MTBPS2022 media statement

SECTION27 CONCERNED THAT BASIC EDUCATION AND HEALTHCARE FUNDING CONTINUES TO BE SIDELINED IN MEDIUM TERM BUDGET POLICY STATEMENT THAT FAILS TO PRIORITISE HUMAN RIGHTS

27 October 2022, Johannesburg – SECTION27 is concerned that small upward revisions to basic education and health funding do not keep pace with inflation and population growth over the medium term. This will erode the rights to basic education and access to healthcare services, already under enormous strain following the disruptions of the COVID-19 pandemic. Despite opening and closing his speech with references to the link between democracy, inequality and low economic growth, Finance Minister Enoch Godongwana’s second Medium Term Budget Policy Statement (MTBPS) continued the trend of cutting funding for socio-economic rights, which are critical for levelling the playing field in the country, in both nominal and real terms.

Minister Godongwana yesterday promised that the MTBPS would “enhance the quality of public services such as education and health”. But without new support to provinces responsible for the delivery of these crucial services, it is likely that if this year’s MTBPS proposals are followed, we will see more overcrowded classrooms and understaffed schools, and patients being turned away from healthcare facilities due to a lack of healthcare workers and medical goods and services over the next three years.

This continued approach to budgeting, which sees cuts to social spending in real terms over the medium term to make fiscal space for debt servicing, seriously jeopardises the government’s ability to meet its human rights obligations. Funding for both education and healthcare is dropping in real and per-capita terms in the coming year: funding for public schools drops by 0.7% in real terms and funding for healthcare falls by a massive 6.4% in real terms in the current financial year. While a portion of the fall in healthcare funding is due to less expenditure on COVID-19 vaccines, this only accounts for a fraction of the overall R10.5 billion real terms cut to health funding this financial year.

This trend continues over the medium term: with the picture for basic education funding from 2023/24 onwards continuing to be bleak, with only a 2.2% increase in consolidated funding pencilled in for next year, while CPI inflation is projected to be 4.7%. In health, funding stands to be cut by a massive 4.4% in nominal terms, which with CPI inflation factored in, translates to a real reduction in spending of 9.1%.

By our calculations, real spending per public healthcare user is set to decline by R610 in 2023/24, while spending per learner in public schools will drop by a massive R1 260.

Therefore, the additional expenditure allocated in the MTBPS does not do enough to address the overall decline in social spending over the past decade.

Extending the COVID-19 social relief of distress (SRD) grant until March 2024 will continue to provide an economic buffer for South Africa’s poorest households. But below inflation and food-poverty line level allocations to the Child Support Grant, as well as a general indifference to gender-responsive budgeting, demonstrate that this MTBPS is making trade-offs which impact vulnerable people with the very tools designed to support them. Evidence shows that womxn absorb the extra burden of care which arise when the government implements austerity.
R116.8 million has been allocated to the education infrastructure grantto provide disaster relief for schools impacted by floods in KwaZulu Natal and Eastern Cape. While urgent repairs and additional funding is needed for these schools, SECTION27 notes that this budget is unlikely to be enough for all 600 damaged schools in the two provinces. No additional funding has been allocated for the 85 healthcare facilities similarly impacted by the April 2022 floods.
The MTBPS notes exciting progress for the national school nutrition programme, with the expansion of this life-saving social protection into quintile 4 and 5 schools. Little clarity is provided, however, on how Treasury intends to fund the NSNP sustainably with food inflation averaging annually at 8.5%.
Failures to increase education infrastructure and health facility revitalisation grants will hamstring the ability of the health system to be resilient to the future effects of climate change on crucial health infrastructure.
While the MTBPS acknowledges backlogs in oncology care, notably experienced in Gauteng, it defers any adjustments to the 2023 budget. This delay of funding for cancer treatment will see many patients get sicker while on waiting lists for critical care.
Although the MTBPS document commits to “increas[ing] the number of teachers and… retain[ing] health workers” through spending increases, the actual budget allocations set out in the Medium-Term Budget do not support this commitment and headcounts of educators and healthcare workers are unlikely to increase to match the demand for these crucial services. Chronic human resource shortages in schooling and healthcare facilities will be worsen the provincial equitable share being cut by 3.9% in real terms in the current financial year.

While there are some injections of funding for healthcare and basic education following higher than anticipated revenue generation, these additions are below projected inflation and population increase levels. Further, 65% of R83 billion of additional tax revenue will be spent on reducing government debt. While the markets and business have welcomed the government’s resolve to stick to its fiscal consolidation agenda, we believe that the people relying on public services have once again been side-lined by the doubling down on austerity budgeting. SECTION27 believes that this was a missed opportunity to direct a greater share of the windfall in extra revenue to mitigating the impact of reductions in real spending per patient and learner in February 2022’s Budget Review.

With educator and healthcare worker wages, which are both crucial to the effective delivery of services in the human capital intensive sectors of basic education and healthcare, drawn from the now reduced provincial equitable share, the MTBPS also notes that provinces “are still required to keep compensation spending in line with resources over the longer term”. The fiscal framework does not provide funding for public sector wage increases from 2023/24 onwards, only a 1.5% pay progression. Instead, the budget utilises the novel measure of an “unallocated reserve” of R41.3 billion. As a result, there is much uncertainty about how it will be spent. Even in the best-case scenario of a significant portion of the R41.3 billion going to basic education and healthcare compensation budgets, the total funding envelope for these critical areas would likely still go down in real terms.

The need for more teachers and healthcare workers, and the reversal of previous years’ hiring freezes or cuts, is a human rights necessity. Because educators and healthcare workers are at the coalface of service delivery for South Africa’s most vulnerable, their posts must be protected from hiring freezes and retrenchments. Previous years’ hiring freezes in these crucial social sectors demonstrate that the government’s priority is not curbing financial mismanagement, bloated bureaucracies or inefficiencies at higher levels of government, a trend which must be reversed. SECTION27 calls for serious good faith agreements in collective bargaining between unions and the government to ensure that wages for educators and healthcare workers are fair, and the numbers of posts are expanded and protected at a rate which meets demand.

It is in this context of restricted expenditure on compensation while debt-servicing increases, that the top-up baseline revisions to healthcare and basic education must be viewed. While welcome, they do not undo years of real-terms or per capita reductions in spending for learners at public schools or patients reliant on public healthcare. SECTION27 hopes to see an end to austerity in 2023/24. We want to see government equally committed to protecting fundamental rights as it is to offering investors a better view of South African debt management. We want to see a higher threshold for retrogression of socio-economic rights in the form of participatory human rights impact assessments being incorporated into the decision-making process when the government makes cuts to socio-economic rights in real terms.

SECTION27 intends to make submissions to Parliament’s Standing and Select committees on Finance elaborating on these concerns over the coming weeks.

European Union funding supports SECTION27’s work on education and health rights issues.

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