Alison Hickey
AIDS Budget Unit, Idasa
10 February, 2004
Handouts:
Idasa Budget Guide and Dictionary
Budgeting for HIV/AIDS in South Africa
Where is HIV/AIDS in the Budget?: Survey of 2003 provincial social sector budgets
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 1

Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 2

1.
The Constitution says which sphere of government can levy or collect which types of taxes.
 National Revenue Fund where all money received by natl govt must be paid.
Income tax, VAT, corporate tax, customs duties
 Provincial revenue: 4% own revenue, 96% from national government
Flat-rate surcharges on some natl taxes.
Main types of provincial own revenue: road traffic fees, hospital fees, gambling levies
 Local government revenue: 83% own revenue, 17% transfers
Property rates, utility fees (e.g. electricity)
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 3

2. The Constitution also assigns specific powers and functions to each sphere of government.
 Education (at all levels excluding tertiary), health services and welfare services are listed as concurrent functions of natl and provincial govt.
 They are shared responsibilities, with national determining policy and provinces responsible for delivery.
 Social spending over 80% of provincial budgets
Education:40% Health: 24% Welfare:19%
 Local govt primarily concerned with delivery of basic services including water, sanitation, electricity, and refuse collection
 Municipal health services undergoing changes with recent
National Health Act.
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 4

3. According to the Constitution, Section 227 (1):
 Local government and each province is entitled to an equitable share of revenue raised nationally to enable it to provide basic services and perform the functions allocated to it;
 May receive other allocations from national government revenue, either conditionally or unconditionally
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 5

4. Parliament must pass an annual act called the
“Division of Revenue” which tells how nationally-raised revenue will be shared between 3 spheres of government.
Section 214 (1)
 Top slice (debt service, contingency reserves)
 Vertical split (executive/political decision)
Excluding top slice:
39% national
57% provincial
4% local government
 Horizontal split between provinces (determined by formula)
 Horizontal split between municipalities (determined by formula)
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 6

5. National government sends money to the provinces in two different ways.
1. Equitable share grant
• Grant to each province unconditionally. Provinces free to distribute funds between departments according to their own budget processes.
• Technical formula to divide funds based on relative need. Biased towards poorer provinces.
2. Conditional grants (earmarked funds from national to provinces)
 Funds added to the Equitable Share for HIV/AIDS is a special case.
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 7

• National govt provides an Equitable Share grant to each municipality.
(nearly 50% of natl transfers to LG)
•
–
–
Major conditional grants to municipalities (administered by DPLG)
Municipal Systems Improvement Grant (collection capacity-building and restructuring grants; administered by DPLG)
Municipal Infrastructure Grant (amalgamation of number of capital grants e.g. water, public works, electrification, transport)
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 8

1. Drafting phase
2. Legislative phase
3. Implementation
(financial year begins 1 April)
4. Auditing
Medium Term Expenditure Framework
Parallel national and provincial budget processes
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 9

1. Executive determines medium-term spending priorities.
(April-Sept)
2. Natl and prov depts prepare MTEF budget submissions.
(April-Aug)
3. Macroeconomic and fiscal framework and DOR debated between July and August. Budget Council makes final recommendation on DOR between provinces in Sept. DOR approved by Cabinet.
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 10

4. MTEC hearings held between Natl Treasury and separate departments.
(Sept-Oct)
5. Medium Term Budget Policy Statement
Adjustments Estimate
Division of Revenue Bill introduced into
Parliament
(Nov)
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 11

6. Minister of Finance presents budget in Parliament on
Budget Day. Also Division of Revenue Bill.
(18 Feb 2004)
7. Provincial budgets tabled in provincial legislatures.
(Feb-March)
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 12

 Section 77 of Constitution gives Parliament power to amend money bills.
 Constitution says an act of Parliament must provide for a procedure to amend money bills in Parliament. This legislation yet to be passed.
 Civil society organisations interested in stronger amendment powers for
Parliament.
 National Treasury and Parliament currently working on amendment powers legislation.
For now, theoretically:
 Parliament cannot make changes but could vote down the entire budget.
 Parliament can amend the DOR Bill.
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 13

* With respect to HIV/AIDS treatment and care, critical area to watch is provincial budgets—not national.
R million (nominal)
1800
1600
1400
1200
1000
800
600
400
200
0
Allocations for HIV/AIDS from provinces' own budgets
Health HIV/AIDS cgs including
ARV funds
2002/3
181.942
210.209
2003/4
356.458
333.556
2004/5
433.406
781.612
2005/6
501.288
1135.108
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 14

Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 15

written by National Treasury & available from Government Printer.
• Medium Term Budget Policy Statement (MTBPS)  November
Budget estimates for current budget year and two following years.
Includes macroeconomic projections, amount going to provinces, main policy choices
• Intergovernmental Fiscal Review (IGFR)  October
Analysis of provincial expenditure by sector (health, education, welfare)
Also covers municipal budgets and capital investment in local government
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 16

Available on national Budget Day from government printer:
• Estimates of National Expenditure
• Budget Review
• Budget Speech by the Minister of Finance
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 17

over medium term (R1.932 billion),
(2004/5 thru 2006/7)
KwaZulu-Natal
28%
Limpopo
10%
Mpumalanga
10%
Northern Cape
1%
Gauteng
15%
North West
11%
Free State
7%
Eastern Cape
15%
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004
Western Cape
3%
18

ARV earmarked allocations by province, real terms
300
250
200
150
100
2004/5
2005/6
2006/7
50
0
E as te rn
C ap e
Fr ee
S ta te ng
G au te
K w aZu lu
-N at al
Li m po po
M pu m al an ga
N or th er n
C
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 ap e
N or th
W es t
W es te rn
C ap e
19

1,600
1,400
1,200
1,000
800
600
400
200
0
2003/4
HIV/AIDS health conditional grant funds to provinces (real terms)
2004/5 2005/6
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004
2006/7
ARV conditional grant funds
Other
HIV/AIDS conditional grant funds
(excluding
ARV)
20

 Abuja Declaration 2001—15% target
South Africa public health expenditure
R billion 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6
Consolidated expenditure
Consolidated provincial and national health expenditure
245.6
270.4
27.2
29.6
310.2
34.9
351.3
380.8
415.0
39.1
42.5
45.7
As percent 11.1% 11.0% 11.3% 11.1% 11.2% 11.0%
Source: National Treasury, 2003 and 2002 Budget Review.
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 21

R billion 2001/2 2002/3 2003/4 2004/5 2005/6
Idasa estimate:HIV/AIDS targeted allocations in national budget
(excludes hidden/indirect) 0.349
1.004
1.952
2.950
3.568
Nominal % increase in
HIV/AIDS allocations
As percent of consolidated expenditure
Source: National Treasury, 2003 and 2002 Budget Review.
187.7%
0.1% 0.3%
94.4%
0.6%
51.1%
0.8%
20.9%
0.9%
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 22

Public health & HIV/AIDS budget allocations and proportions in real terms
Prelim.
Total public health expenditure
Audited Outcome
2001/02
Rev. Est.
Voted MTEF MTEF
2000/01 2002/03 2003/04 2004/05 2005/06
(Nat+Prov+CG)
R million, real terms 31,967 33,834 34,026 35,731 36,902 37,660
Total Public Health Expenditure as
Proportion of GDP
Total public health expenditure as a share of total expenditure
Total provincial health expenditure as a share of total provincial expenditure
Total HIV/AIDS targeted allocations
R billion
Nominal % Increase in HIV/AIDS allocations
2.96%
11.56%
24.02%
0.214
3.03%
11.60%
24.27%
0.349
63.1%
3.04%
11.66%
22.40%
1.004
187.7%
3.07%
11.35%
22.37%
1.952
94.4%
3.06%
11.33%
22.16%
2.950
51.1%
3.01%
11.16%
21.72%
3.568
20.9%
Total HIV/AIDS targeted allocations as a share of total health expenditure 0.79% 1.18% 2.87%
HIV/AIDS as percent of consolidated
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 expenditure 0.1% 0.1% 0.3%
5.00%
0.6%
6.93%
0.8%
23
7.81%
0.9%

South Africa: Improved spending records on
HIV/AIDS conditional grants by sector
2000/1 2001/2 2002/3
100.0%
90.0%
86.5%
82.9% 82.2% 81.3%
92.7%
85.0%
80.0% 74.5%
66.1%
70.0%
60.0%
59.5%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
22.3%
Education sector Health sector
35.6%
Social Development
36.5%
Total HIV/AIDS

South Africa: Aggregate actual expenditure of
HIV/AIDS conditional grant funds by sector
(includes funds rolled over from previous year)
450
400
350
300
250
200
150
100
50
0
R 136 m
R 6 m
R 45 m
Education
R 204 m
2000/1
2001/2
2002/3
R 385 m
R 109 m
R 51 m
R 10 m
R 14 m
R 2 m
R 46 m
Health Social Development
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004
R 18 m
TOTAL
25

Funds for HIV/AIDS in 2003/4 national budget.
Total: R 1.952bn
Transfers to
NGOs for
HIV/AIDS and TB
2%
Funds for SANAC,
SAAVI, Lifeline and Lovelife
5%
Earmarked grants to provinces for
PMTCT, VCT, home-based care
18%
Natl HIV/AIDS
Directorate
9%
Funds to provinces for
HIV/AIDS treatment and care
57%
Lifeskills education
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004
6%
Community based care and support
3%
26

Roles and responsibilities of health departments
National
Responsibilities of different spheres of government
Provincial Local
Determining health policies
Legislation
Implementation of national policies
Provision of services including
Primary Health Care
(PHC) - shared with local government
PHC - shared with provincial government
Monitoring implementation
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 27

Budget Implications of Division of Roles and
Responsibilities i.r.o. of Health
Total National health expenditure in 2003/04
= 8.4 billion
National health expenditure excl. transfers in 2003/0
= 602 million
Projected consolidated total provincial health expenditure in
2003/04 = 36.6 billion
Consolidated Health conditional grants to provinces amount to 7.4 billion
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 28

Budget Implications of Division of Roles and
Responsibilities i.r.o. of Health
• 93.3% of natl DoH budget is transfers, mainly to provincial departments (conditional grants)
• 88% of natl health expenditure goes to provinces as cgs
National health expenditure is less than 2% of consolidated provincial and national health expenditure
• 98+% is spent on service delivery in the provinces (through conditional grants and equitable share allocations).
• Cgs about 20% of consolidated provincial health expenditure
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 29

How does budget analysis fit in the oversight role of committees?
Policy Budget
Structures and institutions for implementation
Service
Delivery
Impact of programme or policy budget inputs: funds, resources budget outputs: medicine, vaccinations, HIV tests budget outcomes: improved child health
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004
Indicators?
How do we measure inputs, outputs and outcomes?
30

National Budget
National / Provincial budget
National
Vote 16. Health
Departmental budgets
Programme budgets
National
Vote 16. Health
Programme 2: Strategic Health Programmes
Divided into separate line-items
National
Vote 16. Health
Programme 2: Strategic Health Programmes
Sub-Programme 2.1: District Health Systems
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 31

Examples of health policy developments impacting on budget allocations
• PHC: Need for new and upgraded clinics => Infrastructure
Conditional Grants
•PHC: Negotiations around the division of responsibility around
PHC => Transfer payments
•Nutrition Programme: Adoption of PSNP Review recommendations => Integrated Nutrition Programme
Conditional Grant
•Hospital Services: Infrastructure backlogs => Hospital
Revitalisation Grant
•Hospital Services: management improvement => Hospital
Management and Quality Improvement Grant
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 32

Examples of key health policy developments impacting on budget allocations
•Personnel: distribution and scarcity of health personnel => provincial health budgets: personnel item
•Non-personnel inputs: increased prices of medical equipment and consumables => provincial health budgets: machinery and equipment item, stores and livestock item
•Legislation: Mental Health Care Act => provincial budgets: specialised hospitals sub-programme
•Legislation: New National Health Bill => Act => implications for national, provincial and local government responsibilities and budgets
•Free medical care for people with disabilities => provincial health budgets
•Other???
Alison Hickey ~ AIDS Budget Unit, Idasa ~ 10 February 2004 33