Mid-term budget fails to show the way to a more resilient recovery

27 October 2022

The Medium-term Budget Policy Statement (MTBPS) was tabled at a time of increased uncertainty and volatility characterised by rising global interest rates, downward revisions to the economic outlook, and very high unemployment.

The global risks are compounded locally by decreased investment, driven in part by concerns over increased political uncertainty and increased electricity supply issues hampering any prospect for sustained economic growth.

At face value, it is difficult to argue against the strategies presented to mitigate these risks.

However, with government’s failure to account for public sector wage increases beyond the current fiscal year and the uncertainty over just how much of Eskom’s debt will be transferred to the country’s balance sheet, the medium-term budget policy statement fails to provide a credible path out of the current crisis.

The medium-term budget policy statement is an important event in the fiscal calendar – firstly as it provides insights into how government departments such as health have performed against their budget allocations tabled in February. It also allows departments to make adjustments to their budgets to allow for changes.

More importantly, it allows National Treasury to update the assumptions that informed the 2022 budget and update their outlook for the period ahead. So, it is worth looking at how these choices will impact public-funded healthcare and rural health in particular.

Outlook for publicly funded healthcare

All revenue is collected after the deduction of debt servicing costs and is distributed between national departments, provinces, and local government. Debt servicing costs as a percentage of total expenditure remain the fastest-growing item on the budget and the trend continues over the medium term.

Turning to healthcare, funding for healthcare is allocated at both the national and provincial levels as the function is shared between national and provincial governments. Over the medium term, consolidated health spending rises on average by 2.5 percent per annum in nominal terms. Over the same period, Treasury forecasts inflation at just below 7%, which translates to an effective cut in healthcare expenditure.

Healthcare delivery is a labour-intensive business and as provinces are responsible for the delivery of healthcare services, expenditure on compensation of employees can constitute up to 65% of provincial health budgets. In the absence of a public sector wage agreement, the projected provincial equitable share allocations do not include provisions for wage increases let alone provides for expanding health sector employment – which has been stagnant since 2012.

South Africa has a large footprint of publicly funded healthcare facilities comprising around 3 500 primary healthcare clinics and around 600 hospitals distributed across 52 health districts. The ongoing electricity supply issues will impact the functioning of these facilities as running costs for emergency power supply, medicine costs, and medical equipment costs all increase. In addition, currency depreciation could also contribute to the further weakening of an already fragile health system. Recent surveys from community-led monitoring group Ritshidze, show that accessing healthcare services remains a challenge, with consistent access to reproductive health services a major concern.

On a population health level, South Africa made significant progress prior to the emergence of COVID-19 as a public health threat. Maternal mortality on an aggregate level has been reduced to just over 70 per 100 000 live births, under 5 mortality rates have been reduced, and global universal healthcare (UHC) targetswere within reach.

Over 5.3 million people living with HIV receive lifesaving ARV treatment and the treatment success rate for TB has also followed an upward trajectory. The COVID-19 health crisis has disrupted this progress – for the first time in decades TB deathsare rising.

On the district level, there is significant heterogeneity across South Africa’s 52 districts, with rural districts amongst the worst performers in public healthcare services. This is not surprising as delivering healthcare services in rural areas is constrained by a number of factors, including issues of topography which complicates physical access, low population densities, and various socio-economic factors such as higher levels of unemployment, low rates of school completion, and poor housing that negatively impact health and healthcare seeking.

The right to healthcare services, including reproductive health services, is guaranteed to everyone in section 27 of the Constitution. But healthcare needs are unlimited while the capacity to deliver is hamstrung by resource constraints (human resources, infrastructure, health technologies, and funding).

The risks to maintaining, let alone the expansion, of access to healthcare services, are significant. While the National Treasury’s hawkish narrative with its obsession with reducing expenditure at all costs in the face of significant uncertainty may be prudent, the lack of a clear path out of the current crisis increases the risk of the state failing to execute its plans effectively.

Strengthening governance

The MTBPS tabled this week is weak on direction. It fails to show us the way out of our current economic quagmire. But our Constitution, specifically the Bill of Rights, points to the direction we should be going and provides the framework for the kind of governance we need to build the social solidarity around a resilient recovery we so desperately need.

This is how we can start:

First, we must strengthen political accountability to ensure access to healthcare services. A first step could be giving content to the state’s obligations in respect of publicly funded healthcare services. Currently, the National Health Act, for example, only guarantees free access to primary healthcare services but is yet to declare a primary healthcare package that is standardised and consistently available. This makes it difficult to ensure accountability that services are consistently available across all districts.

South Africa has very good health management information which can assist in understanding access to healthcare and which groups have the least access. This should be used to determine which populations should be prioritised in how and by whom funding decisions are made.

We must also increase transparency in how decisions are made. Earlier this year, the National Treasury announced adjustments to the health component of the provincial equitable share. The new formula, while still heavily weighted to utilisation (75%), does consider premature deaths, levels of poverty, and sparsity or distance from health facilities. The changes result in increased funding for poorer rural provinces, but as the transfer is unconditional, provinces can allocate as they see fit and there is no guarantee health will get the extra money it needs. We need more transparency and accountability for such funding decisions.

Increasing the involvement of civil society at all levels of health system governance is crucial. The National Health Act includes a number of provisions (sections 23,24, 26, 28, 31,42 ) that could contribute to strengthened governance at all levels, but they are either underutilised or exclude civil society involvement. At the primary healthcare level ensuring that the composition of the clinic committee reflects the profile of the community it serves, for example, having young women represented, could improve the quality of sexual and reproductive health services. Similarly, at the hospital level including both healthcare managers and community members, could improve the governance and functioning of the hospital. At a national level, the National Health Council can be enhanced by including civil society and representatives from private healthcare.

Lastly, government should stop obfuscating the issues and take the public into their confidence by clearly communicating the extent of the crisis, the issues that need urgent attention, and how we, the broader public, can help.

*Rensburg is the Director of the Rural Health Advocacy Project and a member of the Budget Justice Coalition.