The Government Employees Medical Aid Scheme (Gems) has been taken to court for allegedly irregularly awarding a R4.5 billion pharmaceutical courier contract to a “start-up” company linked to the pharmaceutical company, AfroCentric Group. 

In court papers filed at the North Gauteng High Court, Pretoria-based pharmaceutical company, Dely Road Courier Pharmacy, accused GEMS of awarding the contract Marara Pharmacy, which entered into a “questionable joint venture” with Pharmacy Direct, a subsidiary of Afrocentric Group, without following due process.

Marara would pocket R900 million a year over five years, according to the tender, for rendering courier services. The court papers highlighted that Pharmacy Direct, which has a 30% stake in the Marara Pharmacy contract, is 100% owned by Afrocentric Healthcare Assets, whose four subsidiaries already render services to GEMS. 

Mogologolo Phasha, Dely Road Pharmacy director, has asked the High Court to set aside the joint venture and order GEMS to award the same contract to Dely Road Courier Pharmacy.

He argued in his application that the contract had been awarded irregularly because Marara Pharmacy was only registered with the South African Pharmacy Council 20 days after it got the contract. 

 The council is a statutory entity tasked with regulating the pharmaceutical industry in South Africa. 

Phasha argued in his court papers that on May 12, 2021, he learned that GEMS had issued a request for bids for the appointment of a service provider who would render courier services relating to the pharmaceutical business.

He said various companies submitted their bid for the courier tender before the July 9, 2021, closing date. These included his company and Marara Pharmacy.

“The successful bidder would render the services for a period of one year, commencing on 1 January 2022. The period of one year would be renewable annually for a maximum of four additional years. As such, the 2021 tender envisaged a maximum period of five years,” said Phasha.

The court application comes a few months after Afrocentric Group was accused of capturing GEMS through officials who gave its subsidiaries unfettered powers to adjudicate and irregularly award multimillion tenders to their sister companies. The accusation came after it emerged that GEMS allegedly awarded a dodgy R600 million multivitamins contract to Medscheme, a subsidiary of Afrocentric Group in December 2021.

Phasha said upon learning that the GEMS Tender Adjudication Committee had recommended Marara Pharmacy for appointment, he made inquiries about the company and discovered that it was registered on July 30, ‪2021, three weeks after the tender application was closed.

He added that GEMS had cancelled the tender on October 21, 2021, following the discovery of Marara Pharmacy’s registration defects. Marara Pharmacy, through a joint venture with Pharmacy Direct, a retail arm of the AfroCentric Group, was later awarded the tender in August 2022, almost a year after it was cancelled. 

“I was not familiar with the entity called Marara. I, therefore, decided to make my own inquiries about it. I discovered that Marara was only registered with the Council on 30 July 2021, as is evident from Marara’s registration records.

“Marara’s registration was, of course, after the bid closing date for the 2021 tender. This printout was extracted from the website of the Council. I verily believe that the Board became aware of the defect in Marara’s registration during or about October 2021,” said Phasha.

Phasha said the GEMS Board was forced to cancel the tender.

However, he believes that cancelling the tender was not enough. His application is therefore aimed at getting the Board to appoint one of the bidders whose papers were in order, especially his own courier company.

“As is evident, GEMS cancelled the 2021 tender after the discovery of Marara’s registration status.

“I verily believe that GEMS elected to cancel the 2021 tender as opposed to awarding it to the other entities which met the bid requirements so as to re-issue the tender so as to give it to Marara, which is now registered, albeit unlawfully,” Phasha said.

Phasha said true to his suspicions, GEMS issued another request for bids four months later, with April 11, 2022, closing date.

“The successful bidder would render the services for a period of one year commencing on 1 January 2023, which one-year period would be renewable annually for a maximum of four additional years.

According to the application, there was a lot of back and forth, which resulted in Marara being appointed as part of a joint venture.

“To the extent that Marara carried itself out as a pharmacy when it was not entitled to render the services…such conduct would constitute a criminal offence.

“It is clear the purported joint venture was established solely for the purpose of enabling Marara to utilise the background and experience of Pharmacy Direct.

“The joint venture is comprised of Marara Pharmacy with a participation ratio of 70% and Pharmacy Direct with 30%,” said Phasha.

He added that Marara Pharmacy also provided the name of an intern who was registered in February 2020 after completing her degree. He said the intern completed the internship in January 2021, six months before Marara was registered as a pharmacy.

Phasha further argued in his court papers that GEMS had strict requirements for the companies that wanted to bid for the tender.

Amongst the requirements was proof of valid accreditation with regulatory bodies in line with legislation.

“Bids submitted without the required proof of accreditation would be deemed to be non-responsive,” he said.

Amongst other strict conditions was that each bidder must prove that they had rendered similar services before, he said in court papers. 

He added that the GEMS bid conditions were clear that they needed the experience of the company, “not that of your team members” to avoid a situation where inexperienced start-ups go out to hire experienced personnel to use them for their bids.

Marara Pharmacy CEO Elias Mpolaene Monhla referred enquiries to a company spokesperson, only known as Gwabi, who did not respond to African Times questions. However, It is understood that Marara intends to oppose the application after receiving legal advice.  

GEMS and Afrocentric said they were unable to comment because the matter is before the court.

“This matter is before the court for consideration, and GEMS is not in the position to comment until the matter has been heard fully by the court,” said GEMS chief marketing officer Dr Phumelela Dhlomo.