The Western Cape’s Health Department has threatened to freeze more than 2 000 jobs after Treasury’s warning that the state’s wage settlement with public servants would make it harder to fill posts, and that it would cost an extra R37.4bn above the allocation set aside in the February budget for compensation in 2023/24.
It said departments needed to find the money by cutting jobs and delaying or scrapping projects.
“We are concerned the salary agreement is expected to be funded from savings, meaning a reduction in headcounts,” the Minister had said in his budget vote speech.
BusinessLIVE reports that consolidated public health expenditure fell from a revised estimate of R259.4bn in 2022/ 23 to R259.2bn in 2023/24, and will increase to R268.9bn in 2024/25 and R281.3bn in 2025/ 26, but fails to keep pace with inflation. The budget grows a nominal 2.7% over the medium-term expenditure framework, while the Treasury put inflation at 6.9% in 2022, and estimates it will come in at 5.3% this year, 4.9% in 2024 and 4.7% in 2025.
A report presented at the recent (second) presidential health summit showed that poor financial management was exacerbating the pressures created by shrinking provincial health budgets and unfunded wage agreements. The report was compiled by the Wits Public Economy Project and the Medical Research Council (MRC), drawing on data from the department of health, the Treasury and the Auditor-General.
“Financial management capacity remains as big a concern was it was five years ago (when the first presidential health summit was held),” said the MRC’s director for HIV/Aids, Fareed Abdullah.
The report shows most provincial Health Departments received qualified audits year after year, meaning their financial statements contained material misstatements.
Only the Western Cape received unqualified reports without findings from 2018-2020, and Mpumalanga and Gauteng were the only provinces to show improvement in recent years, he said.
Irregular expenditure
The analysis found irregular expenditure by Health Departments averaged R6bn a year and had accumulated to R60bn by 2020. Irregular expenditure is regarded as the broadest gauge of financial management capability, referring to money spent in contravention of the legislation governing public finances.
Michael Sachs, who directs the Public Economy Project, said unfunded wage deals were a long-standing trend, but this year was particularly severe because the Treasury had deliberately under-budgeted for compensation. “However you look at it, it has a negative impact on the quality of services and efficiency of the sector,” he said.
To meet their obligations to pay employees, analysis of the past decade showed provincial Health Departments delayed payments to service providers, cut back on capital spending and maintenance, and reduced spending on training and agency personnel.
Simultaneously, they sought to reduce their headcount by attrition, rather than a more deliberate approach such as retrenching underperforming or unnecessary staff, said Sachs. The result was increased pressure on the remaining employees, and ballooning accruals — amounts owed to suppliers that are rolled over from one financial year to the next.
The report shows the combined accruals in health stood at R15.36bn by 2021/22, or 17% of the sector’s non-compensation budget. The Eastern Cape was particularly hard hit, with accruals 45% of its non-compensation budget. This was partly due to its high level of medical negligence payouts, which were not budgeted for, said Sachs.
Most provincial departments had no plan to manage accruals, negotiate with suppliers to reduce payments, or prioritise spending, Abdullah said. “Our overall finding is there isn’t sufficient capacity in most provinces to do it in a smart way,” he said.
Health MEC for the Western Cape Nomafrench Mbombo said if National Treasury does not allocate additional funding to compensate for the agreement, it would have to freeze 2 362 posts to be able to afford the higher salaries, reports News24.
“While we understand the constrained fiscal environment …financing needs urgent attention for the sector to achieve universal health coverage,” Mbombo said.
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