirmation of accuracy of the National Health Laboratory Service (NHLS) annual report


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About the NHLS

The National Health Laboratory Service (NHLS) is a national public entity, established in terms of the National Health Laboratory Service Act, no. 37 of 2000, to provide quality, affordable and sustainable health laboratory and related public health services. It has approximately 266 laboratories across the nine provinces of South Africa, excluding depots, and serves approximately 80% of the South African population.

The NHLS is the main provider of clinical support services to the national, provincial and local departments of health, through its countrywide network of quality assured diagnostic laboratories. It also provides surveillance support for communicable diseases, occupational health and cancer.

The NHLS is managed according to the provisions of the National Health Laboratory Service Act; the NHLS Rules, gazetted in July 2007; and the Public Finance Management Act (PFMA), no. 1 of 1999. It is a Schedule 3A Public Entity, governed by a Board and a Chief Executive Officer (CEO).

It has a clear organisational structure consisting of a head office in Sandringham, Johannesburg, six regions (Mpumalanga and Limpopo; KwaZulu-Natal; Eastern Cape; Western and Northern Cape; Free State and North West; and Gauteng) and two institutes, namely: The National Institute for Communicable Diseases (NICD), incorporating the National Cancer Registry (NCR) and the National Institute for Occupational Health (NIOH). The six regions are purposefully designed to ensure that the NHLS plans, agrees on budgets and monitors laboratory services jointly with provincial health partners, with the intention for laboratory services to be perceived and accepted as part of the public health delivery system.

The NHLS delivers services throughout the public sector, from national central, provincial tertiary, regional and district hospitals, to primary healthcare facilities. The level of complexity and sophistication of services increases from the peripheral laboratories to the central urban laboratories (with specialised surveillance infrastructure existing at specific sites).

South African Vaccine Producers (SAVP) is a wholly owned subsidiary of the NHLS and provides the following services:

• The manufacturing of biologicals, namely polyvalent, Echis, Boomslang, spider, and scorpion antivenom;• Safety testing for pharmaceutical companies;• Research on routine products authorised via the animal ethics committee involving animals;• Preparation of horse and sheep serum; and • Preparation and sampling of horse blood.Vision

To render efficient patient centred services and become a global centre of excellence for innovative laboratory medicine.

Mission

To provide quality, affordable and sustainable health laboratory services through an integrated network of laboratories, the provision of training for health science education and the execution of innovative and relevant research with focus on patient care.

Values

The following values are guiding principles that were established to govern and align the behaviour of all NHLS employees:

Strategic Overview


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Value Description

3.1 Care Caring about the environment and society: This involves consideration of our impact on the environment and local communities, acting with concern and sensitivity. The NHLS is committed to behave ethically and contribute to the economic development of the workforce, community and society at large. It is about giving back to society and the environment, as well as capacity building for a sustainable future.

3.2 Unity of purpose All working together towards a common goal: All employees should be united by a common vision and support each other in contributing to a beneficial and safe working environment. Teamwork and cohesion are key, and collaboration should include pooling resources and communicating about each other’s roles. Foster trust and honesty in interactions with colleagues and behave professionally. Value all contributions, treat everyone consistently and fairly and capitalise on diverse viewpoints. Address and resolve conflicts effectively. Listen to others to fully understand and give clear, concise information when communicating expectations and accountabilities and providing feedback during coaching. Making NHLS goals a priority, using NHLS resources wisely and effectively and taking responsibility for your work.

3.3 Service excellence Valuing good work ethics and striving towards service excellence for customers: This speaks to being committed to working with customers and building good relationships with them by understanding their needs, responding quickly and providing appropriate solutions. We treat them with respect at all times; we are helpful, courteous, accessible, responsible and knowledgeable in our interactions. We understand that we have internal and external customers that we provide services and information to. This information should be presented in a clear and concise form, and the message should be adapted to the audience.

3.4 Transformation Looking forward to the future and growing together: This encompasses investing in professional growth of staff by sharing knowledge and experience, peer networking, education through training and seeking opportunities to develop. It covers creative problem solving, informed risk-taking, learning from our mistakes and experiences and behaving professionally. We should adapt to change timeously and positively, address setbacks and ambiguity and adapt our thinking/approach as a situation changes. Ideas should be shared and implemented effectively. Leaders should develop innovative approaches and drive continuous improvement, as well as effective and smooth change initiatives.

3.5 Innovation Pioneering relevant research solutions and training: Identifying needs to broad challenges present in local society. Creating space for research to be done and backing fresh ideas by bringing them to the market. Pursuing cost-effective solutions in research and training. Monitoring the impact of solutions on the challenges faced. Supporting the application of new ways of doing things at senior management level in the organisation. Encouraging pioneering personalities to operate outside the research box. Rewarding and publicising boundary-breaking initiatives. Giving credit to those to whom it is due.

3.6 Integrity Working with integrity and responsibility: Setting and achieving goals, consistently delivering business results, while complying with standards and meeting deadlines. Displaying commitment to organisational success; proactively identifying ways to contribute and taking initiative to address problems/opportunities. Building efficiency in the best use of public resources.


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The legislative mandate of the NHLS is derived from the Constitution, the National Health Act, No. 61 of 2003 (NHA), the NHLS Act 37 of 2000, and several laws, regulations and policies issued by Parliament.

Constitutional Mandate

In terms of the constitutional provisions, the NHLS is, amongst others, guided by the following sections and schedules:1. The Constitution of the Republic of South Africa, 1996, places obligations on the state to progressively realise socio-economic rights,

including access to healthcare.

2. Section 27 of the Constitution states the following with regards to healthcare, food, water, and social security:(i). Everyone has the right to have access to:

o Healthcare services, including reproductive healthcare;o Sufficient food and water; ando Social security, including, if they are unable to support themselves and their dependents, appropriate social assistance.

(ii). The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of each of these rights; and

(iii). No one may be refused emergency medical treatment.

The National Health Act, No. 61 of 2003

This act provides a framework for a structured and uniform health system within South Africa, considering the obligations imposed by the Constitution and other laws on the national, provincial and local governments regarding health services. The objectives of the NHA are to:

• Unite the various elements of the national health system in a common goal to actively promote and improve the national health system in South Africa;

• Provide for a system of cooperative governance and management of health services, within national guidelines, norms and standards, in which each province, municipality and health district must address questions of health policy and delivery of quality healthcare services;

• Establish a health system based on decentralised management, principles of equity, efficiency, sound governance, internationally recognised standards of research and a spirit of enquiry and advocacy which encourage participation;

• Promote a spirit of cooperation and shared responsibility among public and private health professionals and providers and other relevant sectors within the context of national, provincial and district health plans; and

• Create the foundation of the healthcare system that must be understood alongside other laws and policies that relate to health.The National Health Laboratory Service Act, No. 37 of 2000

This act mandates the NHLS to provide cost-effective and efficient health laboratory services to all public sector healthcare providers; any other government institution inside and outside of South Africa that may require such services; and any private healthcare provider that requests such services. The act also mandates the NHLS to support health research and provide training for health science education.

Additional governance contexts

The NHLS is required to comply, inter alia, with the following:

• General rules established in terms of Section 27 of the National Health Laboratory Service Act;• The Companies Act, No. 71 of 2008;• The Protocol on Good Corporate Governance in the Public Sector;• The Public Finance Management Act, No. 1 of 1999 (as amended) (PFMA);• Treasury regulations issued in terms of the PFMA, 1999;

Legislative and other Mandates


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• The Preferential Procurement Framework Act, No. 5 of 2000;• All legislation that are applicable to the health sector;• The Annual Report Guide for Schedule 3A and 3C Public Entities; and• The King III Code on Good Corporate Governance.Other policy initiatives

As articulated in its Strategic Plan 2015/2016–2019/2020, the NHLS is committed to support the following:

• The National Health Insurance (NHI), which will cover a defined basket of pathology services that are aligned with the package of services required per level of care. The pathology service will be delivered at public healthcare level, as well as at higher levels of care as defined by the NHLS Act and in line with the NHA. The latter requires the setting, monitoring and enforcing of quality control standards applicable to pathology services, to ensure patient safety.

• The National Public Health Institute for South Africa (NAPHISA), that has the following functions:o Communicable diseases;o National Cancer Registry (NCR);o Occupational health;o Non-communicable diseases; ando Injury and violence prevention.

The various departments that will form part of NAPHISA are still being determined but it is anticipated that the NICD, including the NCR and the NIOH will be incorporated into NAPHISA.


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Organisational Structure

Minister of Health

NHLS Board

Chief Executive

Audit and Risk Committee

Senior Manager:Monitoring and

Evaluation

Chief Financial

Executive Manager:

HR

Executive Manager:

Laboratory Service

Executive Manager:

AARQA

Chief Information Director:

NICDDirector:

NIOH

ExecutiveManager:

NPP

Manager:SAVP

Company Secretary

Senior Manager:

O�cer

Communications, Marketing and PR

Head: Risk Management and Internal Audit


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Performance Information

PART B


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The independent auditor performed the necessary audit procedure on the performance information of the NHLS to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance of the NHLS against its predetermined objectives, is included in the report to management, with material findings being reported under the ‘Predetermined objectives’ heading in the report in the ‘Other legal and regulatory requirements’ section of the auditor’s report on pages 187 to 193.

Auditor’s report predetermined objectives


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Service delivery environment

The NHLS continues to provide quality service to its stakeholders. The organisation strives to ensure accessibility of service to all communities, through having a presence in all hospitals and through collecting samples from all primary healthcare facilities, daily.

Through the NHLS, South Africa was the first out of 18 countries in Africa to have two laboratories that were awarded five-star level, following an audit by the African Society for Laboratory Medicine (ASLM), that uses the World Health Organization (WHO) Stepwise Laboratory Quality Improvement Process Towards Accreditation (SLIPTA) system, to conduct their assessments.

From April to December 2016, the average performance of NHLS laboratories that were tested through proficiency testing schemes (PTS) of an external quality assessment (EQA) has been 91%, with a total of 84% of laboratories achieving a performance score of more than 80%. Since the beginning of 2016/2017, the laboratories that have been audited internally, have also achieved an average performance score of 84%, compared to a score of 82% achieved at the end of 2015/2016.

The NHLS successfully completed the rollout of its Laboratory Information System (LIS) in all laboratories across the country, which resulted in seamless and integrated management of laboratory data. The NHLS’ Corporate Data Warehouse (CDW), enabled the development of the first National CD4/Viral Load Monitoring Dashboard, an online tool that that was launched in November 2016 and that monitors CD4 count and viral load in South Africa’s HIV positive patients.

The NHLS information technology (IT) infrastructure, which has been a challenge for some time, was prioritised. The aim is to build a strong IT foundation based on a robust and agile infrastructure with core laboratory and enterprise capabilities and innovative solutions to help build state-of-the-art laboratory services in the country.

The South African Vaccine Producers (SAVP), a wholly-owned subsidiary of the NHLS, continued to supply strategic products with outstanding results. Excellent feedback was received from as far as Spain and Thailand, including a report from Kenya stating that “the anti-venom has saved lives in these serious snakebite areas”.

Organisational environment

South Africa experiences a quadruple burden of disease comprising communicable diseases, non-communicable diseases and occupational health and injuries. The NHLS is the main provider of clinical support services to the national, provincial and local Departments of Health, through its countrywide network of quality assured diagnostic laboratories. It also provides surveillance support for communicable diseases and cancer, as well as occupational and environmental health services, which in turn assists in addressing the burden of disease.

The NHLS supports Government’s plans towards addressing the challenges of HIV/AIDS and Tuberculosis (TB) in an integrated manner. For this reason, the NHLS has been and will remain an important partner in the successful implementation of the HIV Counselling and Testing (HCT) Campaign, the Prevention of Mother-to-Child Transmission (PMTCT), and the Comprehensive Care, Management and Treatment (CCMT) Programmes through the National Priority Programmes Unit (NPPU). The announcement that the Minister of Health, Dr Pakishe Aaron Motsoaledi, made during his budget speech on the 10th of May 2016, that the country will implement the WHO evidence-based guidelines on Universal Test and Treat (UTT) by 1 September 2016; is expected to have an impact on the demand of service by the DoH, at various levels.

The NHLS is a custodian of a wealth of valuable health data that could inform policy and guidelines through collaborative engagement and our diagnostic and monitoring services are critical in contributing to the reduction of disease progression, improving quality of care, quality of life and to ultimately reduce premature deaths.

Situational Analysis


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Accessibility to pathologist services

Pathologists play a vital role in health laboratory services. There is a clear need to improve access to pathologists’ support outside of the major academic centres. The ideal would be to place clinical pathologists and mono-specialist pathologists at provincial, tertiary and regional laboratories. Any clinician working in the public sector should, at the very least, have telephonic access to a pathologist/pathology registrar in the relevant discipline for clinically related queries. A pathologist ‘hotline’ for relevant queries should be established that is capacitated through a combination of on- and off-site pathologists that are placed on a roster and that is clearly communicated to clinicians. Pathologists should furthermore participate in the District Clinical Support Teams’ (DCSTs) as envisaged in the NHI strategy, and this must be incorporated on the clinical platform to complement patient care, add value in clinical decision-making and ultimately contribute to improved patient outcomes.

Accessibility to testing services

The current model involves an extended laboratory “footprint” with numerous services provided close to the periphery. The NHLS is guided by the directives, policies and guidelines of the DoH. Accessibility to services can be extended through electronic access to test results. Doctors and nurses rely on data from the NHLS to inform their decisions about patient diagnoses and treatment. A technology-driven results system is far superior to courier-delivered paper results, as it saves time, is more cost-effective and efficient, and can be accessed via the Internet, or transmitted via SMS printers and mobile cellular devices.

Point-of-Care Testing (POCT) could also improve access and revolutionise laboratory and diagnostic services for patients and health providers. Rapid technological advances have made near- and/or on-site performing of such tests a reality and this has become the fastest growing segment of the diagnostic industry. The NHLS is currently conducting pilot studies that address aspects of quality assurance and control, instrument monitoring, as well as the downloading of results into the LIS, as part of the patient pathology records and public health surveillance.

The National Health Insurance (NHI)

The government has tabled the NHI in a bid to expand accessible healthcare to all South Africans and to provide universal coverage of health services, while controlling costs. The NHLS, together with the DoH, are working on means to reduce laboratory diagnostic test costs through rational laboratory usage or electronic gate keeping projects.

The public pathology services in South Africa constitute less than 3% of the total health spend in the public sector. The benefit of pathology to health has however been established in both developed and developing countries, right through from training of undergraduate and postgraduate health professionals, to clinical consultation, surveillance, infection control and prevention, diagnosis and monitoring of disease. Data from developed countries show that pathology services are important in 70 - 80% of critical medical decisions.

Health promotion, that is strongly emphasised in the NHI policy, requires a thorough understanding of the epidemiology of disease in South Africa. National laboratory surveillance is crucial to providing detailed information on a national and local level, to inform policy formulation and drive appropriate interventions. The NHLS has significant surveillance capacity with a data powerhouse supported by a seamless LIS. In this regard, the NHLS is a national asset.

Management Information Systems

The power of this database has already been demonstrated through the national mapping of multi-drug and extensive drug resistant TB. A national LIS is required to allow retrieval of patient results as patients are referred or migrate between districts. The establishment of a business intelligence unit dealing with patient data, will improve decision-making and healthcare provisioning. Such a system will furthermore enable consistent gatekeeping, eliminate unnecessary requests for testing and reduce wasteful expenditure.


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Affordability

The NHLS provides pathology services that are affordable.

The entity is also in the process of reviewing new funding models including Modified Capitation Funding Model. in addition, these models will be complemented by:

• Minimum Clinical Data Set (MCDS): The project serves to improve the completeness of information, relating to the patient and specimen, as received on the NHLS request form. The billing of provinces is intricately linked to the request form, which is the source document that provides a link to the clinician. The accuracy and completeness of the patient and clinician demographics is vital to improved efficiency and billing.

• Electronic Gatekeeping (eGK): eGK in a pathology laboratory is the process whereby access to laboratory testing is controlled by using rules that are programmed into the LIS. These rules will either allow or disallow the laboratory test to be done. Currently a set of eGK rules (formulated by a Hospital Medical Committee) are embedded in the LIS with the aim to promote rational use of laboratory services, by avoiding unnecessary testing (e.g. repetitions) without compromising patient care and also encourage good clinical practice.

These projects will further enhance the affordability of the service.

Delivery on the academic mandate

The NHLS has the mandate to support and undertake the training of pathologists, medical scientists, medical technologists and medical technicians, has joint appointment arrangements with all universities with medical schools and some with dental schools and has a formal relationship with a number of comprehensive universities and universities of technology. Clinical pathology, the generalist discipline in the field, needs greater focus, as the requirement for clinical pathologists to be placed at regional laboratories increases, to improve accessibility to pathology consultancy services.

Research was mandated as a function of the NHLS by the NHLS Act No 37, 2000. A balance will need to be established between the research interests of the NHLS, the National Research Priorities (NRPs) of the country, individual researchers and external funders. Clear alignment between the research and service delivery agendas should be driven.

Resource constraints

Given the strategic alignment with Government programmes, the NHLS must ensure it has sufficient capacity, whether human, technology or infrastructure – to adequately respond to the increasing burden of disease outbreak, despite the resource-constrained environment faced. This will require innovation, creativity, flexibility, agility, foresight, prioritisation of tests and services.

Key policy developments and legislative changes

The following Bills, which are either going through a parliamentary process or broader public comments, will impact on the NHLS once they have been implemented. They are:

• NHLS Amendment Bill – which aims to strengthen the governance and funding mechanism of the NHLS;• National Health Insurance Bill 2018 – which has been designed to create a single compulsory medical scheme for all citizens and

permanent residents, with a special fund for refugees;

• Medical Schemes Amendment Bill 2018 – which seeks to improve the legislative oversight of medical schemes; and• The National Public Health Institute of South Africa (NAPHISA) Bill – which seeks to establish a single national public entity that

will coordinate, and where appropriate, conduct disease and injury surveillance; provide specialised public health services, public health interventions, training and research directed towards the major health challenges affecting the population of South Africa.


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Introduction

Performance information enables the organisation to track how well the organisation is progressing in meeting its planned strategic goals and strategic objectives. The performance information is key to effective management, including planning, budgeting, implementation, monitoring and reporting of information. It also facilitates accountability and enables stakeholders and interested parties to track progress and identify the scope of improvement plans and better understand the issues involved (Framework Performance of Information: National Treasury).

The National Health Laboratory service managed to achieve 60% of its set targets. The performance was impacted by the resignation of executive managers and supply chain challenges.

Programme 1: Administration

Programme purposeThe Administration Programme plays a crucial role in the delivery of the NHLS services through the provision of a range of support services, such as organisational development, HR and labour relations, information technology, property management, security services, legal, communication and an integrated planning function. The NHLS depends highly on the effective management of financial resources and procurement processes, as administered within the financial department. Generating sufficient revenue remains a critical focus area for NHLS to ensure financial viability and sustainability. There are four sub-programmes, namely:

Sub-programme - Financial ManagementThe purpose of this sub-programme is to improve the cash flow position of the NHLS.

Strategic objective: To improve the liquidity position of the NHLS.Objective statement: Improve the cash flow position of the NHLS by improving the cash flow coverage ratio from 2.6 to 2.1 by 2020 and thereby ensure that there is liquid capital to implement key plans and priorities. Increase the current ratio rating from 2.6 to 2.0 by 2020 to optimise the margin of current assets over current liabilities.

Programme 1: Administration

Sub-programme: Financial Management

Performance indicator

2014/15 2015/16 2016/17 2017/18 2017/18

Reason for deviation from the planned targetActual Actual Actual

Planned target Actual

1.1.1 Current ratio (current assets/current liabilities)

New New 1.3 2.6 times: (2.0 times)

1.9 times Target not achieved. Despite a year-on-year increase in both current assets and current liabilities, the growth in short term liabilities exceeded the growth in current assets by 2.2%, which led to a reduction in liquidity. A reduction in the accounting provision for doubtful debt offsets potential concerns around reductions in company liquidity.

1.1.2 Cash flow coverage ratio (Operating cash in-flows/total debt)

New New 1.9 2.5 times: (2.1 times)

2.3 times Target achieved. Increases in the cash coverage is as a result of improved cash collections.

1.1.3 Turnover (including other income): Rbn

5.9bn 6.9bn 7.3bn R7.2bn R8.2bn Target achieved. Actual turnover exceeded the planned target by R1bn due to increases in test volumes as well as an increase in non-exchange revenue, viz the revenue budget allocation from the DoH.

1.1.4 Percentage of materials to test revenue

40% 44% 44% 38%: (43%) 43% Target achieved. This is due to the effective management of price increases as well as an improvement in the exchange rate volatility.

Performance information by Programme


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2014/15 2015/16 2016/17 2017/18 2017/18



1.1.5 Number of creditor days

45 64 74 80: (67) 51 Target achieved. Despite an overall increase in short term liabilities in the reporting period, the profile of the outstanding debt improved due to renewed focus on paying debt that was in arrears. This resulted in improved creditor days.

1.1.6 Number of debtor days

335 320 336 150: (302) 260 Target achieved. Cash collections have improved, which has led to a reduction in debtor days. This is due to a resolution of the long outstanding debt dispute with Gauteng.

Historical figures (in brackets) have been restated on the basis of revised ratio calculations to bring them in line with more accepted ratio standard calculations. Due to these restatements, it has also been necessary to amend planned targets to bring them in line with the revised ratio calculations.

Sub-programme - Governance and Compliance

The purpose of this sub-programme is to provide support services and ensure compliance with relevant legislation.

Strategic Objective 1.2: To maintain the unqualified audit opinion if the NHLS by 2020Objective Statement: Provide support services and ensure compliance with relevant legislation. Uphold audit outcome by ensuring continuous management practices through compliance with standard operating procedures and systems within the NHLS.

Performance Indicators

2014/15 Actual

2015/16 Actual

2016/17 Actual

2017/18 planned Target

2017/18 Actual

Reasons for deviation from the planned target

1.2.1 Audit opinion of the AG

N/A Unqualified audit report

Qualified audit report

Unqualified audit report

Qualified audit report

This was due to irregular expenditure, commitments and accruals largely due to findings from the previous year.

Sub-programme - Information Technology and CommunicationThe purpose of this sub programme is to build a robust and agile IT infrastructure and innovative digital solutions to facilitate and enable state-of-the-art laboratory services at the NHLS by 2020.

Strategic objective 1.3: Access to customer-centred innovation.Objective statement: Investing in solutions that facilitate easy access to patient results, deliver services in new ways and improve stakeholder engagement through the NHLS laboratory network. Providing innovative opportunities to search, access, link to and use the NHLS’ digital information and services.

Strategic objective 1.4: Results analytics.Objective statement: Leveraging NHLS data and analytics to provide improved interfaces for patient results, and better “end-to-end” technology solutions to improve patient diagnosis, decision-making and risk management.

Strategic objective 1.5: Modernising of ICT systems.Objective statement: Developing solutions that are open, adaptable and robust and reflect the reality of industry trends and technology developments. Decommission legacy systems and revamp underlying and supporting technologies.

Strategic objective 1.6: Improve governance of ICT.Objective statement: Implement relevant structures, processes and policies to facilitate effective governance of ICT and


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decision-making.

Sub-programme: Information Technology and Communication


2014/15 2015/16 2016/17 2017/18 2017/18



1.3.1 Percentage of new IT strategy completed

New New New 100% 75% Target not achieved. The compilation of the draft strategy commenced late, due to changes in management. The first draft is complete and will be implemented in 2018/2019.

1.3.2 Percentage of projects implemented as per the approved IT roadmap

New New New 40% 0% Target not achieved. The first draft is complete. The strategy will be implemented in 2018/2019. The roadmap is detailed in the IT strategy.

1.3.3 Number of dashboard, analytics and customer channel projects implemented

New New New 4 4 Target achieved. The projects implemented are:• Laboratory performance dashboard (TATNPP);• Rejection report; • Facility report; and • APP.

1.4.1 Percentage system uptime for critical systems

99% 99% 99% 99% 99% Target achieved.

1.5.1 Number of modernisation projects completed

New New New 8 5 The target is not achieved because there was adelay in the implementation of the LAN and VOIPprojects and procurement of computers for ECMwas delayed.

Five projects which were completed are:• Migration to Exchange.• OS and Office IT modernisation.• Implementation of MS monitoring tools.• Migration to MTN MPLS VPN.• Replacement of CDW equipment.

1.6.1 Percentage projects implemented against approved IT governance framework and security strategy implementation plans

New New New 60% 75% (3/4) Target achieved. Projects completed:• IT governance framework approved.• IT policy reviewed and updated.• Project management framework implemented.

Sub-programme - Human Resource ManagementThe purpose of this sub-programme is to provide effective services through efficient processes and adequate human resources.

Strategic objective 1.7: To ensure adequate and skilled human resources by 2020.Objective statement: Provide effective services through efficient processes and adequate human resources. Improve the motivation and performance levels of all employees.


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Sub-programme: Human Resource Management


2014/15 2015/16 2016/17 2017/18 2017/18



1.7.1 Climate survey satisfaction rating

New New New 70% 59% Target not achieved. The survey was conducted in quarter 1. The previous year’s figure was for both an internal and external survey and was reported at 72%. This was an internal survey conducted just prior to labour instability, which led to a protected strike. As a result, the staff was negative and gave poor scores. Rewards and remuneration were amongst the lowest scored.

1.7.2 Leadership proficiency index level

New New New Level 3 Not implemented

Target not achieved. The assessment could not be completed due to suspensions and resignations of senior management at executive level.

1.7.3 Talent coverage ratio for critical positions across all levels

New New New 3:1 Not implemented

Target not achieved. The policy was approved but could not be implemented because of instability at executive level and the suspension of both the Chief Executive Officer (CEO) and the Chief Financial officer (CFO).

1.7.4 Percentage of employment equity achieved across grade C,D and E relative to Employee Assistance Programmes (EAP)

New 82% 83% 84% 88% Target achieved. The intake of newly qualified medical technologists is informed by the composition of interns whom majority are African females.

1.7.5 Percentage of employees with contracted, reviewed and evaluated performance agreements

New 49% 63% 95% 80% The target was not met because some of the Executives and Senior Managers resigned during the reporting period and proper appraisals could not be performed.

1.7.6 Customer satisfaction index

New 69% 75% 76% 72% Target not achieved. The lowest scored areas are communication, training and skills development. It was later discovered that this was mainly because some of the survey questions were ambiguous, which in turn led to incorrect responses.

1.7.7 Medical technologists’ pass rate

42% 55% 60% 62% 68% Target achieved. Integrated learning and remedial training programme was introduced in this financial year.

1.7.8 Medical technicians’ pass rate

10% 58% 60% 62% 53% Target not achieved.

Commentary on how the strategic objectives contributed to the strategic outcome-oriented goals Strategic objective Strategic outcome-oriented objectiveTo improve the liquidity position of the NHLS Sound governance and sound financial

managementTo maintain the unqualified audit opinion of the NHLs by 2020

To ensure that 100% of the registered users have access to the TrakCare Lab WebView system by 2020Performance-driven processes and systems

To increase the system’s availability to 99.5% by 2018

To ensure that the workforce of the NHLS are capacitated and motivated Adequate and competent human capital


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There were no changes to planned targets for Programme 1 in 2016/2017.Linking performance to budget:

Programme 1

Budget 2017/18

R’000

2017/18 Actual

expenditure R’000

Over/under expenditure

R’000

Budget 2016/17

R’000

2016/17 Actual

expenditure R’000


Administration 890 219 212 816 677 403 1 122 251 667 103 455 148

Reasons for deviations from the budgetThere was an underspend on labour and the writing-off of bad debt in 2017/2018.

Programme 2: Surveillance of Communicable Diseases

Programme purposeThe NICD is a national public health institute of South Africa that provides reference microbiology, virology, epidemiology, surveillance and public health research to support Government’s response to communicable disease threats.

Strategic objective 2.1: To uphold the communicable disease surveillance level at 90% by 2020 and beyond. Objective statement: Maintain comprehensive communicable diseases surveillance programmes for leading infectious disease associated with morbidity/mortality.

Strategic objective 2.2: To maintain response levels for outbreaks at 100% and responded to within 24 hours after notification. Objective statement: Maintain capacity and resources to be able to respond to outbreaks of diseases within prescribed timeframes and requirements.

Strategic objective 2.3: To ensure all NICD laboratories remain South African National Accreditation System (SANAS)-accredited.Objective statement: Maintain standards and processes within the laboratories to retain SANAS accreditation for all of them.

Sub-programme: Surveillance of Communicable Disease


2014/15 2015/16 2016/17 2017/18 2017/18



2.1.1 Percentage of identified prioritised diseases under surveillance

100% 90% 90% 90% 90% Target achieved.

2.1.2 Number of articles published in the peer reviewed journals

120 120 128 120 180 Target achieved. Managed to secure extra funding for research

2.2.1 Percentage of outbreaks responded to within 24 hours after notification

100% 100% 100% 100% 100% Target achieved

2.2.2 Number of field epidemiologists qualified

New 5 14 5 8 Target achieved

2.2.3 Percentage of provinces with appointed epidemiologists (1 per province)

80% 80% 36% 88% 11% Target not achieved. During the year, a number of epidemiologists resigned.

2.3.1 Percentage of SANAS-accredited NICD laboratories

100% 100% 100% 100% 100% Target achieved.

Commentary on how the strategic objectives contributed to the strategic outcome-oriented goals

Strategic objective Strategic outcome-oriented objective

To uphold the communicable disease surveillance level at 90% by 2020 and beyond

Accessible pathology service footprintTo maintain response levels for outbreaks at 100% and responded to within 24 hours after notification


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There were no changes to planned targets for Programme 2 in 2017/2018.Linking performance to budget:

Programme 2

Budget 2017/18

R’000

2017/18 Actual

expenditure R’000


R’000

Budget 2016/17

R’000

2016/17 Actual

expenditure R’000


Surveillance and communicable diseases 367 008 309 431 57 576 347 274 295 742 51 532

Reasons for deviations from the budgetThere was an underspend on CAPEX in 2017/2018.

Programme 3: Occupational Health and SafetyThe NIOH is a national public health institute that provides occupational and environmental health and safety services across all sectors of the economy, to improve and promote workers’ health and safety. The institute achieves this by:i) Providing occupational medicine, hygiene and laboratory services;ii) Conducting research; andiii) Providing teaching and training in occupational health and safety.

Programme purposeThere are four sub-programmes namely:

Sub-programme – Occupational and Environmental Health ServicesThe purpose of this sub-programme is to provide quality and accredited services for occupational and environmental health related matters in accordance with applicable quality management systems.

Sub-programme - Provision of Technical Support for Occupational and Environmental Health and Safety for the NHLS The purpose of this sub-programme is to provide occupational health, safety and environment services to the NHLS and to be the occupational medical practitioner for the NHLS.

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