Will Godongwana budget for the NHI?

With the fiscal screws tightening on government finances, the two biggest questions ahead of Finance Minister Enoch Godongwana’s 2024 Budget Speech at 2pm on Wednesday (21 February) are whether there will be any new allocation for the implementation of the National Health Insurance (NHI) scheme and whether Godongwana will bite the bullet and tap into the almost R500 billion in foreign reserves held by the South African Reserve Bank (Sarb).

Read: Should SA tap R497bn in paper profits?

It may be premature for both, but being an election year, Godongwana will clearly be under pressure to announce some populist moves to please the governing party (ANC).

While President Cyril Ramaphosa is yet to sign the NHI Bill into law, he punted it in his State of the Nation Address earlier this month.

Tapping into the Sarb-administered Gold & Foreign Exchange Contingency Reserve Account, which contains unrealised profits or losses on the reserves that are incurred due to exchange rate fluctuations, will require a governing framework to be tabled.

While National Treasury indicated in December that it is considering the move, Godongwana and Sarb governor Lesetja Kganyago have both previously warned that it is not an easy move and could have negative ramifications for investor confidence.

Following the tabling of SA’s 2023 Medium-Term Budget Policy Statement in November, Godongwana said, “We are looking into it”, but no timeline has been set for determining whether the account will be accessed.

Read:
SA weighs tapping foreign reserve gains to close funding gap
Godongwana says no imminent plan to tap reserves
IEJ economists warn against ‘chaotic budget cuts’

Another question is whether the finance minister is looking at the contingency reserve account to fund the NHI or to lower the country’s widening budget deficit amid a high interest rate environment.

Interest rates are however expected to fall later this year, which could give government some breathing space.

Organised business bodies, CEOs of JSE-listed companies, economists and other organisations have voiced grave concern about rolling out the NHI in its current form, labelling the legislative process unconstitutional and the scheme unaffordable. Their estimates of the cost of the overall NHI range from R300 billion to as much as R800 billion.

Izak Odendaal, investment strategist at Old Mutual Wealth, said this week in his latest Investment Note – Another pivotal budget –that if the NHI is introduced, it could “perhaps” represent the “biggest increase in state spending in history”.

“Well-intentioned as it is, it cannot be accommodated in the current fiscal framework. It will be important to see if the budget makes any provision for NHI this year,” he added.

Read:
Kick the NHI Bill back, it’s unconstitutional – Busa to Ramaphosa
NHI means 31% more tax and 69% less benefits for medical scheme members
Ease up on Section 33 of NHI Bill – Discovery boss
Biggest farce in the NHI charade is the funding story: Mavuso

On Tuesday, ahead of this week’s budget speech, the Health Funders Association (HFA) again warned about the financial viability of rolling out the NHI in its current form. The non-profit organisation currently represents some 73% of the country’s medical schemes and 43% of South Africa’s total medical scheme membership base.

“South Africa needs actionable solutions now to broaden healthcare access and improve affordability. However, with the current debt-to-GDP ratio and many demands on the public purse, it is difficult to see how the state could afford to finance the NHI alone, as outlined in the NHI Bill,” Craig Comrie, chair of the HFA, said in a statement.

“The existing regulatory framework could offer a more viable springboard to achieve the aims of Universal Health Coverage sooner through collaborative healthcare initiatives that improve healthcare access for all South Africans,” he added.

‘Tip of the iceberg’

Comrie pointed out the substantial financial commitment demanded by the NHI, noting that an initial allocation of more than R20 billion has already been disbursed.

“This allocation, which is merely the tip of the iceberg, accentuates the magnitude of the financial hurdle that lies ahead for the country and its people if the NHI Bill is enacted in its current form,” he said.

“In the current economic climate marked by reduced GDP and tax collections, financing the NHI presents an impossible task for National Treasury, particularly with the exclusion of private health funding collaboration.

“We are therefore urging the Presidency to prioritise the exploration of alternative pathways towards realising Universal Health Coverage in South Africa.

“There is a critical, urgent need to reassess and redirect vital resources towards more pressing national priorities than the NHI’s potentially unsustainable framework,” said Comrie.

“This is a heavy financial burden for the South African taxpayer to shoulder, particularly at this time, with cost projections ranging from R200 billion to a staggering R500 to R800 billion annually if fully implemented.

“This exorbitant sum, dwarfing recent and future government bailouts, presents an insurmountable challenge given our economic downturn and diminished tax revenue.”

Listen:
Why SA can’t afford the proposed NHI
Is SA’s Gold and Foreign Exchange Contingency Reserve Account up for grabs?
Don’t cancel your medical aid, NHI a way off yet