Department of Health Annual Performance Plan/Budget: input by Auditor-General & Financial and Fiscal Commission

Meeting report

Presentation by the Auditor-General of South Africa (AGSA)

Mr Musa Hlongwa, AGSA Business Executive presented on the overall function and areas of oversight by the AG. The presentation began by focussing on the mandate of the AG as laid out by the Constitution. First, he discussed the legislations and background of the office of the AG. He outlined the annual mandatory audits which include the audit on financial statements, the report on predetermined objectives (which he highlights to be the focus of the presentation), compliance with laws and regulations. The office of the AG also conducts discretionary audits which focus on specific area of interests, it has a specific purpose can take place over any amount of time.

Mr Hlongwa discussed what was meant by a clean administration. He outlined that this was when an administrative entity had unqualified audits. Unqualified audits, he explained, were audit where no findings could be made from the financial statements and the predetermined objectives. This was when Department or entity has had no negative findings all their financial management. This had been the desired results for all audits every year. Mr Hlongwa also explained what was meant by predetermined objectives audits, outlined that these audits are annual audit of actual reported performance against predetermined objectives, indicators and targets as contained in the annual performance report. It is an integral part of the annual regularity audit process which confirms compliance with rules and regulations, usefulness of performance information and reliability of performance reporting. Predetermined objectives audits do not occur independently.

Auditing Requirements

Auditing requirements inform how to audit the performance information, this is outlined in Section 20 (2)(c) and Section 28 (1)(c) of the Public Audit Act. This states that “an audit report must reflect an opinion or conclusion of the auditee against the predetermined objectives” so the office of the AG is required by law to audit the performance information and to give an opinion or conclusion on our audit. This is applicable to all spheres of government. The legislative requirements and benchmark for performance management and reporting can be changed from these different areas.

These areas prescribe how performance is to be monitored, measured and reported on. This is taken from the Public Finance Management Act of 1999, Treasury regulations, guideline instruction notes issued by Treasury and from the National Treasury framework on management of performance information along with strategic plans and annual performance plans which are issued by National Treasury. These regulation and legislation prescribe how performance information is to be compiled, prepared and reported on and it guides the departments and entities what they need to do. When auditing takes place, the above mentioned rules and regulation inform the process.

Performance Management

The performance management and performance information framework against which outlines the performance information should be managed and reported. The principles and requirements set out in the framework are used a basis for the Act. The whole budgeting cycle starts with the oversight bodies such as Parliament and provincial legislature which sets out what needs to be done and creates policy development process. This results in the departments and public entities being able to perform the strategic planning; the strategic planning will specify the performance indicators. Following from strategic planning is operational planning and budgeting, this outlines what needs to be done in the annual cycle. This will include target setting and resources allocation and how targets will be met. The last part is implementation and this will require of the department or entity to have quarterly reports to submit to oversight bodies to monitor how the targets are being met. There is monitoring and corrective actions which were directed by the recommendation from the oversight bodies. By the end of the year, there is a year-end reporting by the entities and departments where they must submit financial statements and performance indicators to the office of the AG. From there the AG will compile an Annual Audit from the information submitted by the entity or department and that will be submitted to the oversight bodies. This cycle is repeated every year.

Strategic Planning and Budgeting Guidelines

Looking at the strategic planning and budgeting guidelines, these guidelines are informed by the Treasury regulation under the Public Finance Management Act. Under the Act, Chapter 5 deals with the strategic planning requirements for departments, constitutional institutions and public entities; chapter 29 deals with corporate planning requirements for Schedule 2, 3b and 3d entities. Chapter 30 deals with strategic planning requirements for Schedule 3a and 3c entities.

The Public Services Regulation part 3b and 1a is only applicable to departments. In order to understand the process of strategic planning and to be able to guide the process, it is necessary to refer to these pieces of legislation. The reporting requirements for departments, public entities and constitutional institutions are guided by Section 40 (3) Section 55 (a) Section 18 and 28 of the Public Finance Management Act and Public Service Regulation Section 3 (g). The key accountability document which is applied to the whole process explained above of auditing done by the AG. These structures are consistent to ensure predictability.

The indicators used by the predetermined objectives must be appropriate, useful, relevant and well-defined. These are the corner stones for the performance plan. The targets must adhere to the SMART principles. SMART stands for specific; measurable; achievable, relevant and time-bound. This is the criteria used in the auditing process of the predetermined objectives. How can this contribute to oversight? The oversight bodies must make sure that the strategic planning and budgeting is aligned with the legislation. There are key question that the oversight body can ask departments and entities about how planning and budgeting will be aligned to legislation and what it set out in their respective targets and predetermined objectives.

Changes in the budget were important to note and see how the change relates to targets and performance. Were there measures to detect fraud and irregularities? The questions are important for the Committees to be asking departments and entities

Ms Jolene Pillay, Senior Manager in the Office of the AG, said the audit criteria and what is looked when the audit takes place. The AG is required to make an opinion about the audit of the predetermined objectives after the entity has reported its performance which after the financial year when financial statements are submitted. There are three main things that the audit looks at; first it is the compliance with regulatory requirements, the usefulness and reliability. The focus then was on the interim review of 2015/2016, the Department is not in a position to report its performance at this point in time. The AG has decided that there will be a review of the APP and the strategic plans prior to it being tabled in Parliament. Prior to doing the review, there is two sub criteria used in the review process: there is usefulness, reliability and relevance of the targets and indicators set by the Department.

The review was meant to assist the Department create indicators and targets which are aligned with the SMART principles and so that this process takes place before anything is tabled in Parliament because they cannot change thereafter.  She changed the slideshow and used the slides which were presented to the Chairperson in a confidential meeting. This meeting was to present the Chairperson with the findings of the review. As an overview, Ms Pillay explained that there would be a selection of programmes which the office of the AG would review. They selected programme 3: HIV, TB and Maternal health care and programme 5: Tertiary Health service and Human Resource development. They review these programmes according to how useful they are, the process is to review it, make an opinion on it and give management the review on whether to forward their APP to Parliament. The opinion of AG was sufficiently addressed by management of the Department.

Ms Pillay then switched presentations, this presentation dealt with what the actual findings of the review were. The kind of findings which the review made to the APP began with the problem with the technical indicators which did not have clear defined. The calculation method is not clear, the technical descriptions are not clear and the targets are not SMART.

The Chairperson interrupted the presentation to alert the presenters that the Committee did not have in their possession the current presentation Ms Pillay was working from. In a meeting between the Chairperson and the AG, there was an agreement that the information being shared now was not for circulation. There was thus a problem when the AG shared this information without formal engagement with the Chairperson. She said this was making Members of the Committee uncomfortable because this was not professional from the side of the AG. She expected that at this level of government and leadership, this should not be happening as the AG should be the most efficient organ of the state. Before the presentation, there should have been more consultation from the office of the AG about the mandate of their presentation and any shortcomings they meet in meeting this mandate so the Chairperson prior to the meeting can rely this to the rest of the Committee.

Ms Pillay continued the presentation. The background on the review covered the review of the draft of the 2015/2016APP. The review looked the usefulness of the indicators. Are the indicators well-defined? Are the indicators reliable? The review also looked at the planned targets, are these targets specific? Are these planned targets measurable? Are the planned targets time bound? Those are the specific criteria which are used in the review. The findings of the review were corrected by management which why we did not include it in the original presentation. The APP is supported by the technical indicator descriptions (TIDs), it provide detail how the Department is going to measure the indicators. Some the findings in Programme 3 are that the (TIDs) for the indicators were not completed so there was difficulty in understanding the indicator in 5 cases. The other was no clarity on which document the Department will use as a way to measure in 7 cases. In 8 cases the calculation method was not specified thus I was hard to ascertain the results for the indicator. There was difference in the APP and TIDs especially with the short descriptions because they were not giving enough detail in respects to 5 indicators. The targets were not SMART in 1 case.

If management had not addressed these findings then it would have resulted in a qualified audit. In programme 5, there was the same problem in terms of TIDs and the problems with indicators.

Presentation by the Financial and Fiscal Commission

Mr Bongani Khumalo, Chairperson of the Financial and Fiscal Commission (FFC), presented on the financing with health system. He pointed to the fact that when a country has great health care, economic development prospers. High level of poverty will result in lower life expectancy thus an economy which has a high number of people living under poverty will experience severe shortages of labour. South Africa spends about 3.9% of its GDP on public health, but there were also comprehensive private health facilities. When the spending on public health and private health are combined, South African spend about 8% of its GDP on health care in totality. The primary problem with health care system in South Africa is the high levels of inequality because 17% of the population is funded by 50% of the funds while 83% of the population is funded by 47%. This needs to be taken into account when public health policy and public health funding

Mr Eddy Rakabe, a Researcher of the FFC, presented on the issue of alignment between the medium-term strategic frameworks (MTSF) and the long term goals. They look at the priorities of the MTSF and the long term goals within the health sector. The NDP says that every South Africa should have access to quality health care by 2030, the emphasis is that there should be a balance between prevention and treatment. Looking at the priorities of MTSF, the prioritising of the National Health Insurance (NHI) initiatives, the training of professionals and the improving of infrastructure were important. The goal was to expand the NH model from 10 districts to half of the health districts. The issue is that there is limited information about performance in the health care sector thus it is hard to monitor thus the Department needs to place a lot of emphasis on rectifying this. The other issue, he discussed, was whether the strategic plans were aligned to the MTSF and the long term goals of the NDP.

Short Term Objectives

The Department had six programmes of the short term goals. Programme 1 was about performance and evaluation, programme 2 is about NHI, programme 3 is about HIV and maternal care, programme 4 is about primary health care and there is a need to prioritise community based health care, programme 5 is about tertiary health care and it is important to increase the capacity and infrastructure and programm6 is about health compliance and it is important to have proper oversight of the Department. An observation is made to see if the programmes are aligned with the MTSF and the long term goals of the NDP.

There are targets which were set through the millennium goals for health and most of those goals were not met by the time which they had hoped to meet them. All areas have not been met. Looking at the budget, each programme has a share in the budget but the general budget has increased by 7.1% which above inflation. The reprioritisation of the budget has undermined the policy objectives of the Department. The provinces spend most of the budget while the share of the National Budget has been moderate. The Department is spending a large amount on salaries but goods and services make up 18% of the budget but there is severe underspending. Majority of the budget is spent on programme 3: HIV and TB and programme 5: tertiary health care. From the data, most of the budget is spent for all the budget. The problem is programme 2: NHI initiatives where there has been very little spending even though it is a government priority overall, the spending for this programme must be revisited.

The other issue is the conditional grants between government and provinces. The amount given out as grants has increased over time but the use of the conditional grants has not changed. The money of the NHI grant has been reprioritised to programme 3: HIV and TB. The money should have reprioritisation must be taken from goods and service rather than NHI due its importance. The biggest contribution to conditional grants in programme 3 and programme 5 but this is in line with policy. All programmes are spending on their conditional grants, the biggest cut was from the programme 2: NHI. The allocation for NHI is only R50 million which divided amongst the provinces and indirect grant of R1 billion but there tends to be ambiguity about accountability when the national Department plans the conditional grants for provinces. The entities are also spending well and spending most of their budgets.

The money allocated to provinces has increased by 8% but the allocation of money in the provinces is equitably shared especially the per capita allocations. The distribution of health allocation, 42% goes to primary health care and this is aligned with the MTSF which prioritises primary health care. On the audit of the national Department and the different provinces, the provinces have lots of qualified audits. The entities had unqualified audits unlike the provinces, programme 6 is doing well as it is in charge of the entities. The financial oversight is great in the entities and maybe that can then be applied to the provinces. Overall the Department has aligned its strategic plans with the MTSF and the long term goals of the NDP successfully. NHI implementation needs to be taken seriously, the budget and government priorities need to be aligned. The money should not be reallocated without serious interrogation.

Mr Khumalo continued the presentation by speaking on NHI. The NHI will be a policy which will change the public finance system absolutely. The Department has not formally consulted the FFC about the financing of the programme but the FFC is fully aware of the financial implications of the programme. The FFC is concerned that the starting up of the NHI programme is taking too long, the policy document and white paper have been in a much slowed process. The establishment of the NHI presents a paradox especially when looking at the intergovernmental (IGR) fiscal principles which drive the system of financial relations between spheres. This presents the need to have a purchaser and provider split. The NHI fund will be the purchaser while the provinces become the providers. This will require a NHI fund which will hold funds and then distribute functions.  The IGR fiscal principle states that the funds must follow the function, thus to shift the funds there needs to be a shifting of the functions. The location of functions is important and must be done with technical accuracy in accordance with constitutional provision to avoid complications. The allocations of functions had huge implications for the Health sector. The conditional grant systems also need to be re-addressed to fit the complexity that arises for the IGR fiscal principles.

The Committee was informed that the Director General of Health will be meeting with the Chairperson of FFC to discuss these technicalities further and the engage about the process in which NHI. This conversation about these technicalities should have started earlier because they need to be addressed before this programme is rolled out. In the 2015 division of revenue, there were two recommendations the commission made and the first recommendation is that provinces align their budgets with the focus on primary health care and the second recommendation is that the Department need to be aligned with the international standards.

Discussion

Mr A Emam-Shaik (NFP) asked whether the missing slides will be printed out so that Members can look through them

Mr Hlongwa replied that the absent copies would be sent to the Members of the Committee or the missing parts can be made available in the course of the meeting.

Mr I Mosala (ANC) said he felt that this presentation is like a lecture about the functions of the office of the AG. The slides that were missing are very important. The purpose of their presentation was to give a breakdown on the spending of the department and the causes of spending and how the Committee can play more of an oversight role in the governance process of the Department of Health (the Department) and its entities. He apologised that maybe he had skipped ahead of the presenters but there was nothing in the hand-out which dealt with what the Committee has mandate the office of the AG to present on.

Mr Hlongwa replied that it was essential to go over the process again for clarity sake and to give better understanding of the process.

Mr Mosala said the documents handed did not have the necessary information thus he reiterates the urgent need to have the missing slides because the direction which the presentation had taken was not beneficial to what the Committee had hoped to achieve.

Mr Phakiso Tladi, Relations Manager in the office of the AG, apologised for the miscommunication between the Committee and the office of the AG about what was expected of the presentation. He assumed that beginning the presentation with an overview before going into the strategic plans and annual performance plans (APP). If that is not sufficient, the presenters will do best to answer questions about the process which the presented information does not address and the Members would then seek further clarify.

The Chairperson said the presenters should have sort for more clarify about what they are required to present on. Another problem is that the missing slides were not communicated to the Committee Secretary so as to have the Committee informed in time. The presentation itself was not made available on time for the Committee which was also problematic. The presenters did not allow the Committee enough time to interrogate the information.

Mr A Mahlalela (ANC) said he agreed with Mr Mosala’s query about the presentation. This presentation is repetitive because it was given the previous year when the Committee was constituted. The purpose of this presentation was to give clarity about the Department’s strategic planning and APP in relations with their predetermined objectives and budgeting. This presentation should have focussed on the extent to which the Department has compiled with these targets. Through the information which is relied in this presentation, we should have been able to critically interrogate the Department about their compliance to the APP, strategic plans and predetermined objectives. The problem becomes that when the mandatory auditing takes place, the office of AG will point out how poor the chosen strategic plans and APP of the Department and that they are not measurable or reliable. The problem is when these are not strong than the result is not smart. The purpose of this presentation was for the AG to inform the Committee on what are to be considered smart APP and strategic plans so that they do not only discover that at the end of each year. The presentation was to equip the Committee with the ability to be critical of what the Department presents to them tomorrow.

Mr Tladi said there should have been more communication on what the purpose of the presentation should have been and hopefully what has been included in the slides will answer some question. He moved on to explain the pre-auditing process which is an interim review which helps the Department avoid the negative results generally found in the end of year report. If the AG finds anything than a meeting with the Chairperson and the Department is convened and the discussion is centred on how the Department can correct whatever negative things happening.

The Chairperson requested that the Members of the Committee have those missing slides before the AG is finished presenting.

Mr Hlongwa agreed with the Chairperson that the report was not for public circulation. He then sought guidance from the Chairperson about how to proceed.

The Chairperson noted that there was an expectation of the office of the AG to be efficient and effective. The Chairperson suggested that the presentation be postpone the presentation until they have the correct information for the Committee to use. At this point, she said, there is no point in proceeding with the presentation because the presentation is taking place in an ill-prepared manner. There is no assistance in terms of how the Committee should go about playing its oversight role during the Planning and budgeting process. She opens the floor for the Members about their opinion. She said the Committee was clear in their previous meeting with the AG that this meeting would be about assisting the Committee critically interrogate the strategic plans of the Departments and the AG has not done so.

Mr A Mahlalela (ANC) said it is not practical for the AG to come back because of time constraints. The presenters must make copies and we, as the Members, can look through it on their own. In the interim, they can put up the document on the screen or make copies for everyone.

Mr Emam-Shaik agreed with Mr Mahlalela citing that the Committee is to meet with the Department the following day thus it is important that this presentation continues. He said the Committee does not sit on a Thursday thus it has been a great sacrifice by the Members for the meeting to convene thus he would appreciate if the copies could be delivered before the end of the meeting.

Ms C Ndaba (ANC) agreed with the points made by Mr Mahlalela and Mr Emam-Shaik.

Mr Hlongwa apologised again and urged the Committee to return to the presentation

The Chairperson allowed the presentation to continue

Mr Mahlalela asked for clarity. The Department used the Treasurer framework and further they are Public Service regulation informed by the Public Finance Management Act Section 1 (a) and 3 (b).  The vision of the Department is not an issue but the vision of some of the entities is problematic because they seem to be lacking, he used the example of CMS (Council of Medical Schemes). He asked whether the AG looks at the totality of the framework of specific areas of the framework. He then refers to Section 3 (b) of Public Service Regulation, the Department only compliance with this in the Annual report and not in the APP or strategic plan. The Section says that there must be a mechanism of complaints but it is not present in the APP, he asked whether this should be in both the APP and Annual report.

There was no system in the APP that allows the Committee to have oversight but there are results in the Annual report that the committee cannot account for. Another issue is the reporting of targets. The target reports cannot be presented to the Committee on a quarterly basis because the targets are annual thus there is only one report at the end of the year. Can these targets be broken into quarters to allow for oversight by the Committee? There is no oversight in having most of the targets. There is a need to have constant oversight but this cannot be achieved with annual targets.

Mr Emam-Shaik said the results were the same and the office of the AG has noted this challenge. The processes being deployed by the AG are happening after the fact rather than a preventative measure. What mechanism does AG have to detect fraud beyond Treasury? What mechanisms does the AG have to measure that the Strategic plans and APP are feasible? When the Strategic plans come through, is the AG not tracking spending and if spending is used according to priorities? What changes do you plan on instituting?

Mr Hlongwa replied to Mr Emam-Shaik by pointing to the “mutual assurance” clause which was not presented on due to prior complication but “mutual assurance” means holding people accountable to the roles and responsibilities they have been assigned. The managers need to manage the performance process according to the legislation. There are internal auditors in the Departments but they are severely under used and if they were used they would find the problems which are discovered at the end of the year during the course of the year and they can then be addressed internally rather than externally by the office of the AG. The audit committee is also an oversight body within the Departments and they are also severely under used but they have the role to look at all the quarterly reports and act upon them before they are presented to the Committee. Management needs to ensure that there are right people in the right positions and the oversight bodies such as the Committee also hold the Department and entities accountable. The Committee must ask the relevant questions.

In terms of the entities, the AG does not make findings on policy rather on compliance with law.

Ms Pillay replied to Mr Emam-Shaik about the funding, the role of the AG is to make sure that the information given by the management is reliable. The AG does not review the actual plans just the viability of the indicators in relation to the targets because policy has to do with the actual structure of the plans and the types of indicators used. The AG also does not look at the strategic plans of Departments. What the AG opinion on the actual targets and indicators has primarily been on the merit of the targets. The annual targets are problematic but the Department has tried to break down but it is still a process.

The Chairperson said the performance of the Departments and the entities. The targets that they had were annual and there had not been a change from the Department. There is not a suffice response about quarterly target. Once the Members of the Committee had gone through the document and get a better understanding of the information

Ms L James (DA) asked whether the AG, on a quarterly basis, can give information on what they picked up from the Department. This can help the Committee in their oversight role, this can also help to avoid at the end of the year the shock that the Department has not been complying with the regulations. This also assists in making sure funds are used appropriately and allows the Committee to intervene accordingly if there are negative findings.

Mr Emam-Shaik said he appreciates the report but he says that the quarterly reports are problematic because they appear in the third quarter which is too late. He pleads that the AG to work closely with the Committee on a monthly basis to assist with the issue of accountability when it matters most.

Mr Mosala said when reading the audit outcome, the AG will say the information is not reliable but currently the information is correct. What impact will happen at the end? How do we fix the discrepancies?

Mr Mahlalela said his question was not answered about the legislation

Mr Hlongwa said the legislation applies to all reporting process. This is all in the annual report. There are not for all types of report. The findings made on the APP are correct. This is a review not an audit. This is an attempt to limit findings.

Ms Pillay said on a quarterly basis there is a meeting with the Chairperson were the quarterly interim audits are presented. These are not made public until there is a public report. The suggestion for monthly consultation is not feasible because monthly reviews are too soon

The Chairperson said there is a need to address the communication issues between the AG and the Committee. The AG must seek clarity if they are unsure of the mandate.

Mr Hlongwa pleaded with the Committee to ensure that the Department makes use of the Internal auditing process and the auditing committee to avoid the anxiety of only knowing the negative findings at the end of the year.

Ms Ndaba asked that why the data on page 6 and page 13 does not include 2013/2014? On page 19 in the annual performance plan has different data to that used in the presentation, where did the FFC get their data?

Mr Emam-Shaik asked how does the Department about improving spending when for the past couple of years spending has not been very good. The NHI initiative is severely underspent. Will we achieve the goals for 2030? How do we go about improving the chances of reaching the goals? The obstacle to success of service delivery begins in the provinces. What can be done about the provinces?

Mr Mosala congratulated the FFC on the presentation. In relation to page 31, the issue of funds following functions is good idea. What exactly is the feasibility of instituting this especially seeing that provinces are the problem with regards to service delivery and spending? How does the Department along with the Committee reconcile this? Another question is about the suggestion, the FFC made to cabinet last year about the changing in how conditional grants are structured, can the FFC please elaborate on this. The document that the FFC gave them

Dr H Volmink (DA) agreed with Mr Mosala but he also asked about the cost implication of NHI on the public. What is the opinion of the FFC about this? The NHI funds, what is the equitable share? The problem with provinces with failure of service delivery, can the functions of NHI be moved to the districts with strategic oversight from national. The issue of inequity, there needs to be a building of relationship between NGOs and government and strengthening the public-private relationship but all of these must result in good public value and financially efficiency.

Dr P Maesela (ANC) said the presentation was great but it lacked recommendations which made this process problematic because everyone is making suggestions. He also asked in terms infrastructure, refurbishing of facilities that were responsible for that between national and provinces? Training of health care professionals is important because it will lead to the non-implementation of NHI. It is capacitating professionals to run the facilities. The increase in HIV, ARV recipients means that government is failing at preventing and the policy needs to be revisited because it is not sustainable in its current form. The equitable allocation of funds also need to the addressed and the prioritising of funds even if the constitutional changes have to take place. Service delivery also needs to be reviewed, it must be done and there needs to be a priority the capacitating of professionals. The issue of IGR is the elephant in the room and needs to be addressed.

Ms James said the all agencies should come together to discuss how service delivery takes place. Make delivery easier for the Department especially with regards to NHI. The planning for delivery is taking place in pockets but the agencies need to be pulled together. There needs to be coherence in delivery to maximise on public funds. There needs to be a platform where the agencies make sure through coordination that service delivery does take place.

Mr Mahlalela said the amount South Africa spends on health care compared to other countries should automatically make the health care system better than that of countries that spend less but that had not been the reality. The outcomes in the health sector have been very poor but the income is substantially high. He asked whether the FFC has identified where the problem in the health sector of South Africa really is. He also asked about NHI about its budget, APP does not mention NHI pilot sites. The other issues was the reprioritising from NHI to HIV, where the cut in cut in taking place.  The transfers which go to CCOD, where is that money going? The Eastern Cape has the lowest percentage of equitable share, why is that? The big portion of province’s budget goes to primary health care, can we get a breakdown of how much each province allocates to primary health care? There is not enough information about provinces for the Committee to give proper oversight. In terms of the norms and standards, FFC recommended that they be reviewed, are the provinces following those norms and standards?

Mr Khumalo replied to Mr Mahlalela by saying the norms and standards are not being followed by provinces especially in terms by of the budgeting process. Government wants these norms and standards reviewed as those being used were created in 2000. The Committee must ask the Department has done as a response to the recommendations made by the FFC. The presentation given by the FFC was to give an analysis only and not to make recommendations as the mandate of the presentation. This was to enable your decision-making. The equitable share of Eastern Cape and Limpopo was lower due to migration from these provinces to economic hubs of the country but the formula used ensures that the money follows the people. The formulation should be driven by population. The pilots of NHI were for a limited period time but there shall be further elaborated. South Africa spends a lot of money on health in comparison to other countries in the same economic bracket. The problem health care in South Africa is historical and structural. The health sector focussed on tertiary health care and it is hard to move towards a prioritisation of primary health care. The problems of the health care sector are institutionalised dynamics.

The current health minister highlighted this that there needs to be a shift in health care practices and mindset. The system was not built for this and primary health care and the training of health care professionals did not prioritise that. Thus the structural challenges will be very hard to overcome. The other issue is about IGR, this problem is legislated in chapter 3 of the constitution thus the Department and Committee needs to work around. The other issue is the NHI and the cost implication for public with regards to the NHI, it is very difficult to give an exact figure. The last time there was attempt to calculate this resulted in a substantial amount of money. It is important to observe how the fiscus will be affect. This is a very complex process and the implication for NHI is that the system will have change to accommodate this policy. The commission will have further information after the meeting with the Director General of the Department on the 7th of May. The revenue of government cannot continue to focus on expenditure but there needs to be a focus on the income side and to find a way to balance out this. There also needs to be tighten of the process of moving functions with funds always to deal with funds. The use of conditional grants is the reaction to failure in fund management by provinces. Publishing of budgets can also assist with the accountability problem especially at provincial level. The system Mr Mosala was referring to is the rationing of grants, pooling the money and only using it when in need. Another issue was the data, the data used in the presentation is that provided by the treasury and the discrepancies can be better explained by the AG but they have left. There are serious discrepancies between the numbers produced by every sphere of government and the AG thus it is safer to use Treasury’s data.

Mr Rakabe replied about the concern about the data, it is hard to use what is provided by Department thus FFC uses the indicators and targets given by the NDP. The other issue is underspending in the Department especially Programme 2 and that there is large spending in the last couple of months. The APP does not speak a lot on NHI pilots and how it can be applied. A lot of spending for NHI was through conditional grants. The problem is even the NHI indirect grants were being reprioritised to programme 3: HIV. The national department is unable to contract private doctors and they redirect. The money is taken to where the need is greatest. The increase of HIV recipients is a failure of policy. The Department needs to review its targets in this regard.

The Chairperson thanked the FFC for having a clear and concise presentation. The health system in South Africa was hindered by Human Resources Management and infrastructure development. The structural context of health is very important. She thanked the FFC and said there was a request for the FFC to present again in the year.

The meeting was adjourned.