Public, Private and Third-sector Procurement

What is it?

Healthcare provision in Africa is usually performed by a mix of public-, private- and third-sector organisations. Procurement practitioners need to understand the implications of this for them to operate effectively in this environment.

Public-sector organisations are owned and controlled by the government. They are funded by the taxpayer and their purpose is to provide the general public with services that are integral to their well-being and lifestyle. This is particularly the case in relation to healthcare. They are structured to serve a public need rather than generate a profit. Because they are responsible for spending taxpayers’ money, there is a legal requirement for high levels of transparency, fairness, scrutiny, auditability, and accountability.

Private-sector organisations are owned and funded by individuals or enterprises. Their purpose is to provide goods and services to paying customers and consumers. There is an over-riding objective for these organisations to make a profit. Examples of private-sector healthcare providers are hospitals and clinics, pharmacies, and insurers.

Third-sector organisations, such as charities, membership organisations, and social enterprises, are not geared towards achieving profits like the private-sector or to serve the taxpayer like the public-sector. Instead, they tend to focus on a specific cause and derive their income from specific donors, both collective and individual. Non-governmental development partners (DPs) and faith-based organisations fulfill this role in African healthcare. Because they are spending other people’s money, third-sector organisations tend to adopt high levels of governance, similar to those in the public-sector.

Private-sector firms benefit from having a clear point of focus (profit) which enables them to concentrate on reducing costs and developing products demanded by customers. In the public-sector value is the main driver, but this is difficult to define and different stakeholders (the treasury; donors; specific beneficiaries; general taxpayers) will have different interpretations of value. The greater levels of governance may lead to onerous levels of bureaucracy and may limit the ability to be agile.

However, public-sector organisations are beneficial in providing services which a private-sector company would not. They provide benefits to all citizens, irrespective of their ability to pay, and offer stability in volatile economic environments. They also take a holistic view by considering social as well as economic value. Furthermore, having transparent and robust processes in place provides reassurance to taxpayers and donors. The private-sector focus on profit may lead to negative behaviours and impacts on society if left unchecked.

What does it look like?

How does it work in practice?

In Kenya the public-sector serves about 50% of the population in terms of healthcare, with the other 50% served by the private-sector. Third-sector influence is also high, with about 75% of government healthcare provision being donor funded. In Nigeria public sector healthcare provision is less developed than Kenya, with the private sector providing 70% of healthcare services. South Africa, on the other hand, is less reliant on private- and third-sector organisations, as the public-sector serves 84% of the population and 95% of healthcare spend is sourced and funded by the government.

Third-sector organisations in the guise of DPs and faith-based organisations are key players in relation to healthcare provision in Africa.  Third-sector objectives are usually aligned with those of the public-sector and there is strong cooperation between the governments and development partners. Given the number of stakeholders involved, the DPs also coordinate their efforts by means of steering committees, oversight committees, forums, and regular meetings.

Public-sector healthcare procurement is strictly controlled in Kenya. Public procurement is governed by the Public Procurement and Asset Disposal Act 2015 and the Public Procurement Regulatory Authority monitors compliance. Likewise, public procurement in Nigeria is governed by the Public Procurement Act 2007, with subsidiary regulations such as the Public Procurement Regulations for Goods and Works (2007), and the Public Procurement Regulations for Consultancy Services (2007). The Bureau of Public Procurement is the regulatory authority. The relevant legislation in South Africa is the Public Finance Management Act (1999) and the National Treasury Chief Procurement Officer’s Office is accountable for overseeing compliance.

The situation with private-sector healthcare provision, however, is not as strictly controlled. In a study of 15 East and Southern Africa countries it was found that there were a number of problems in relation to the type, volume, distribution, quality and price of private-sector healthcare services.[1] Private-sector organisations are not well-monitored or controlled, while health insurers (except in Namibia, South Africa and Zimbabwe) are only governed by the very general provisions of ordinary insurance legislation.

Most legislation focuses on controlling the entry of health professionals and organisations into the market, but most countries have not developed adequate legislation around behaviour following entry. Generally the type and quality of services provided by private practitioners and facilities are not well-regulated or monitored and there is minimal control of prices.

Several countries are updating and improving legislation, although in most cases this is without the benefit of an overarching policy on the private-sector or reference to wider public health objectives.

Private market quality concerns continue despite the regulatory efforts of the Tanzanian Food and Drug Authority and the Kenyan Pharmacy and Poisons Board.[2] Addressing this will ensure that public- and private-sector objectives are aligned.

[1] Doherty, Jane; Regulating the for-profit private health sector: lessons from East and Southern Africa; Health Policy and Planning, Volume 30, Issue suppl_1, 09 March 2015

[2] Mackintosh, Maureen et al; Rethinking health sector procurement as developmental linkages in East Africa; Social Science & Medicine; Volume 200, March 2018, Pages 182-189