The Health Department and national Treasury are in talks to dig into South Africa’s R2.7trn savings pool held by the Public Investment Corporation for the upgrading of public health infrastructure.
This follows Finance Minister Enoch Godongwana’s recent Medium Term Budget Policy Statement in which no adjustments had been made for the health sector, despite the country preparing for the implementation of the National Health Insurance (NHI).
Cautioning that tax collection for the 2024/25 financial year was expected to be lower than estimated in February, Godongwana last week said there would be increased focus on growing the pool of funders for public infrastructure financing, with the issuing of requests for proposals for projects like the construction of hospitals.
However, this week, in a written reply to a parliamentary question by DA MP Michéle Clarke, Health Minister Aaron Motsoaledi said there was “work in progress” regarding tapping into the national savings pools to fund public health infrastructure.
MedicalBrief notes that Motsoaledi has previously suggested that the PIC could play an important role in financing the country’s public health sector. One of the key points the Minister has made concerned the PIC’s capacity to fund the public in the same way it funds the private sector.
Enlisting the PIC, Africa’s largest fund manager with R2.7trn in government employee pensions under its custody, could potentially be held up as evidence by critics of the NHI that the biggest health reform since the end of apartheid is unaffordable and a burden to pensioners, reports Business Day.
Still, the idea of using the PIC funds to prop up public health may fall within its mandate, which includes pumping money into projects with positive social impact on condition that specific investment decisions comply with relevant pension regulations and guidelines.
If the government wants the PIC to inject more money into health infrastructure, this would probably require amendments to the Pension Funds Act, which sets the maximum level pension funds and life insurers can hold in asset classes such as property, government bonds and listed shares, but does not prescribe minimum investments in asset classes.
“Within the current intergovernmental arrangement, large infrastructure projects such as hospitals are under the ownership of provinces. Provinces have various legal routes to fund, plan and implement projects. This includes on-budget funding, approaching development finance institutions for technical assistance, initiating public-private partnerships (PPPs) and seeking support from national government through the Budget Facility for Infrastructure,” the Treasury said.
Discussions between the PIC and the Health Department about funding began a decade ago, however, Treasury was not involved in these discussions.
Business Day previously reported that PIC chair and Deputy Finance Minister David Masondo rejected considerations to permit pension funds and other asset managers to finance public health infrastructure.
The pension fund industry comprises R4trn in retirement savings, more than half of which is in the custody of the state-owned PIC.
Concern
There had been concerned reaction to the Budget policy statement by Godongwana by activists and trade unions, who said they were anxious about about what the sector might face in the new year.
“The lack of adjustments … ignores provinces. Almost every province has a shortfall in salaries. And the way they are handling it is by aggressively accruing expenses. There’s already pressure on goods and services – especially medicine,” warned Russell Rensburg, director of the Rural Health Advocacy Project.
Godongwana said that over the next two years, the main budget revenue estimates had been lowered by R31.2bn, reports Health-e News, and without faster growth and in the face of external risks, tax revenue would remain constrained, forcing the government to make difficult decisions on spending.
The SA Medical Association Trade Union (Samatu) had predicted that with lower revenue estimates, the Health Department might suffer cuts in its allocated funds, which could affect ongoing and future investments in infrastructure, staffing and essential services.
General secretary Dr Cedric Sihlangu said the underfunding “perpetuates the shortage of doctors and critical services personnel, further stressing the system”.
The impact includes longer patient waiting times, overburdened healthcare professionals and potentially compromised patient care, he added.
Setting new priorities
Rensburg said this was the right opportunity to reorganise the country’s health systems, which have become too centred on hospitals, and unaffordable.
“We need to focus on priorities like minimising hospital costs and expanding primary healthcare. Not having an increase in public spending means we have to work with what we’ve got.”
This means working across sectors by taking the time to understand the problems in the sector and identify inefficiencies, he added.
“We need a framework on how to improve services. More money won’t solve the problem.”
The National Department of Health (NDoH) said it would wait until the Treasury provides the revised estimates for next year.
In July, although it was allocated a budget of R62.2bn, a 3.5% increase from last year’s R60.1bn, concerns were expressed that this would not still solve the funding crisis in the sector.
Business Day PressReader article – PIC may be tapped for health funding (Open access)
See more from MedicalBrief archives:
Proposed budget cuts disastrous for health sector, activists warn
Eight steps to get SA’s health sector right
Freeze on equipment outlays as Gauteng budget falters