Appropriation Bill: Committee Report; Underspending on the Health Conditional Grants: PBO Briefing

Meeting report

The Chairperson welcomed the Parliamentary Budget Office and thanked the delegates for their presence. Due to illness, she handed over her chairing duties to Mr Y Carrim (ANC, KwaZulu-Natal).

There were no apologies.

Report of the Select Committee on Appropriations on the Appropriation Bill [B3 – 2023] [National Assembly (Section 77)]

The Committee went through the report, scrolling through it point by point to allow Members to thoroughly look at it and ensure that everyone was okay with the points.

The Committee then went through the recommendations as well as the Committee’s decision which is that the Select Committee on Appropriations has agreed to the Bill without any proposed amendments.

The Chairperson asked for Members to move for the adoption of the Bill.

Mr D Ryder (DA, Gauteng) said that Members should not support the Bill because of the last paragraph containing the proposed amendments. He said that the DA, therefore, rejects the Bill and would like there to be amendments to the Bill.

Mr M Moletsane (EFF, Free State) said that The EFF would like to reserve its position on the Bill.

The report was adopted.

The Committee then went over its minutes for 07 June 2023.

The minutes were adopted.

The Chairperson handed over the platform to the Director of the Parliamentary Budget Office.

Briefing by the Parliamentary Budget Office (PBO)

Dr Dumisani Jantjies, Director, PBO, thanked the Chairperson and the Committee Members for the opportunity to deliver a presentation. In his overview remarks, he said that the office has embarked on a process of trying to understand different government functions. He said that the office would consider grants. Everyone has the right to access health care, and the office is concerned that there has been slow progress in providing it. Government is still very behind on its target. This is why the budget is important.

He invited Ms Sibusiswe Sibeko to start the presentation.

Government Underspending Analysis 2011/12- 2020/21: A Case Study of Health

Ms Sibusisiwe Sibeko, Public Finance Analyst, PBO, went through the situational analysis. She said that South Africa’s healthcare system remains overstretched and underfunded. The Health Department is only filling 31% of its vacant positions, and the Minister has credited this to budget cuts. She said that, even if all 18 000 vacancies were filled, South Africa would still have a deficit of healthcare professionals. South Africa has a quadruple burden of disease, and this strains the healthcare system. She said that socioeconomic conditions create significant obstacles to preventative care. And if there is no spending in this sector, it will make it harder for the public healthcare system to perform properly. The medical aid scheme membership has changed very little between the years 2002 and 2021. The Western Cape has more private healthcare facilities and a higher life expectancy than the rest of the country. There is a burden of malnutrition in South Africa.

Budget Allocation

Ms Sibeko said that real per-capita spending is declining in the medium term, and this is concerning.

She handed the presentation over to Mr Tshepo Moloi.

Underspending Analysis

Mr Tshepo Moloi, Economic Analyst, PBO, said that the office adopted a mixed-method approach using qualitative and quantitative data when conducting their analysis. The analysis sought to calculate the budget deviation by comparing adjusted appropriations to the audited expenditure outcomes between 2011/12 and 2020/21. He said that the underspending is a reasonable deviation. At a provincial level, the PBO assessed the Eastern Cape, Free State, Gauteng and Western Cape.

Spending Trends: National Department

Between 2011/12 and 2020/21, the National Department of Health underspent its budget by an average of 0.9% annually.

Spending Trends by economic classification: National Department  

By economic classification, the underspending by the National Department of Health was driven by the current payments and payments for capital assets.

Reasons for underspending at National Level

- Supply chain management problems

- Process delays

- Compensation of employees

- Non-implementation

- Implementation of new programmes

- Transfer issues

- Funding hurdles

 He said that all these factors are a result of poor planning.

Reasons for underspending in Provincial Departments

- Medical legal claims

- Cash flow problems

- Increased efficiency

- Interdependent projects

Conditional Grants 

Comprehensive HIV, TB, Malaria, community outreach, and national tertiary grants are the largest. There is no pattern of underspending for conditional grants, a rollover of underspent funds, and reprioritisations within grants.

Considerations from the AGSA

The Financial Health of the health sector has been under immense pressure for years because of the limited budget and poor financial management. This has been made worse by medical negligence. When medical malpractice claims are not paid, this contributes to the problem. Health is one of the biggest contributors to unauthorised expenditure in 2020/21.

Root causes of specific underspending requiring interventions

- Procurement

- Payment systems

- Vacancies

- Interdepartmental systems

- Compliance

- Project planning

See attached document for more details on the presentation

Discussion

Mr Mark Bletcher, Chief Director: Health and Social Development, National Treasury, said he wants to alert Members that the funding situation raises much concern. There is an R11.2 billion real decline in the allocation to the provinces so far. The Committee needs to keep this in mind. The underspending is particularly in the National Department and the 0.9% figure presented is misleading. So, the figures need to be analysed through spending. He said that there is substantial pressure on the provincial government. Most of these provinces start the year with debt, which puts pressure on their budget. There needs to be strong management to deal with a tight budget.

Mr S Du Toit (FF+, North West) said that he is not surprised that there has been underspending. The figures show that the National Health Insurance is not going to work. The national healthcare sector is not strong enough for it. He said that there are currently many loopholes in the Bill. He asked for more information on the personnel, and said there is no spending on general healthcare practitioners. Does race play a role in this? He asked if people were not allowed to participate in the healthcare sector because they did not have a BEE status. He asked that Members read the proposal on the Bill by the FF+, when they have the opportunity.

Mr Ryder said he agrees that this presentation shows that National Health Insurance will not work. He said that the figures are out of date, and asked why there are no 2021/22 dates. This may affect the analysis of data. The best way to deal with problems is to have current data. He admitted that the underspending analysis is showing positive trends. The Eastern Cape is concerning, and perhaps the Committee needs to call the Department of Health to speak about their challenges. He said it is concerning that donor funding has not been spent and that the national Department needs to account for this. He maintained that this presentation shows why the Appropriation bill should not have been adopted because government spending is not being allocated where it should be going – for example, education and healthcare.

Mr Moletsane said that it is unfair to citizens of the country to have vacant positions because it denies citizens adequate service provision.

The Chairperson said that the document proposed by Mr Du Toit may be put in the chat or emailed. He said that the markup of a civilised society is in free education and free healthcare. He agreed that the public sector healthcare is in bad condition. Government, civil society and looting are to blame for this. The incapacity of the police and the prosecutors to deal with this also adds to the problem. He maintained that no one would like to destroy private-sector hospitals. The question is not about having NHI but about how the two sectors will be integrated without destroying either. The country needs as many skills as possible. He agreed that this conversation could not be productively held without the Health Department being present.

Responses

Dr Jantjies said that there is a disconnection between the budget process and the service delivery process, and this needs to be addressed. There is a decline in the outcome of healthcare, but the budget continues to be reduced and these reductions do not make any financial sense. Budget underspending is a concern because it will lead to reduced budget allocation. The disconnect needs to be closed because, if it is not, the socioeconomic issues will not be adequately dealt with. He said that he welcomes National Treasury's comments but that the PBO has requested meetings with the institution and has not received a response. On the concern that the numbers are outdated, he said that these numbers are the correct numbers.

Dr Nelia Orlandi, Deputy Director: Public Policy, PBO, said that the whole project was based on underspending, but analysts are updating the data and it will be provided to the Committee as soon as it is available.

Ms Sibeko said that the PBO is using these timeframes because they are trying to understand longitudinal trends. This helps to show recurring issues in the sector. She said it is important to acknowledge when an issue arises. On the NHI, she said the assessment shows that inadequate budgeting will lead to more problems than adequate budgeting. This will make it seem like there is underperformance when, in fact, there is not enough money. She maintained that underspending is not as exaggerated as it is made to be.

Mr Moloi said that the PBO sees the data as a foundation, and it will continue to be updated on an ongoing basis. He said it is important for the Committee to have this current data provided for oversight.

Dr Jantjies maintained that the PBO is happy to work with Treasury. In terms of infrastructure spending, he would like the Committee to invite the Presidency to speak about the problem of infrastructure.

Mr Bletcher agreed there should be a joint meeting with the Health Portfolio Committee. He said the provincial share allocations are lower than before Covid-19. So, provinces are under a lot of pressure. He said that the provincial departments of health need to be invited to speak about these problems.

Mr Ryder asked about the claim that the PBO has been unsuccessful in arranging a meeting with Treasury. He said this was concerning and asked to be given clarity on this. He said that if Treasury is not cooperating with PBO, they are hampering the work of the Committee. If there is a problem, the Committee will intervene.

The Chairperson asked why the PBO had not informed the Committee that Treasury was not responding to the Committee’s requests to schedule a meeting.

The Director-General said that the PBO had written twice to Treasury, but they have not gotten any response.

The Chairperson said he was not informed of this and gave Treasury 14 days to respond to the PBO and give them the necessary information.

Ms Julia de Bruyn, Chief Director: Public Finance, National Treasury, said that Treasury is unaware of these letters, but they will look for them and revert to the PBO.

Mr Du Toit said that his question had not been answered.

Mr Bletcher responded that there is no contracting with independent general practitioners using the grant. The grant has not been used, and this has been happening for a few years. Therefore, it is not a race nor a BBBEE issue.

The Chairperson thanked the PBO for their presentation and the Members for their contributions.

He asked Members if there were any outstanding issues. There was no response.

The meeting was adjourned.