1. Standing Committee on Appropriations
VOTE : HEALTH
2017/18

2. Content Strategic Goal Department . Slide 03
2017/18 MTEF Voted Funds / Conditional Grant Slide 04
2017/18 MTEF Per Programme Slide 08
2017/18 MTEF Economic Classification Slide 13
2017/18 MTEF IYM February 2017 , etc. Slide 18
2017/18 MTEF Non-Negotiables Slide 28
Revenue 2

3. The strategic goals for 2015-2019 & for 2017/18
Strengthen health system effectiveness.
Reduce and manage the burden of disease.
Universal health coverage.
Strengthen human resources for health.
Improved quality of health care.
Presentation of how funding support these priorities. 3

4. Voted Funds / Conditional Grant
2017/18 MTEF
Voted Funds / Conditional Grant 4

5. Department of Health Kwazulu-Natal 2017/18 Exp. Estimates
Voted & Grant
Department of Health Kwazulu-Natal 2017/18 Exp. Estimates
R 39,548,473 Billion
Funding Source in table below
% voted funds 2017/18: R 19,7% and declining over the MTEF 5

6. Grant / Voted Funds Exp. Estimates over the years
A review of percentage growth in payments and estimates from – 2019
There is evidence of diminishing growth in equitable share allocation (voted funds)
Significant growth under grant funding is mainly from the HIV/AIDS grant, but low in 2016/17 6

7. Department of Health Kwazulu-Natal 2017/18 Exp. Estimates
Conditional Grant
Department of Health Kwazulu-Natal 2017/18 Exp. Estimates
Conditional Grants
Conditional Grant details table below
% annual growth 10.6% 2017/18 financial year
HIV/Aids share increasing over MTEF 7

8. 2017/18 MTEF
Programs 8

9. Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Programme Graph
2017/18
Department of Health Kwazulu-Natal Budget 2017/18 MTEF 9

10. Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Programme
Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Funding per Program
Program 2 increased funding over the MTEF period (%) alignment APP priorities
R 107,607 m is first charge - incl. under Program 1 (period 2015/ /18 ) 10

11. Change per Programme MTEF (%)
Green highlight above average (alignment APP priorities)
P1 change 2017/ /19 - last year of the first charge (R 107m )
P7 and P8 increases 2017/18 – cost containment 2016/17 fin year 11

12. Core Service Delivery Programs
Budgets over the MTEF display prioritization towards Core Service Delivery Programs
Program 2,3,4 & 5 : R 35,465,137 Billion  90%
Total : R 39,548,473 Billion
Core Service delivery Programs (P2,P3,P4,P5) and % increase over the MTEF 12

13. Economic Classification
2017/18 MTEF
Economic Classification 13

14. Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Economic Classification Graph 2017/18
Department of Health Kwazulu-Natal Budget 2017/18 MTEF 14

15. Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Economic Classification
Department of Health Kwazulu-Natal Budget 2017/18 MTEF
Funding per Economic Classification
Compensation of Employees 63,8% 2017/18 and decline 2019/20
Goods and Services increasing to 30,7% in 2019/20
Capital funding 3,6% 2017/18 15

16. Economic Classification Exp. Estimates over the years
Overview : Compensation of Employees and Goods & Service proportional split and % change over the years :
Progressive decline in COE growth over the MTEF period (63,7% to 63,5%)
Target for COE is below 63%
COE growth below target last 4 years
Significant reduction in G&S growth 2016/17 (2.9%)
In Year budget changes will be required for 2017/18 with additional funds towards Goods and services (from COE, Major Assets) 16

17. Cost Drivers Goods and Services (part of Non-Negotiable Items)
Medicine
NHLS
Medical Supplies
Property Payments
Medicine % continue to grow over MTEF and mainly due to ARV medicines
NHLS expenditure for HIV/Aids will continue to grow (increase in patients)
Table provides information medicine is underfunded (estimated R 500m for 2017/18) 17

18. IYM February 2017 (revised estimates)
Year to Year Growth 18

19. Revised Estimates 2016/17
IYM data : February 2017 and % change per Programme and Economic Classification 2017/18 Financial Year 19

20. Balanced outcome 2016/17 as result of Cash Blocking
Notes IYM Feb 2017
IYM February 2017
Balanced outcome 2016/17 as result of Cash Blocking
Accruals above R 1 Billion (payments on hold due to lack of available funds, and a concern)
Pressure HIV/Aids with projected R 329m overspend (not all payments processed)
Pressure Medico-legal claims with projected R 243m overspend
Both put pressure on other Programs / Subprogram, Economic classification
All Conditional Grants will be spend 2016/17 and no request for roll over will be required as per revised estimates
Percentage increase 2017/18 budget based on revised estimates (Feb 2017):
8,0% for COE below the target of 8,5% (NDOH)
2,9% for GS and far below the medical inflation 8,8% (target NDOH)
38,2% for Capital Assets and a result of very low spending 2016/17 -> low spending a result of addressing pressure GS and COE 20

21. Notes IYM Feb 2017 and challenges 2017/18
Concerns for 2017/18 financial year
Cash Flow  Available Budget 8,3% per month (same for each month; restricted, and part of Treasury reforms)
The Department will not be able to pay within the prescribed 30 day period
HIV/Aids is R 500m underfunded for 2017/18
(cost drivers : ARV medication and NHLS (core test and test to monitor whilst on treatment)  impacts on the available budget per month (R 45m monthly pressure)
Underfunding for 2017/18:
COE R 112m (target 8,5%) versus allocated 8,0% revised estimates
GS R 674m (target 8,8% ) versus allocated 2,9% -revised estimates
> R 1 Billion (accruals 2016/17 financial year) 21

22. Pressures, concerns 2017/18 financial year (2)
The Department could identify areas of expenditure pressure
Shortfall for :
Housing allowance (2015/16 ) : R 200m
NHLS migration flat fee to per invoice (2015/16): : R 300m
Total : R 500m
Other factors : medical inflation above CPIX (medical inflation), inefficiencies in Supply Chain Management, Inventory Management, price increase non – medical items like outsourced cleaning & security services, above budget wage agreement, inflationary pressures, etc.
0.4% increase above wage agreement was not fully funded , and once off budget was provided with no carry through cost (R 100m)  increase shortfall MTEF 22

23. Pressures, concerns 2017/18 financial year (3)
Concerns for 2017/18 financial year
Cash Flow  Available Budget 8,3% per month (same for each month; restricted, and part of Treasury reforms)
The Department will not be able to pay within the prescribed 30 day period
HIV/Aids is R 500m underfunded for 2017/18
(cost drivers : ARV medication and NHLS (core test and test to monitor whilst on treatment)  impacts on the available budget per month (R 45m monthly pressure)
Underfunding for 2017/18:
COE R 112m (target 8,5%) versus allocated 8,0% revised estimates
GS R 674m (target 8,8% ) versus allocated 2,9% -revised estimates
> R 1 Billion (accruals 2016/17 financial year)
Will it be possible to find savings in 2017/18 to reduce total amount of accruals? 23

24. Pressures, concerns 2017/18 financial year (4)
The challenge (concerns)
The weakening rand, increasing food prices, increasing water and electricity, increasing cleaning and security contract costs remain a challenge and therefore could not be fully budgeted for
Medical Inflation is above the CPI index ( weighted average 8,3%)
Accruals 2016/17 exceed available monthly budget and the Department will not be in position to pay within 30 days
Additional funds will be required to continue acceleration HIV/Aids Grant (R 500m) and to ensure payments within 30 days (accruals >R 1,1 Billion)
Investment in electronic inventory, medicine, NHLS, Medical Record system remains a priority, but require additional funds 24

25. Special projects / issues
Jozini CHC: Provision was made for Phase 1 commissioning of Jozini CHC within the allocated baseline ( R 30m voted funds)
MTEF Budgets for medico legal
(expenditure 2016/17 R 243m no budget)
2017/18 : R 120m (shortfall at least R 100m)
2018/19 : R 100m
2019/20 : R 100m
PPP (IALCH) budgets MTEF (extension of contract)
2017/18 : R 650m
2018/19 : R 710m
2019/20 : R 737m
IT Budget for 2017/18 : R 190m
Medicine Trading account : Department budget allocation 2017/18 for PPSD 25

26. Payments for capital assets
Notes : Capital Assets
Payments for capital assets
Machinery and Equipment increased is attributable to clear the backlog in medical equipment, and to accommodate accruals. Allocated budget is R622,178 million of which
Transport equipment: R147 million
R 43m is set aside for replacement of ambulances
R 104m is available for other vehicles, mainly mobile clinics replacement as well as the outreach team vehicles.
Other Machinery and equipment : R475million
R254 m for Health Technology services (Medical Equipment)
R66m for Infrastructure related equipment
R57 million NTSG
R32m emergency medical services medical equipment
R180 million is for replacement of essential non medical equipment 26

27. Notes : General
In formulating the 2017/18 Revised baseline figures, reprioritization of 2017/18 indicative baseline, the department took the following into consideration:
The alignment with the 2016/17 projected outcome.
Sustain current level of services and strengthening of primary health care services through savings to be realized savings from optimizing hospital services.
Inflationary adjustment within the baseline where possible.
Reprioritization within economic classification to provide for overall growth in Compensation of Employees budget of 7.5%.
The 15 per cent growth in HIV/AIDS Grant hides the budget shortfall at high level .
The 2017/18 baseline shows an annual growth rate of 5.8 % from the 2016/17 Revised estimates, below the 6.2 projected CPI.
Additional funding will be required to sustain services. 27

28. 2017/18 MTEF Non-Negotiables28

29. Non-Negotiables over the MTEF period
Revised Estimates February 2017
Red highlights  under funding
Overall % growth 16% from 2014/15 to 2015/16 & 19% from 2015/16 to 2016/17
Underfunding could be above R 700m for non-negotiables (8,8% increase on revised estimates (Feb) 29

30. Percentage growth Non-Negotiables over the MTEF period
Revised Estimates February 2017
Red highlights  under funding (% growth) -> reprioritization 2017/18?
Additional funds will be required (HIV/Aids CG) and Voted Funds 30

31. Non-Negotiables comments
The Department must ensure sufficient budget allocation to the Non-Negotiable item and budget for other items must be reduced. Reprioritization within Good and Services is impossible to close the gap
Main shortfall in funding is for HIV/Aids Grant (Medicine, NHLS, Medical Supplies)
Non – Negotiable expenditure is accrued in 2016/17 (NHLS, Medical Supplies, etc) due to lack of funds (Cash Blocking).
Inventory Management and efficiency gains to transversal contracts should result in reduced pressure (shortfall). 31

32. Department receipts collection (revenue)
Revenue DOH KZN
Department receipts collection (revenue)
Percentage beneficiaries accessing free services, increasing over MTEF
Growth in revenue less than growth in expenditure. 32

33. THANK YOU