South Africa is in a fiscal bind and this has the potential to be catastrophic for healthcare financing. The Minister of Finance has the unenviable task of managing expenditure, especially on big-ticket items such as the public sector wage bill, while ensuring the long-term sustainability of key services such as HIV and tuberculosis programmes. All of this happens in the context of widespread resistance to tax hikes and an increased demand for healthcare. Health-e News speaks with Sean Muller,  an economist and Senior Research Fellow at the University of Johannesburg and Russell Rensburg Director of the Rural Health Advocacy Project about key considerations for a health budget. 

Public sector wage bill

There’s a lot of pressure to contain the escalating public sector wage bill, but at the same time, there’s been pressure on the government to hire the growing number of unemployed healthcare workers. The challenges were articulated by the Finance Minister after Wednesday’s budget speech was postponed:   

“We’ve had challenges in funding frontline services – health, education and so on. About two weeks ago there was a march to my office by doctors …” 

[WATCH]

Finance Minister Enoch Godongwana says there's not enough money to pay government employees. pic.twitter.com/R7Nfq0FAIx

— SABC News (@SABCNews) February 20, 2025

But is there a middle ground? 

Muller: It is important to note that past Budgets over the last decade have created, or exacerbated, the problem of unemployed healthcare workers by cutting the healthcare baseline and then leaving provinces to make reallocations. 

Although the Treasury claimed a negative impact on frontline posts could be avoided, that was never plausible in sectors where personnel are necessarily such a large proportion of expenditure. Consequently, we have had recurrent crises in this regard almost every year. Interestingly, the cancelled Budget actually proposed to allocate additional funds of R9 billion/year to such personnel, which, arguably, is an admission of past errors. 

The calculus is fairly simple: increasing the number of personnel will increase the wage bill unless salaries are decreased simultaneously.

National Health Insurance 

Despite resistance from the business community, parts of the private health sector, and political parties in the Government of National Unity, the ANC remains resolute in its commitment to the NHI. 

The NHI will be implemented in phases, the first of which started in 2023 and runs until 2026. But how much has been done? 

Rensburg: We are a long way away from the actual implementation of the NHI. 

Over the next three years, we will see the establishment of ministerial advisory committees described in the Act – particularly the benefits advisory committees which will begin with a basic package which will include reproductive and maternal child health, infectious diseases and non-communicable diseases.  

The NHI Fund is expected to be established by March 2027 

In the current phase, an option could be to strengthen the district health programme conditional grant to coordinate the integration of the PEPFAR-funded services and potentially turn the 27 districts where PEPFAR operates into NHI pilots.

PEPFAR

According to the United Nations Programme on HIV/AIDS (UNAIDS), more than 15 000 HIV response staff in South Africa have been affected by the ‘stop work’ order resulting from the US’ decision in January to freeze foreign aid. While some TB and HIV programmes in the country resumed operations a couple of weeks back after a US court ruling, many organisations that service marginalised and at-risk populations remain closed. 

US aid Freeze: Call for urgent plan and increased budget for health

The South African government issued a circular in mid-February detailing steps to deal with the immediate health services disruptions brought on by the suspension of programmes supported by the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR).  What is not clear though is what the government’s plan is in the face of uncertainties around the future of PEPFAR. 

Rensburg:  USAID funding makes up about 20% of the HIV and AIDS response. The funding complements South Africa’s funding which covers the cost of antiretrovirals through the publicly funded system. While the country can cover the cost, the challenge is integrating the capacity into the government system. 

Muller: Unlike some other African countries, South Africa is in the fortunate position that the amount of money it receives in ‘aid’ is small relative to the national Budget. It would not be very difficult to replace the PEPFAR financing ourselves. For example, the government could scrap the ineffective Employment Tax Incentive, that alone would almost cover the (R8 billion) cost. In principle it would of course be better to get that money ‘for free’, but as the current geopolitical situation is making clear: aid rarely comes without strings attached and can always be used as leverage. The National Treasury has not, however, proposed any kind of specific contingency plan and that seems irresponsible. – Health-e News