Spending money we don’t have
Iwas staggered by President Cyril Ramaphosa’s comments about SAA in parliament this week. By directly contradicting comments made by finance minister Tito Mboweni that the ailing state airline should be shut down, he undermined both the Treasury and the minister, and once again cast doubt on SA’s sovereign sustainability.
Worst of all, he made it abundantly clear that political expedience will be favoured over economic stability until the national elections next year.
Regrettably, it is not just the president whose forked tongue is putting our fiscal sovereignty at risk for the sake of political expedience.
Last week, health minister Aaron Motsoaledi came out with a garbled message that although there have been “delays in implementing the National Health Insurance (NHI)”, it was still “going ahead as scheduled”.
His comments came in the context of explaining how budget cuts have forced him to reprioritise spending within the health department and how money allocated for the NHI has since been reallocated to the stimulus package.
It is clear that there is not an inch of fiscal space for the NHI to go ahead as scheduled. It is also clear that, even without the budget cuts this year, the NHI was not going ahead as initially planned.
What makes me really angry is that the minister had the audacity to insist that the NHI is about equitable access to health care and not just about votes.
Perhaps I expect too much of politicians, but promising something to voters that is never going to happen is cynical and reckless. More importantly, it delays the critical decisions that need to be made to give foreign investors and ratings agencies a clear signal that SA intends to stick to its debtreduction target.
The past few months have made it apparent that a default on SA’s sovereign debt is not beyond the realm of possibility. Growth has ground to a halt, government revenues are falling, investment is stagnating and, despite the best efforts of our new finance minister, the president insists on increasing debt to keep a loss-making state-owned entity in the air.
As Mboweni made clear in his mediumterm budget policy statement last month, SA’s growing debt burden threatens to cripple the fiscus if it increases beyond around 60%, and heavy debt repayments mean there is less money to spend on key economic infrastructure. If we can’t fund the NHI through debt, then the only alternative is through tax.
Nationalised Healthcare Systems (NHS) are not uncommon in developed and developing economies, but they require wide tax bases. The majority of countries that provide some form of NHS, such as Thailand, New Zealand, Mexico and Australia, all have employment rates of 60% and higher. SA is closer to 35%.
According to the findings of the Davis tax committee, funding the NHI would require a 4% increase in payroll tax and a substantial increase in the value-added tax (VAT) rate.
You can debate the methodology all you want and quibble over percentages, but we simply do not have a wide enough tax base to fund this monster.
The hard truth is that the department of health fails to deliver adequate health care to the majority of South Africans
The most recent annual inspection report of the Office of Health Standards Compliance found that out of the 696 public health facilities inspected, 36% were “noncompliant”, 26% were “critically noncompliant” and 23% were “conditionally compliant — with serious concerns”.
Only seven of the almost 700 state facilities that were inspected achieved the 80% requirement set for accreditation under NHI.
Changing this would require a massive injection of public funds that we don’t have and won’t have for the foreseeable future. Instead, we should fix the usual issues of maladministration, corruption, wastage and appointments of unqualified personnel.
I don’t disagree with the minister that SA’s health-care system is grossly inequitable or that the private health-care sector is unsustainable in its current form.
What I do disagree with him about is his cynical approach to fixing these problems.
The fact is that the department of health has been dangling the NHI in front of voters for years, and so far we are no closer to understanding the how, what and who of how it will be funded, administered and managed.
To pretend that the NHI is a viable and realistic option for SA, especially now, makes my stomach turn. Given the current fiscal space, the solution is to improve what we have, not expand.
Implementing the NHI is not impossible, but it is impossible in SA right now.
To pretend the NHI is a viable and realistic option for SA makes my stomach turn