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Budget requires a refocus on long-term healthcare funding

The presentation of the 2022/23 National Budget is expected to take place with the consensus that South Africa has largely exited the fourth wave of the COVID-19 pandemic, while other geographies still grapple with high daily cases. In budget documents issued since the Supplementary Budget of June 2020, spending had been shifted forward to the immediate periods to rapidly respond to the effects of the pandemic. As the country moves into 2022, the economic and socio-economic fallout of the past two years has resulted in increases in the unemployment rate, increases in school drop-out rates, and a fall in gross domestic product and government revenue. Further, worsening disease burdens, such as the increase in non-communicable diseases as well as burden of HIV and TB, will continue to strain government finances. It remains the challenge of government to look to return to spending priorities in the medium term, while also balancing the ability to provide sufficient and immediate response to additional waves that may manifest themselves throughout 2022. 

Since the 2020 Supplementary Budget, much of the focus in healthcare spending has been on bringing in additional resources to combat the worst effects of the pandemic. Budget 2021 continued this trend, allocating an additional R18 billion in funding over the medium term to the COVID-19 response. The downside to bringing forward spending is that many budget allocations were forced to reprioritise funding away from medium-term spending. Health spending was not exempt from this, as health expenditure shifted from an annual average growth rate of 5.1% over three years in Budget 2020, to a contraction of 0.3% average annual growth over the next three years in Budget 2021. Much of this spending was reallocated away from key items, such as the HIV, TB and Community Outreach Grant and the Health Facility Revitalisation Grant, to the total of R4.5 billion reprioritised in 2020/211.

In the years following the outbreak of the pandemic, socio-economic outcomes for the country have deteriorated. The expanded unemployment rate rose to a record high of 46.6% in the third quarter of 2021, and it is expected that around 750,000 children may have dropped out of formal schooling because of the direct and indirect economic fallout in 20212,3. In addition, varying lockdowns of 2020 and 2021 limited the movement of people to access treatment, and increased the opportunity costs of accessing chronic treatment versus basic survival needs such as food. This has had knock-on effects on people living with diseases such as HIV and TB. It is also expected that the worsening socio-economic outcomes increased the number of people accessing the public healthcare system, while increasing the incidence of substance abuse and teenage pregnancy, all of which require long-term commitments to healthcare spending. This has been concerning within the context of the fall in HIV and TB-related spending, which was budgeted to contract by an average annual rate of -0.1% in Budget 2021 over three years.

The 2022 Budget brings about a challenging balancing act compared to previous budget processes. While Budget 2021 had a sharp focus on funding immediate responses including the vaccine rollout, the latest COVID-19 statistics have presented a different challenge. In the latest Omicron variant-led wave, excess deaths were seen to have been a fraction of previous waves (3,087 in the week of December 19 2021, compared to the peak of 16,115 in early 2021 and just over 10,000 in the peak of the delta wave). With that, it is expected that government’s spending commitments in combating the virus have been lower than previous variants4. Attitudes towards COVID-19 are adjusting and in January Switzerland announced a view that the virus may transition to an endemic phase - where countries treat the virus as they would the seasonal flu5. It is expected that South Africa’s Department of Health will soon provide guidance on this6. This has significant effects on the budget process, which would then result in COVID-19 funding transitioning to budgeting for consistent longer-term commitments.

If the latest variant signals the beginning of a new transition into longer-term smoothing of funding and away from short-term responses, this could signal a shift back to normality for the budget. Along with the requirement to address the effects of worsening socio-economic outcomes on rising disease burdens, government’s attention should shift toward improving funding in critically underfunded areas. In January, it was reported that the Eastern Cape Department of Health was unable to place more than 90 trainee doctors as well as nurses and other medical professionals due to funding constraints7. It is crucial that government addresses these shortfalls urgently. Further, global trends such as the rising incidence of non-communicable diseases such as cardiovascular diseases and diabetes (expected to be the leading cause of mortality in Sub-Saharan Africa by 2030) will require significant funding, and careful planning in the short term to ensure the country is appropriately prepared8

The 2022/23 National Budget is expected to be delivered within the same funding challenges of rising debt as recent years. While this will constrain expansionary spending, government must move into a phase of prioritisation of long-term funding strategies to combat the direct and indirect effects of the COVID-19 pandemic. While short-term preparedness should still feature in the event of future variants, attention should now turn to improving healthcare outcomes, strengthening the healthcare system with enhanced funding, with an acute awareness of future challenges by building funding into the budget now.

End Notes :

1. National Treasury
2. Quarterly Labour Force Survey, Q3 2021, StatsSA
3. Global Citizen, 750,000 South African Children May Have Dropped Out of School Due to COVID-19 Pandemic, 9 July 2021
4. Business Live, Excess mortality during omicron wave ‘a blip’ compared to that of previous surges, 6 January 2022.
5. Bloomberg, Swiss Add Voice to View That Endemic Stage of Covid Is in Sight, 12 January 2022
6. eNCA, COVID-19 in SA – SA may transition to endemic phase, 13 January 2022
7. Health-e News Service, Young doctors at boiling point as EC health crisis deepens, 13 January 2022
8. The Lancet, The rising burden of non-communicable diseases in sub-Saharan Africa, October 2019

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