Date: 13 May 2015

2015 Appropriation Bill2015 Appropriation Bill

OverviewOverview

• Education• Health

• HIV/AIDS• Governance & Service Delivery• Economy

Enhancing the effective and efficient utilisation of financial resources in Education

Enhancing the effective and efficient utilisation of financial resources in Education

SACMEQ III (2007): Comparison between South Africa and KenyaSACMEQ III (2007): Comparison between South Africa and KenyaScores South Africa Kenya

Reading score 495 543

Maths score 495 557

Functionally illiterate 27 8

Functionally innumerate 40 11 4

Country

Public spending on education, total (% of GDP)

Public spending on education, total (% of govt. expenditure)

Expenditure per student, primary (% of GDP per capita)

Expenditure per student, Secondary (% of GDP per capita)

India 3.8 12.9 9 15.5USA 5.2 13 20.9 23.9Brazil 5.8 14.6 21.1 21.6Norway 6.6 15 19.9 26.2Kenya 6.6 23.8UK 6 13.1 26.4 31.5Australia 5.1 13.5 20.1 17.9South Africa 2015 6.3 19.6 19.4 (2013) 21.6 (2013)

International comparison of spending on International comparison of spending on education education

Province Total appropriation for Education (R mil)

Compensation of employees (R mil) %

KZN 39 445 18 5 28 746 139 72.9EC 27 934 964 21 976 007 78.7FS 11 258 854 7 971 147 70.8GP 32 845 229 22 082 190 67.2LP 24 964 160 19 315 759 77.4MP 16 102 831 11 939 540 74.1NC 4 744 333 3 416 818 72.0NW 12 422 999 8 844 040 71.2WC 16 424 944 11 627 354 70.8TOTAL 186 143 499 135 918 994 73.0

Employee compensation as a % of the total Employee compensation as a % of the total allocation (2014 estimates)allocation (2014 estimates)

Employee compensation as a % of the total Employee compensation as a % of the total allocation (2014 estimates)allocation (2014 estimates)

5

• The proportions for salaries are high, but newly qualified educators and those with less than 5 years experience earns on average R 115 76 and Teachers with 5 to 9 years experience have salaries between R124,038 and R146,087 per annum.

Relationship between achievement and proportion Relationship between achievement and proportion of budget spent on salaries of budget spent on salaries

Relationship between achievement and proportion Relationship between achievement and proportion of budget spent on salaries of budget spent on salaries

6

Student funding in higher educationStudent funding in higher education

• Over the medium term: R19.9 billion will be spent on student loans and bursaries to support 711 355 students in higher education institutions and 844 842 in TVET colleges

• For 2015/16: R7,4 bil down from R8.5 bil in 2014/15• NSFAS has developed a negative reputation due to:

• Insufficient funds to meet the number of students• Late payment to students

• NSFAS mechanism for disbursing funds to students must be improved.

Health Budget 2015Health Budget 2015

Allocation Amount R (bn)

Percentage Growth relative to

2014/15District Health Services 66.7 7.6Provincial Hospital Services 30.2 6.3Other Health Services 26.4 18.2Central Hospital Services 25.9 5.9Facilities Management and Maintenance

8.1 9.7

TOTAL 157.3 8.8

Sources of Funding –Health Sector Sources of Funding –Health Sector

Provincial Expenditure 2009-2014Provincial Expenditure 2009-2014• Overall expenditure increased

across programmes except admin• Focus on PHC re-engineering

should see a disproportionate increase in district health services expenditure

• Hospitals continue to consume significant proportion of resources – hospicentric resource allocations

• Expenditure on health sciences and training has increased significantly but this need to be more than doubled to meet the country’s HR needs

Public Funding priorities to follow NDP focus areas, e.g.

Public Funding priorities to follow NDP focus areas, e.g.

• Increasing life expectancy to 70 years by 2015;• Having a generation of under 20’s free of HIV and

AIDS;• Reducing maternal and child mortality;• Significantly reduce the burden of diseases both

communicable and non-communicable;• Implementing the National Health Insurance (NHI)

in phases, complimented by relative reduction in the cost of private healthcare, supported by better human resources and systems.

Strong case for investing more in-Strong case for investing more in-• HIV and AIDS- prevention and management• Maternal and Child Health to reduce maternal and child mortality (MDG

4&5);• Communicable and non-communicable;• Health systems strengthening including:

• Human resources for health – training of health workforce• Quality improvement in the public sector- OHSC• Health infrastructure and management – new infrastructure and

maintenance• Regulation of the private sector – for effective stewardship of the

sector (CMS/NDoH)• National Health Insurance (NHI) – scaling up pilot activities including

testing resource mobilisation, pooling and strategic purchasing of services

• NB: FUNDING FOR UHC KEY!!

HIV/AIDSHIV/AIDS

• The government must be commended for contributing about 80% of the cost of the national HIV response hitherto. This is one of the highest levels of national contribution among the high priority countries for HIV/AIDS.

• A health budget of R36.46 billion has been allocated for the new financial year. This is an increase of 7.4% when compared to previous financial year

HIV/AIDS HIV/AIDS

• According to the National HIV Household SurveySouth Africa 2012, HIV prevalence in the total population: 12.2%

(2008: 10.6%)

• 6.4 million living with HIV/AIDS• Apart from attributing this to the success of the

antiretroviral (ARV) treatment programme, this also showed that there was still a large number of new infections of around 400 000 still occurring at the time.

ART rollout in South Africa(L. Johnson, SAJHIVMED 2012)

ART rollout in South Africa(L. Johnson, SAJHIVMED 2012)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2004 2005 2006 2007 2008 2009 2010 2011

HIV/AIDSHIV/AIDS• To date, nearly 3 million people are currently on ART

treatment. • The coverage from this year onwards will increase by

another 2 million or so South Africans due to the new ART guidelines which call for the increase in the threshold from 350 to 500 CD4 cells/mm3 for initiating treatment which have been adopted since the start of this financial year.

• In order to accommodate this, one of conditional grants aimed at assisting provinces to implement the Comprehensive Plan for HIV and AIDS has been increased by 45% from R782 million in 2004/05 to R1.135 billion this year.

HIV/AIDSHIV/AIDS

• There has been some mixed results in terms of the progress the country is making in the fight against HIV/AIDS.

• The country continues to make some tremendous progress in getting the population tested for HIV but however, there appears to have been less gains in prevention as shown in the drop in condom use at last sex in 2012 when compared to 2012.

• This suggests the need to re-double our efforts the fight on the prevention of new infections.

Awareness of HIV status among those who tested in the last 12 months, by sex (15 years and older), South Africa

2005-2012

Awareness of HIV status among those who tested in the last 12 months, by sex (15 years and older), South Africa

2005-2012

Condom use at last sex by age and sex, South Africa 2002-2012

Condom use at last sex by age and sex, South Africa 2002-2012

HIV/AIDSHIV/AIDS

• It is also commendable that some funding continues to be provided to some HIV/AIDS NGOs such as loveLife and Soul City.

• Of some great concern is the fact that SANAC’s budget was only R15 840 000 which is clearly inadequate granted the important role SANAC plays in coordinating the multi-sectoral national HIV response.

HIV/AIDS- Other departmentsHIV/AIDS- Other departments

• It is also pleasing to note Social Development also includes funding for NGOs working in the HIV/AIDS sector.

• DHET also has allocated R7 761 000 to HEAIDS. Once again HEAIDS deserves a much higher allocation granted its mandate in coordinating the HIV response in universities and further education training colleges.

• Finally, DST has also allocated some generous funding for innovation in HIV, STIs and TB research which is also highly commendable.

• Indeed, if we are to win the war against HIV/AIDS, STIs and TB we need to increase funding to NDOH, DSD, DHET and DST as donor funding is reduced during the next few years due to the middle income status of the country.

Social science that makes a difference

Improving Governance and Benefits to South African Society

Improving Governance and Benefits to South African Society

Satisfaction with different areas of government performance

Satisfaction with different areas of government performance

• Social grants, electricity and education recorded the highest levels of satisfaction relative to the other indicators for both 2011 and 2012.

• In general South Africans are satisfied with the way that the government is handling education. In 2012, 61% of all adult South Africans registered satisfaction with the government's management of education and only 27% indicated that they were dissatisfied with the state’s performance. This does nonetheless represent a 10% drop in satisfaction over the last two years.

• Satisfaction levels in terms of electricity have been dropping since 2003 with 2012 showing a minor increase of 2% (61% in 2011 compared to 63% in 2012).

• Although satisfaction levels of HIV/AIDS treatment is slightly down in 2012 (56%) compared to 2011(61%) it still displays a reasonable level of satisfaction particularly in the last three years (2010 – 2012).

• Satisfaction levels with regards to water and sanitation; and refuse removal continues to receive consistent ratings since 2003 until our latest survey in 2012.

• The level of satisfaction to access to health care is up by 6% from 2011 (51%) to 2012 (51%).

• The areas of greatest public concern continue to be job creation (14% in 2011 but now 7% according to the 2012 survey), crime reduction (32% in 2011 and 20% in 2012), and low-cost housing (32% in 2011 and 35% in 2012).

Satisfaction with different areas of government performance(Source: SASAS 2003 – 2012)

Satisfaction with different areas of government performance(Source: SASAS 2003 – 2012)

Table 1: Level of satisfaction with different areas of government performance, 2003-2012 (% satisfied or very satisfied)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Social grants 70 73 70 72 71 77 72 72

Education 69 69 74 68 70 66 60

Electricity 66 70 67 70 64 67 67 67 61 63

Water & sanitation 61 62 59 57 60 59 57 59 57 58

Refuse removal 60 55 53 55 51 54 52 52 49 51

Access to health care 43 50 50 53 56 53 50 53 51 57

HIV/AIDS Treatment 27 36 43 38 47 45 45 54 61 56

Affordable housing 34 37 31 28 32 33 32 34 35 32

Land reform 26 32 32 30 35 28 31 33 30 23

Crime reduction 22 26 22 18 17 18 18 27 32 20

Job creation 8 11 9 8 8 9 10 12 14 7

Governance through Traditional AffairsGovernance through Traditional Affairs

Provision is made for •the promotion and coordination of research and information management and the development of policies and legislation on traditional affairs; •Coordination of institutional development and capacity building programmes to enhance efficiency and effectiveness within the institutions of traditional affairs.Research points to:•Taking into account that about 15 million poor rural people live under traditional leaders, the allocation of R1 19 447 is very low. •The reality most funding goes to salaries and stipends for traditional leaders. These leaders are requesting additional and increased stipends to equal with public service. This will place a huge pressure on the fiscus, and leaves less funding for development of traditional institutions of governance•There is a dire need for research on the relationship between traditional leadership, traditional councils and municipal councils to ensure synergy in local development. Such research will partly resolve the contestations around traditional leadership originating from civil society organisations•Extensive capacity building of traditional leaders requires appropriate research and development which takes local community context as focus

Improving Rural DevelopmentImproving Rural Development

• The allocation makes provision to catalyse, initiate, facilitate and coordinate the implementation of a comprehensive rural development programme, leading to sustainable and vibrant rural communities.

• The allocated amount of R1 345 679 seems low in comparison to the needs for infrastructure, economic development and youth development

• Research highlights the need for increased integrated comprehensive rural development projects, and M&E systems to measure performance and develop appropriate models

Solidification of Separation of Powers Solidification of Separation of Powers

First time MTEF that the Office of Chief Justice has its own mandated budget separate from the Department. It consequently:-

•Entrenches independence of the judiciary and the Constitutional Court.

•Provides strategic leadership, management and support services to the DOJCD.

•Secretariat and administrative support services to the JSC.

•Judicial Education and Research

Varying understandings of democratic principle of separation of powers. •Arguments emerging that support a flexible interpretation: public “Constitutional Dialogue” where all the arms of government and civil society share ideas about how to create a better life for all. •Most agree that Courts should be independent and play a role in constitutional transformation, but courts cannot implement their own judgments – legislature and the executive must comply. •Compliance is necessary to entrench respect for the rule of law in SA.

Findings emerging from Research Findings emerging from Research

• Civil society and NGOs are primary funders in socio-economic rights cases. Donor funds are drying up - unsustainable unless Chapter 9 institutions e.g. SAHRC play a more supporting role.

• Some members of the legal profession make significant contributions to pro bono work but severe limitations in the current system. eg low number of hours allocated to Advocates and reluctance to monitor pro bono litigation.

• Mandate of Legal Aid Board should be expanded to deal with socio-economic rights.

• Alternative dispute resolution offers potential for resolving disputes around service delivery, but results cannot be used as enforceable legal precedent, and costs tend to be high.

IMPROVED PUBLIC SERVICEIMPROVED PUBLIC SERVICE

• Capable State required to achieve goals in the NDP – directed at infrastructure-led growth and development of the economic, physical and social infrastructure

• improving investigative abilities of institutions to combat corruption, recent release the Supply Chain Management Review, ongoing cost containment measures and various capacity building programmes

• What is required is support for these initiatives and implementation from whole of government

• Bill identifies a number of measures to improving capability to implement infrastructure projects

• Built environment performance plans introduced to incentivise integrated planning and implementation across built environment functions located in municipalities.

• The focus should be on a more holistic approach to capacity building if infrastructure projects are going to succeed (E.g. single capacity support programme per municipality)

• Number of policy proposals in the Bill to fund research to identify future skills gaps in the labour market

• Should not neglect demand-side factors to encourage uptake of labour, especially among youth and the forecasting of future skills required in the public sector

Fiscal Consolidation RisksFiscal Consolidation Risks

• Budget Appropriation encourages fiscal consolidation and balance. There are potential key risk areas that may serve to unsettle the balance attained in the 2015 Budget: – Public sector wage bargaining process outcome, particularly if the outcome

significantly exceeds inflation

– Implementation of the National Health Insurance (NHI)

– Social security reforms in the 2015 Budget Speech

ConclusionConclusion

• Appropriation consolidate the fiscal position of direct service-delivery to citizens

• Investment in infrastructure-led growth considered to provide benefits and spillovers in to economic development and social development of citizens

• Improvements in performance monitoring and evaluation through the various mechanisms such as Presidential Infrastructure Commission

The EconomyThe Economy

ContextContextContextContext

• Economic slowdown: 1.4% - 2014; 2% - 2015• Weak global economy with uncertain outlook • High government debt (24% of GDP (2009) up to 45%

now)• Large budget deficit (4% of GDP)• Growth of debt servicing of 10% p.a. since 2009• Growth of public sector staff and wages (15% p.a.)• Poor investment climate, weak business & consumer

confidence, energy crisis • Little room for manoeuvre

Overall assessmentOverall assessmentOverall assessmentOverall assessment• Shift in approach from recent counter-cyclical spending –

modest tax rises + slowdown in spending• Tax increases

• Personal incomes tax (up 1% for people earning over R182,000 p.a. – 1st time in 2 decades)

• Fuel levy (up nearly R1 per litre)

• Slowdown in public spending growth • 2% reduction in budgeted expenditure (R25bn)

• Freezing public sector head count

• Tougher approach to managing state entities (eg SAA) including sale of non-core assets (eg property)

InfrastructureInfrastructureInfrastructureInfrastructure

• Long-standing theme – NGP, NDP, PICC

• More effort to encourage private investment in infrastructure projects

• Yet major construction companies complaining about lack of new contracts

• July conference on infrastructure investment opportunities

• More focus on infrastructure maintenance

New emphasis on citiesNew emphasis on citiesNew emphasis on citiesNew emphasis on cities

• “Well-planned and well-managed urbanisation can accelerate economic growth”

• “Realising the economic dividends of urban growth requires a new approach to providing infrastructure, housing and public transport services, while overcoming the spatial divisions of apartheid”

• A new approach to local government infrastructure financing over the next 3 years – to support integration

• Treasury will work with financial institutions to expand the municipal debt market

• Support metros to do public-private partnerships

Framing questions about the budgetFraming questions about the budgetFraming questions about the budgetFraming questions about the budget1. The overall level of public expenditure

2. The balance between investment and consumption expenditure

3. The quality of public expenditure

4. The balance between national, provincial and municipal spending

5. Encouraging creativity and innovation