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Analysis:
Analysis
03 Feb 2020
10 minute read

Prioritisation of the National Budget and Healthcare

The 2021 National Budget is expected to result in pressures across all departments as South Africa continues to require fiscal resources to respond to the COVID-19 pandemic with both pharmaceutical and non-pharmaceutical interventions. Previous public interest in the budget and matters relating to health initiatives have been centred around National Health Insurance (NHI) and the implementation thereof. Now, the focus has shifted to initiatives in response to the COVID-19 pandemic. Standing on the other side of 2020 affords us the opportunity to understand the fiscal requirements underlying a successful response. The 2021 Budget has implications far beyond the single financial year ahead, and correctly prioritising the budget is of paramount importance.

There are some difficult choices that need to be made. On the one hand, the South African economy is in the midst of a low growth trap, facing a unique combination of both supply and demand-side shocks, not to mention structural factors, such as electricity-supply constraints, policy uncertainty and record unemployment rates. On the other hand, the budget must provide financing for not only COVID-19 vaccines, but also the swift and efficient rollout of the vaccination programme – not only to ensure the safety of the population, but also to protect the economy from pandemic-driven stoppages, which has proven to be vastly detrimental to the economy. To prioritise the vaccination programme is by far the most effective manner of containing the COVID-19 virus and giving South Africa the best possible chance to get back on the road to recovery.

The Supplementary Budget Review 2020 noted that a “total of R21.5 billion has been reprioritised to public health services”, bringing the health sector’s share of consolidated expenditure by function to 12.1% (compared to 11.8% in the February 2020 Budget). This reprioritisation was meant to help prepare the health sector for “a rising number of cases, including expanding capacity and ensuring personnel are protected”.

Unavoidably, the focus of the health budget has shifted towards COVID-19 rather than NHI, and this will continue to be so for the next couple of years. The failings seen in both the public sector and private sector in responding to COVID-19 through not having effective consolidated data and systems for the country, has further highlighted the need for an effective consolidated healthcare system. COVID-19 has likely reinforced the idea of a National Health system, although the current crisis means that priorities and timing of the NHI roll out, as well as the form and level of cover (related to cost) are likely to shift compared to a pre-COVID world view.

Amongst the many priority initiatives that need to be addressed, the budget will need to make provision for the procurement of COVID-19 vaccines and the subsequent implementation of the roll out thereof.  South Africa is targeting to achieve population immunity by vaccinating 67% of the population, estimated at a cost of R20.6 billion for obtaining vaccines. Costs pertaining to the rollout of the vaccination programme are not included in this estimate, which will likely not be insignificant (government estimates range from R64 to R270 per vaccine).

The public health impact of COVID-19 goes far beyond the numbers of COVID-19 cases and related deaths, with the full repercussions only to be fully understood and quantified in years to come.  From an economic perspective, the damage has been severe. Economic activity came to a complete halt for a number of weeks in the second quarter of 2020 across many sectors, with real GDP shrinking by 51% quarter-on-quarter (seasonally adjusted and annualised) in Q2 of 2020. Furthermore, the pandemic and subsequent economic lockdown have had a devastating effect on employment. South Africa’s unemployment rate increased to a record high of 30.8% in Q3 2020, following a record total 2.2 million jobs lost between April and June 2020. The largest job losses recorded in a single quarter before this was in Q3 2009 (527 000 job losses), in the wake of the global financial crisis.

A successful and comprehensive vaccination programme will support South Africa in catching the much-needed wave of economic recovery, which is expected to be seen at a global level as economies start to bounce back from the recessions and contractions seen during 2020. If an adequate vaccine supply (and rollout thereof) is not properly budgeted for, then it is likely that South Africa will see further waves of infections. Each wave will mean economic restrictions renewed, with the accompanying economic consequences thereof in each iteration.

Prioritisation of the national budget to streamline a COVID-19 vaccination effort is the surest manner in which to fast-track an economic recovery. As President Ramaphosa told the nation when first announcing the economic lockdown in 2020, “As we walk this road together, as we struggle to defeat this pandemic, we remain strong and united and resolved. Much is being asked of you, far more than should ever be asked. But we know that this is a matter of survival, and we dare not fail.”

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Ashleigh Theophanides

Deloitte - South Africa
Ashleigh is the Chief Sustainability Officer for Deloitte Africa with responsibility for the firms sustainability strategy. This covers regulatory affairs and public policy, supporting our communities through strategic partnerships and leveraging our networks, capabilities and resources and embedding a sustainability culture across our firm and achieving net zero by 2030. In her 20 years of experience, Ashleigh has worked across the private and public healthcare sectors, with government departments, financial services organisations, mining operations and telecoms operators. As a qualified health actuary, she has provided benefit design actuarial valuations and pricing strategies. She is also recognised as a leader in disease modelling. Outside of the scheme environment, Ashleigh focused on helping multi-national companies with market entry strategies and model design, market assessment & forecasting. Ashleigh also leads the Deloitte Africa’s Health Equity Institute (DHEI), a global Executive Office initiative aimed at improving health equity on the continent.
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