Background: 2 primary vehicles to transfer funds to provinces from national: conditional grants & equitable share Problems with condtl grants (underspending) Enhanced Response to HIV/AIDS in Budget 2002/3 New funding approach gives provinces more freedom to allocate resources and implement programmes as determined by provinces Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

What is government spending on HIV/AIDS? On regular budget of DoH (as programme) Conditional grants to provinces (ring fenced funds) HIV/AIDS specific allocations/programmes by provinces themselves (from own budgets) HIV/AIDS-specific allocations HIV/AIDS Directorate in national Department of Health Conditional grants administered by national depts (DoH, DoE, DSD) Funds added to provinces equitable share grant--for purposes of HIV/AIDS Allocations for general strengthening of health sector (non-specific HIV spending) + Total government is spending on HIV/AIDS Other programmes: nutrition, poverty alleviation, social security,

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 NEW BUDGET 2003/4 1. Smart budget with large increases in resources for HIV/AIDS. Context of poverty alleviation, social security, nutrition, support to hospitals etc. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 NEW BUDGET 2003/4, cont. 2. More importantly, new budget channels large amounts through ES to provinces • Overall R13.9 bn added to provincial ES (over and above what was announced last year) Province's share in DOR increases from 56% in 2002/3 to 57.6% in 2005/6 • Allows for general strengthening health sector; deal with additional hospitalisation costs Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 NEW BUDGET 2003/4, cont. • Some indications ES funds successfully trickling down, as demonstrated by increased provincial health budgets Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 NEW BUDGET 2003/4, cont. 2. Budget allows resources for anti-retroviral programme • Increase in ES partially to allow for treatment options considering ARVs, once policy is finalised/approved • Addtl future funding options: contingency reserve, cgs to be announced in Oct. • Compares reasonably to UCT/TAC cost estimates of national prevention & treatment plan (R1.6bn for 2003; R5.6bn in 2005) Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

KEY QUESTIONS TO BE ASKING 1. Massive boost in resources needed to strengthen health sector generally. Are we doing enough? 2. Extra money for HIV/AIDS was put into the Equitable Share in Budget 2003/4. Are provincial health departments seeing the benefit of those funds trickling down to their budgets? Or is money diverted to other departments and priorities? Mainstreaming Provincial budgets as moment of truth 3. Absorption capacity becomes critical question, given direction of Budget 2003/4 provincial programme management skills financial management skills Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Effective HIV/AIDS response will require: - leadership allocation of sufficient resources getting the policy right set-up of appropriate structures/systems capacity to deliver services Massive boost in resources needed to strengthen health sector generally. Absorption capacity becomes critical question: - programme management skills - financial management skills Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Desk study findings on conditional grant spending : Calculated actual expenditure record on cgs for 2000/1; 2001/2; first half 2002/3 Based solely on public spending data from National Treasury 1. Suggests low spending on HIV/AIDS conditional grants is because spending on cgs generally is low. • Average spending for HIV/AIDS cgs for 2001/2 (77%) was higher than spending on cgs generally (70%). Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Desk study findings on conditional grants, cont. 2. Good evidence that spending on the HIV/AIDS conditional grants has significantly improved in the last two years. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Desk study findings on conditional grants, cont. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Desk study findings on conditional grants, cont. 3. Suggest provincial health depts more easily spend funds from their regular provincial budget--compared to ring-fenced funds transferred from national govt as conditional grants Average spending on regular provincial health dept budgets = 99% HIV/AIDS conditional grant spending generally = 77% HIV/AIDS health cg specifically = 69% Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Desk study results on HIV/AIDS allocations in 2002/3 provincial budgets Data analyses focused on the following: - Size of conditional grant (CG) - Programme/ subprogramme receiving HIV/AIDS funding - Department sourced HIV/AIDS funding - Quantity and quality of information provided in the official provincial budget statements Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Conditional Grants Department of Health Health CGs administered by District Health Services In 2002/03 size of health CG increased in order to cover: VCT, CHBCS, Step down care, provincial management, and PMTCT Departments directly and indirectly spend finance from own revenue on AIDS Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Real growth rates of CGs in the health sector Total health cgs for HIV/AIDS R334 million in 2003/4 In real terms, the CG to provincial DoH increased by 50% in 2003/04; 37% in 2004/05; and 8% in 2005/06. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Department of Education Lifeskills CG administered by different programme in each province Total Lifeskills cgs in 2003/4 R120 million In real terms, the CG to provincial DoE drops by 21% in 2003/04, grows by 2% in 2004/05 and 1% in 2005/06. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Department of Social Development (Welfare & Social Services) CG administered by different programmes Total cg for CHBCS R66 million in 2003/4 The CG to provinces grows in real terms by 31% in 2003/04, 1% in 2004/05 and also 1% in 2005/06. Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Own revenue allocation Desk study results of 2002/3 provincial budgets, cont. Own revenue allocation Budget statements do not give full details about additional allocation from own revenue Interviews with departments prove that almost all departments make direct and/or indirect allocations to HIV/AIDS Quantity and quality of reporting on HIV allocations Budget formats vary across provinces and departments Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Role of provincial treasuries in HIV/AIDS funding Preliminary findings from provincial interviews: Role of provincial treasuries in HIV/AIDS funding Funds flow through provincial treasuries Financial control and business plans are the responsibility of national departments Receive financial and non-financial reports from departments Provincial treasuries report to National Treasury Additional earmarked allocation from provincial treasury to the health sector (e.g. KZN & EC) Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Key obstacles identified by provincial treasuries Provincial interviews, cont. Key obstacles identified by provincial treasuries Underspending is a management issue Lack of knowledge Poor communication channels between and within departments (bureaucracy) Late transfers to departments (the issue of business plans and the tendering process) Lack of monitoring systems for transfers to local government and NGOs Poor financial and project management skills Capacity issues Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Provincial departments’ response Provincial interviews, cont. Provincial departments’ response Bureaucracy in reporting CG conditions impossibly rigid Tendering process inhibits timeous service delivery Lack of personnel and support facilities A case of the EC lifeskills programme Difficulties relating to Section 100 departments (EC) DSD receiving the smallest CG yet huge demands Integrated HIV/AIDS strategies not functional (particularly in cases staffing shortages) Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003

Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003 Effective HIV/AIDS response will require: - leadership allocation of sufficient resources getting the policy right set-up of appropriate structures/systems capacity to deliver services Massive boost in resources needed to strengthen health sector generally. Absorption capacity becomes critical question: - programme management skills - financial management skills Research Unit on AIDS and Public Finance ~ Idasa ~ 5 March 2003