RHD Prelude Chapter - Health Systems Trust

at the same time not increasing the tax burden. This policy has impacted on health sector reforms,
the expansion of services and attaining inter- and intra-provincial equity of health resources.
GEAR focuses more on efficiency than equity, one of the pillars of health sector reforms.
These macro-economic changes (GEAR, MTEF and provincial global budgeting) have increased
the complexity of the budgeting process for health services. Along with the changes in processes
and policies there has been an overall decrease in finances available from the national fiscus for
the public sector. For health services this is compounded by the increasing number of patients
moving from private sector to public sector health care, particularly for chronic medication. In
1992/93, 23% of the population used private sector health services. This figure has now decreased
to 16%.
The 1997/98 funds were allocated for the first time as a global amount to each province, through
a fiscal federalism. The Budget Council, (comprising the nine MECs of finance, the National
Minister and Deputy Minster of Finance plus officials from Department of Finance and State
Expenditure and the Provincial Treasuries and the FFC as observer) coordinated the process.
In 1997/98 the DoH committed itself to establishing the district health system (DHS), and
defining the norms and standards for the PHC package and hospitals. 5
The National Treasury (NT) plays a central role in decentralisation. It is responsible for distribution
of funds to provincial and local government for provision of services. Treasury monitors the
use of funds according to financial legislation. The treasury is seen by some managers as
retaining control centrally and not being in favour of decentralisation, particularly of non basic
services. Health is not a defined as a “basic service” in the Constitution, although in many
quarters it is considered as such, and is defined as a “basic need” in the RDP document.
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7.1.1 National and Provincial Processes
Before 1997, the budget process was highly centralised through the Department of State
Expenditure (DSE). The Health Functioning Committee used historical budgeting data in
allocating funds for the provinces and the ‘homelands’ for health services. Provinces and ‘selfgoverning
states’ had little flexibility to change budgets once set by the committee. Between
1994 and 1997 a needs formula based on population size was used for provincial health budgets.
Thereafter, in 1997, fiscal federalism and the MTEF were introduced. Fiscal federalism comprises
global allocation to provinces, who then divide this allocation to provincial sector departments.
The National Department of Finance (NDoF) has retained a centralised role in the budgeting
process because the department is the appointed custodian of GEAR. The MTEF was introduced
to monitor and account for expenditure. The National Cabinet sets broad government priorities
against which the detailed provincial budgets are evaluated. Although there is some devolution
of budgeting to the provinces, central government retains a controlling influence. Overall
constraints on public spending are due to policies within GEAR and the MTEF. Personnel costs
are a major component of government spending. Civil service salaries are negotiated through
central bargaining structures and significantly constrain available resources for service delivery. 6
In 1998/99, a process of ‘horizontal’ and ‘vertical’ allocations between spheres and across spheres
of government was introduced. Guidelines for allocations for national and provincial level
budgets are available. National Cabinet requires Provinces to allocate 85% of their total budgets
to the social sectors i.e. health, education and social welfare. Local government, however, is not
subject to the same control and has a different budgeting process.
5 South African Health Review 1997. Durban: Health Systems Trust; 1997.
6 Di McIntyre, Stephen Thomas, Sandi Mbatsha and Luvuyo Baba. In Crisp N, Ntuli A, editors South African Health Review
1999. Durban: Health Systems Trust; 1999.