Spend­ing money we don’t have

Sunday Times - - Business Opinion - Bron­wyn Nortje

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

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