The 2021 budget, like the vaccine rollout, dare not fail
Prioritising vaccination is by far the most effective way of giving SA the best possible chance to get back on the road to health and economic recovery
The 2021 national budget is expected to result in pressures across all departments as SA continues to require fiscal resources to respond to the Covid-19 pandemic with both pharmaceutical and non-pharmaceutical interventions.
Previous public interest in the budget and matters relating to health initiatives have centred on National Health Insurance (NHI) and its implementation. Now the focus has shifted to initiatives in response to the pandemic. Standing on the other side of 2020 affords us the opportunity to understand the fiscal requirements underlying a successful response.
The 2021 Budget Review has implications far beyond the single financial year ahead, and correctly prioritising the budget is of paramount importance. There are difficult choices to be made.
On one hand, the SA economy is in a low-growth trap, facing a unique combination of supply- and demand-side shocks, not to mention structural factors such as electricity supply constraints, policy uncertainty and record unemployment rates. On the other, the budget must provide financing for not only vaccines but also the swift and efficient rollout of the vaccination programme — not only to ensure the safety of the population, but to protect the economy from pandemic-driven stoppages, which have proven to be vastly detrimental to the economy.
To prioritise the vaccination programme is by far the most effective manner of containing the coronavirus and giving SA the best possible chance to get back on the road to recovery.
The Supplementary Budget Review 2020 noted that a “total of R21.5bn has been reprioritised to public health services”, bringing the health sector’s share of consolidated expenditure by function to 12.1% (compared to 11.8% in the February 2020 budget). This reprioritisation was meant to help prepare the health sector for “a rising number of cases, including expanding capacity and ensuring personnel are protected”.
A successful and comprehensive vaccination programme will support SA in catching the much-needed wave of economic recovery, which is expected to be seen at a global level as economies start to bounce back
Unavoidably, the focus of the health budget has shifted towards Covid-19 rather than NHI, and this will continue for the next couple of years. The failures seen in both the public and private sectors in responding to the pandemic through not having effective consolidated data and systems for the country, has further highlighted the need for an effective consolidated healthcare system.
Covid-19 has likely reinforced the idea of a national health system, although the current crisis means priorities and timing of the NHI rollout, as well as the form and level of cover (related to cost) are likely to shift compared to a pre-coronavirus world view.
Among many other priority initiatives that need to be addressed, the budget will need to make provision for the procurement of Covid-19 vaccines and the subsequent implementation of the rollout. SA aims to achieve population immunity by vaccinating 67% of the population at an estimated cost of R20.6bn for the vaccines alone. Costs pertaining to the rollout of the vaccination programme are not included in this estimate, which will likely not be insignificant (government estimates range from R64 to R270 per vaccine).
The public health impact of Covid-19 goes far beyond the number of Covid-19 cases and related deaths, with the full repercussions only to be fully understood and quantified in the years to come. From an economic perspective, the damage has been severe. Economic activity came to a complete halt for a number of weeks in the second quarter of 2020 across many sectors, with real GDP shrinking 51% quarter on quarter (seasonally adjusted and annualised) in the second quarter.
Furthermore, the pandemic and subsequent economic lockdowns have had a devastating effect on employment. SA’s unemployment rate increased to a record high of 30.8% in the third quarter of 2020, following a record total 2.2-million jobs lost between April and June 2020. The largest job losses recorded in a single quarter before this was in the third quarter of 2009 (527,000 job losses), in the wake of the global financial crisis.
A successful and comprehensive vaccination programme will support SA in catching the much-needed wave of economic recovery, which is expected to be seen at a global level as economies start to bounce back from the recessions and contractions seen during 2020. If an adequate vaccine supply (and its rollout) is not properly budgeted for, it is likely that SA will see further waves of infections. Each wave will mean renewed economic restrictions, with the accompanying economic consequences.
Prioritisation of the national budget to streamline a Covid-19 vaccination effort is the surest manner in which to fast-track an economic recovery. As President Cyril Ramaphosa told the nation when first announcing the economic lockdown in 2020, “As we walk this road together, as we struggle to defeat this pandemic, we remain strong and united and resolved. Much is being asked of you, far more than should ever be asked. But we know that this is a matter of survival, and we dare not fail.”
• Theophanides is director, actuarial and analytics solutions leader and Deloitte Africa life sciences and health care industry leader.
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