1. South African Medical Research Council 2011/2012 Annual Report Presentation to the Parliamentary Portfolio Committee on Health 31 October 2012 1

2. Outline Research highlights Financial Reports Challenges facing the MRC Revitalising the MRC 2

3. 3 Research Highlights

4. South Africa’s proudest achievement: People living >10% longer than 5 years ago - due to AIDS treatment Deaths in children <5yrs: ↓ 43% (42 per 1000 live births in 2011) Adults deaths: ↓20% (40% premature deaths in 2011) Life expectancy: ↑ by 6 years (60 years in 2011) Bradshaw D, Dorrington R, Laubscher R. Rapid Mortality Surveillance Report 2011. Medical Research Council RESEARCH HIGHLIGHTS 4

5. MRC shows that new TB drug is highly effective MRC’s TB researchers part of the global effort – developed the first new drug against TB in several decades TMC 207 (Bedaquiline) has a novel mechanism of action and potent activity against drug-resistant TB Published in New England Journal of Medicine 6 RESEARCH HIGHLIGHTS

6. MRC shows impact of new pneumonia vaccine in SA MRC Respiratory & Meningeal Pathogens Research Unit produced the evidence to support the introduction of conjugate pneumococcal vaccine in SA South Africa - only African country funding implementation of this vaccine for children Pneumonia & respiratory deaths declining 7 RESEARCH HIGHLIGHTS

7. MRC finds that 20% of Women in S Africa have been raped MRC Gender & Health Research Unit produced first description of extent of rape in SA: + 20% of women experienced forced sex MRC research on gender-based violence received international recognition - served as the basis for WHO policy Published in Lancet and Science 9

8. MRC shows mother-to-child transmission of HIV reduced to 2.7% in 2011 MRC’s Health Systems Research Unit undertook a national HIV survey to assess mother-to-child transmission In 2011, only 2.7% of newborns acquired HIV from their mothers down from 25% ten years ago Presented at the International AIDS Conference, Washington 2012 8 RESEARCH HIGHLIGHTS

9. 5

10. 10 Financial Report

11. STATEMENT OF FINANCAL PERFORMANCE 2012 R’000 2011 R’000 % (Increase/Decrease) Revenue538 565527 691 2 Other Income9 5385 551 71 Operating Expenses(578 820)(552 799) 4 Operating Deficit(30 717)(19 556) 57 Investment Income15 69020 973 -25 Finance costs(118 )(101 ) 17 (Deficit) surplus for the year(15 145)1 316 11

12. REVENUE BREAK DOWN Revenue2012 R’000 % (Increase/ Decrease) 2011 R’000 % (Increase/ Decrease) Income from contracts, grants & services rendered 300 66555.8290 40355 Government grants237 88944.2237 28845 More than 55% of total revenue now funded from external sources. 12

13. ANALYSIS OF EXPENDITURE 2012 R’000 2011 R’000 % Personnel310 890287 75254 Collaborative Research110 373112 88119 Other expenditure157 677152 26727 578 940552 900100 Of total costs only 19% is allocated to extra-mural research with the balance to cover intra-mural and administration costs. 13

14. STATEMENT OF FINANCIAL POSITION: 31/03/12 20122011 RR ASSETS Current Assets Inventories201 683124 557 Other financial assets35 787 31332 887 621 Receivables from exchange transactions31 498 88628 455 805 Cash and cash equivalents314 349 575410 336 417 381 837 457471 804 400 Non-Current Assets Biological assets that form part of an agricultural activity1 325 200975 000 Property, plant and equipment125 991 712118 416 046 Intangible assets11 924 6874 330 777 Investments in controlled entities22 Other financial assets1 135 042952 918 140 376 643124 674 743 TOTAL ASSETS522 214 100596 479 143

15. STATEMENT OF FINANCIAL POSITION (continues) Liabilities Current Liabilities Finance lease obligation127 446112 431 Payables from exchange transactions52 187 85253 518 694 VAT payable1 463 9431 121 745 Provisions10 208 3246 732 087 Deferred income166 865 544228 970 264 230 853 109290 455 221 Non-Current Liabilities Finance lease obligation8 198135 644 Retirement benefit obligation1 332 0001 080 000 Earmarked funds1 036 301999 344 2 376 4992 214 988 Total Liabilities233 229 608292 670 209 Net Assets288 984 492303 808 934 Net Assets Reserves Fair value adjustment assets available-for-sale reserve2 179 5641 858 370 Accumulated surplus286 804 928301 950 564 Total Net Assets288 984 492303 808 934 20122011 RR

16. STATEMENT OF FINANCIAL POSITION (CONTINUES) Total assets declined by 12.5% from R596 479k to R522 214k due to decline in cash & cash equivalents. Net assets value decreased from R303 808k to R288 984k. Decline of 4.6% as a result of deficit for the year of R15 145k. 16

17. CASH & INVESTMENTS 2012 R’000 % (Increase/ Decrease) 2011 R’000 Cash and cash equivalents314 349-23410 336 Other financial assets35 787832 887 Total cash & investments350 136-21443 223 Deferred income166 866-27228 970 Total cash & Investments declined by 21%. Total decrease of R93 087m Off-set mainly by reduction in deferred income of R62 104 and deficit of R15 145m. 17

18. CASH FLOW 2012 R’000 2011 R’000 Net cash flows from operating activities(63 514)41 236 Negative cash flow due mainly to timing of projects and contract deliverables. 18

19. AG INTERNAL CONTROL DASHBOARD: 30/09/12 19

20. AG INTERNAL CONTROL DASHBOARD: 30/09/12 20

21. AG INTERNAL CONTROL DASHBOARD: 30/09/12 21

22. 22 Challenges facing the MRC

23. MRC baseline grant grew + 3.5% pa in last 4 years MRC is in a state of financial neglect Shrinking budget Heading for repeated budget deficits MRC Budget < 10% of NIH funding to SA 23

24. Skewed resource allocations Total 2012/13 MRC budget: R246million Intramural research: 43% Administration budget: 38% Extramural research :19% (R67million) Salaries comprise a major component of the budget provided to Intramural units –87% MRC’s 2012/13 budget “deficit” = R43million Challenges facing the MRC 24

25. MRC’s outdated organisational & funding approaches Funding to Universities seriously inadequate and the approaches outdated - cannot meet demands of a modern world-class research organisation MRC’s organisation structure developed incrementally - the current MRC is not adequately fit-for-purpose Lack of organisational coherence, incremental and opportunistic growth over time has led to outdated units, duplication and departments with inappropriate functions Example : The biggest change in health in SA is the NHI – the MRC has no research programme to generate data and evidence to guide this change and to support DoH in this initiative Challenges facing the MRC 25

26. 26 Revitalising the MRC

27. “ In restructuring the Medical Research Council, the brief that I gave to the new President, Prof Slim Karim, is to ensure that the MRC becomes a world class medical research institution. However, not all research must and should be done at the MRC. The MRC must also partner with and develop centres of excellence outside itself.” ….Speech by the Honorable Minister of Health Dr Aaron Motsoaledi at the launch of the K-RITH building, 9 Oct 2012 27

28. Revitalising the MRC: 3 key principles Centrality of scientific excellence through leading the generation of new knowledge Accept responsibility for building and facilitating all medical research in South Africa such that extramural and intramural research are equally important Intra-mural research prioritised to maximise impact on health and optimally utilise limited financial resources: –MRC can afford 12 intramural units –Propose to prioritise on Top 10 causes of death in BoD Revitalising the MRC 28

29. What should the intramural research priorities be? Top 10 conditions in the burden of disease Source: Dr Debbie Bradshaw, MRC Burden of Disease Unit Revitalising the MRC 29

30. 1.The 3 key principles (Excellence, Fund Univ, BoD priorities) 2.Modernise the MRC:  12 Intramural units based on BoD  6 extramural funding mechanisms  Strategic Health Innovation Initiative for new drugs & vaccines  Improving MRC administration for efficiency & effectiveness  Optimising lab and office space in MRC buildings 3.Implement new initiatives and create new:  Streamlined policies  Revamp peer-review system  High quality and responsive Information Services 4.New finance: R160million for capital over 3 years 5.MRC budget has to double in 2 years – requested 50% increase in MRC budget this year from R246m to R371m Revitalising the MRC 30

31. Revitalising the MRC

32. We, the members of the Committee of Medical Deans of South Africa, ….. “… Congratulations on your bold vision for the MRC and the exciting plans you’ve put forward. “We agree that restructuring the MRC along the lines proposed in the report, will go a long way to achieving well-funded, well- supported intra- and extramural units, which are equipped to do high impact research, train and mentor young scientists, and ensure capacity development in medical research in South Africa.”

33. 31 Thank you to Parliament and the DoH for supporting and funding the MRC