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South Africa's health sector in the 2022 budget

Despite a commodities-fuelled revenue bonanza of R182bn and the winding down of COVID-29 related expenditure,  Health expenditure increased only marginally, reports MedicalBrief. The lack of largesse places in question the government’s oft-stated commitment to the soonest possible implementation of its National Health Insurance plans.

Finance Minister Enoch Godongwana  announced that the National Treasury expected to record its historically largest tax take ever of R1.5 trillion when the financial year closes, as resulting in much larger tax contributions from the mining sector than had been expected a year ago.

The effect will be that SA will be able to consolidate its rising debt burden sooner and at a lower level than anticipated a year ago. This will put government finances onto a much a healthier footing, although state will, however, still spend a large portion of tax revenue – 20 cents of every R1 collected – to repay debt.

R259bn goes to Health, up from the revised estimate of R256.2bn in 2021. That’s made up of R105.5bn for district health services, R51.4bn for other health services, R44.1bn for central hospital services, R38.1bn for provincial hospital services, and R9.7bn for facilities management and maintenance.

The minister said that over the medium term, the health baseline would account for R764.1bn (or 13.8%) of government’s consolidated total expenditure, a marginal decrease from R259bn in 2022/23 to R257.5bn in 2024/25, as allocations for COVID‐19 wind down.

Over the medium-term, through to 2025, an additional R21.6bn will be allotted largely to support the provinces continued COVID-19 response, and to bridge shortfalls in essential goods and services, including R3.3 billion is allocated to absorb medical interns and community service doctors.

Democratic Alliance Shadow Health Minister Michele Clarke told MedicalBrief that the lack of mention of NHI funding was “a clear indication that our country can simply not afford it”.

“Some historic NHI grants – such as the healthcare facility revitalisation grant – have already been converted to conditional grants after going underspent for many years. No funding model is clear at this stage, no feasibility studies have been done and National Treasury has earlier openly said that South Africa cannot afford NHI,” Clarke said

The DA welcomed the extra funds towards the provincial health departments and for the placement of medical interns and community service doctors.

About 45% of the R180 billion tax overrun will be used to reduce the budget deficit and borrowing requirement and 55% will be allocated for "urgent spending priorities.” The additional spending will go mostly to the provinces to plug holes in health and education which have emerged over the past year of "fiscal consolidation" – or austerity – and to boost health and education budgets over the next two years.

The minister said compensation of employees makes up the largest share (62.5% ) of health expenditure. Compensation will grow at an average annual rate of 1.1% over the next three years, limiting the ability of provincial health departments to employ more frontline staff. As larger numbers of doctors complete their training, including through the programme in Cuba, provincial health departments need to offer more medical internships and community service posts.

Over the MTEF period, R7.8bn is allocated to the statutory human resources component of the human resources and training grant, which supplements provincial funding for these posts. Of this amount, R3.3bn is additional allocations and R744.7m was reprioritised from other health spending items. The Department of Health will have to finance any future shortfalls in funding within its baseline.

South Africa has experienced four significant waves of COVID‐19 infections, and the vaccine rollout is critical to containing the spread of the virus and limiting the severity of infections, he said. The bulk of vaccine purchases were made in 2021/22. An additional R2.3bn – of which, R1.3bn is provisional – is allocated in 2022/23 mainly to buy more doses and administer the vaccines.

Over the next three years, R440.5m is shifted from the Department of Health’s main budget to move the forensic chemistry laboratories function to the National Health Laboratory Service. This change is intended to improve processing times for laboratory services that support police investigations and judicial processes.

The minister spoke about catalytic and blended finance projects, designed to crowd in private investment for bulk infrastructure. A provisional allocation of R17.5bn has been set aside over the medium term for these catalytic projects. “As we upgrade roads, bridges, water and sewer, transport, school infrastructure and hospitals and clinics, the aim is to unlock higher levels of employment for those involved in the projects," he said.

After taxes on alcohol were raised by more than 8% last year, this year’s hikes were largely kept in line with inflation, ranging from 5.5% hikes for wine, beer and cigarettes to 6.5% for spirits and sparkling wine. 

The sugar tax, or health promotion levy for beverages with more than 4g of sugar content per 100ml, would be increased from 2.21c/g to 2.31c/g from 1 April 2022. Consultations will also be initiated to consider lowering the 4g threshold and extending the levy to fruit juices. The increase was a bitter blow to the sugar-growing agriculture sector, which had lobbied hard for a decrease in the tax.

In a statement, SA Canegrowers said in a statement that the hike would not only threaten thousands more rural jobs in our sector but will also continue to hamstring the efforts to successfully implement the Sugarcane Value Chain Masterplan.

“Recent modelling commissioned by SA Canegrowers shows that maintaining the sugar tax at the current level would have cost the industry a further 15,984 seasonal and permanent jobs and would be a major contributing factor towards a decline of 46,600 hectares of area under cane over the next ten years. The fact that government has increased the tax means that there will be even more job losses, than the projection.

“A recent socio-economic assessment commissioned by NEDLAC revealed that the sugar tax had already cost South Africa more than 16,000 jobs and R2,05 billion in 2019 alone.”

In a Tweet, the DA’s shadow minister of Trade & Industry said that the sugar tax was “nothing other than a stealth tax”. “It is not ring-fenced for health care but rather goes into the general revenue fund. The government is not serious about sugar related illnesses. They just need more money and want to appear to be benevolent at the same time.”

 

Full Budget Review 2022
News24 article – Budget 2022 | Road ahead: Godongwana touts plans to boost rollout of infrastructure (Open access)

 

EWN article – 2022 BUDGET: TOUGH LOVE FOR SOES; SOCIAL GRANT AND SIN TAX HIKES (Open access)

 

See more from MedicalBrief archives:

 

SAHPRA appeals for a bigger budget to fill key vacancies

 

Treasury says NHI implementation so slow that no budget is needed anytime soon

 

DA: Dramatically reduced budget leaves Livingstone Hospital hamstrung

 

 

 

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