The presentation of the budget this week is expected to take place with the consensus that SA has largely exited the fourth wave of the Covid pandemic, even as other geographies still grapple with high daily cases.
In budget documents issued after the supplementary budget of June 2020, spending was adjusted to rapidly respond to the effects of the pandemic.
As the country moves into 2022, the economic and socioeconomic fallout of the past two years has resulted in increases in the unemployment rate, increases in school dropout rates, and a fall in GDP and government revenue.
Further, worsening disease burdens, such as the increase in noncommunicable diseases as well as burden of HIV and TB, will continue to strain government finances.
The government faces the challenge of returning to spending priorities in the medium term while balancing the ability to provide sufficient and immediate responses to additional Covid waves that may manifest themselves throughout 2022.
Since the 2020 supplementary budget, much of the focus in health-care spending has been on bringing in additional resources to combat the worst effects of the pandemic. The 2021 budget continued this trend, allocating an additional R18bn in funding over the medium term to the Covid response.
The downside to bringing forward spending is that many budget allocations had 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 the budget of 2020, to a contraction of 0.3% average annual growth over the next three years in 2021's budget.
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; a total of R4.5bn was reprioritised in 2020/2021.
In the years since the outbreak of the pandemic, socioeconomic 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 about 750,000 children may have dropped out of formal schooling because of the direct and indirect economic fallout in 2021.
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.
In the years since the outbreak of the pandemic, socioeconomic outcomes for the country have deteriorated
It is also expected that the worsening socioeconomic outcomes increased the number of people accessing the public health-care system, while increasing the incidence of substance abuse and teenage pregnancy, all of which require long-term commitments to health-care 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 2021's budget, over three years.
The 2022 budget brings about a challenging balancing act compared to previous budget processes.
While 2021's budget had a sharp focus on funding immediate responses including the vaccine rollout, the latest Covid statistics have presented a different challenge. In the latest Omicron-led wave, excess deaths were seen to have been a fraction of previous waves (3,087 in the week of December 19 2021, compared with the peak of 16,115 in early 2021 and just over 10,000 at the peak of the Delta wave).
With that, it is expected that the government’s spending commitments in combating the virus have been lower than previous variants.
Attitudes to Covid are adjusting and in January Switzerland announced a view that the virus may transition to an endemic phase — where countries treat it as they would the seasonal flu. It is expected that SA's department of health will soon provide guidance on this.
This has significant effects on the budget process, which would then result in Covid funding transitioning to budgeting for consistent longer-term commitments.
If the latest variant signals the beginning of a new transition to 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 socioeconomic outcomes on rising disease burdens, the government’s attention should shift towards 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 constraints. It is crucial that the government addresses these shortfalls urgently.
Further, global trends such as the rising incidence of noncommunicable 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 prepared.
The 2022/2023 budget is expected to be delivered within the same funding challenges of rising debt as recent years. This will constrain expansionary spending, but the government must move into a phase of prioritisation of long-term funding strategies to combat the direct and indirect effects of the pandemic.
Even though short-term preparedness should still feature in the event of future variants, attention should now turn to improving health-care outcomes, strengthening the health-care system with enhanced funding, with an acute awareness of future challenges by building funding into the budget now.
• Theophanides is Deloitte Africa life sciences and health-care industry leader and director: actuarial and analytics solutions leader
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