USAID Cuts Force HIV and TB Services Into Business Rescue

MatCH has been placed in voluntary business rescue after cuts to its USAID-funded projects.

• MatCH, which provides HIV and TB services in three provinces, told almost 900 employees it would not be able to pay their salaries after receiving a stop-work notice from USAID.
• The employees obtained a court order compelling MatCH to continue paying salaries until proper retrenchment processes are followed.
• Now MatCH has placed itself in voluntary business rescue and has been paying employees with remaining USAID funds, despite the stop-work notice.
• Two of three USAID grants have been reinstated, but no additional funding has yet been received.

A USAID-funded non-profit organisation providing community HIV and TB services to thousands of people around South Africa has voluntarily placed itself in business rescue.

This comes after almost 900 employees obtained a court order compelling the organisation to pay their salaries despite their USAID funding being stopped.

The court order is automatically suspended because of the business rescue process. But Business Rescue Practitioner Ken Stewart told GroundUp he has directed the management of the Maternal, Adolescent and Child Health Institute (MatCH) to pay some of the employees for February and March, and others, at this stage, only for February, depending on which project they worked on.

He has authorised employees to be paid from the organisation’s unspent USAID funds. He said two of the three grants had been reinstated by USAID but no additional money had yet been received.

“We are robbing Peter to pay Paul,” he said. “I am just doing damage control. But we have to apply South African labour law.”

In February, Durban Labour Court Acting Judge Imraan Mohamed ruled in favour of the employees who were “temporarily laid off” following US President Donald Trump’s executive order putting a three-month hold on all USAID awards pending a review of its foreign aid policy.

Judge Mahomed ruled that MatCH must comply with the Labour Relations Act, which compels “proper and meaningful consultation to avoid retrenchment”.

The Judge further ordered that MatCH must reinstate the employees and interdicted MatCH from retrenching them until it has complied with a fair procedure. MatCH was ordered to pay salaries for February and onwards until it has complied with the provisions of the Act.

In the court papers in the urgent application, which was heard and decided in February this year, the project manager of the men’s health programme, Jabulani Mishack Khathi, said he spoke for 888 others affected by the “temporary layoff”, which, he said, was effectively a “mass dismissal for operational requirements without regard to labour law”.

This, he said, was a result of the “misplaced fury” by Trump, stopping foreign aid or grant payments to MatCH. Kathi said MatCH had not consulted meaningfully with the employees.

MatCH was the recipient of three awards (USAID grants) and employed 1,060 people across KwaZulu-Natal, the Eastern Cape and Mpumalanga. Kathi said at the end of January this year, more than 800 employees were told to “stop work” and return all tools of the trade after the suspension of the USAID awards.

They were informed that they must not return to work and, as of February 1, they would not be paid.

There was a subsequent online meeting with employees – during which they were muted.

Questions addressed to the human resources department had not been answered, he alleged.

Khathi said MatCH had not been candid about its financial position and did have money in its bank accounts. He claimed the relevant notice on the pausing of funding specifically excluded spending on operating expenses, which meant that salaries could be paid.

In her opposing affidavit, MatCH CEO Catherine Searle argued that the organisation’s hands were tied by Trump’s order. She said the executive order was issued “abruptly and without warning” and had affected 4,000 organisations in over 100 countries. “We were not spared,” she said.

USAID had advised that all programmes were to be placed on hold and reasonable steps had to be taken to minimise incurring costs.

As a result, MatCH had engaged with various creditors, such as landlords, to make payment arrangements for payment holidays.

“When we informed our employees that we had been directed to pause all our programmes and not incur further expenses, this was not a letter terminating employment. We are implementing temporary layoffs without pay across the board. It has not initiated retrenchment proceedings or dismissed anyone for operational reasons, nor does it intend to as USAID has not terminated the awards,” Searle said.

She said MatCH had applied for a waiver for certain projects and had made submissions to USAID for the payment of salaries but the waiver had not yet been granted, and USAID had not given approval for the payment of salaries from the balance of funds from previous payments.

She said, in any event, at that time there was not enough money in the bank accounts to pay salaries.

MatCH was placed in business rescue on March 10. The first meeting of creditors was held on March 20.

According to the minutes of that meeting, there are about 500 creditors.

While in terms of the law, a business rescue plan would be due by mid-April, Stewart asked creditors to extend the date until the end of June. This was to provide for the outcome of the US foreign assistance review due on May 23, 2025.

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