SOUTH AFRICAN HIV/AIDS SPENDING IN 2006 BUDGET

UNCLAS SECTION 01 OF 03 PRETORIA 001052

SIPDIS

SIPDIS

DEPT FOR AF/S; AF/EPS/SDRIANO
DEPT FOR S/OFFICE OF GLOBAL AIDS COORDINATOR
STATE PLEASE PASS TO USAID FOR GLOBAL BUREAU KHILL
USAID ALSO FOR GH/OHA/CCARRINO AND RROGERS, AFR/SD/DOTT
ALSO FOR AA/EGAT SIMMONS, AA/DCHA WINTER
HHS FOR THE OFFICE OF THE SECRETARY/WSTEIGER, NIH/HFRANCIS
CDC FOR SBLOUNT AND DBIRX

E.O. 12958: N/A
TAGS: ECON KHIV SOCI TBIO EAID SF
SUBJECT: SOUTH AFRICAN HIV/AIDS SPENDING IN 2006 BUDGET

Summary
--------------


1. Summary. Finance Minister Trevor Manuel presented South
Africa's 2006 Budget, highlighting the South African
government's planned expenditures and revenues over the
following three years. Expenditures on social development
constitute over half of total expenditures. Spending on health
and HIV/AIDS continues as a high SAG priority. The Department
of Health spends over 80% of HIV/AIDS funds, with the
Departments of Education and Social Development receiving the
remainder. Provinces will receive more funding through
equitable share allocations rather than funds earmarked for
particular purposes. However, relying more on equitable share
funding, where provinces have discretionary spending authority,
makes it difficult to insure these funds are actually spent on
HIV/AIDS, especially without clear government-wide monitoring.
End Summary.

Social Development Spending
--------------


2. The strength of the South African economy and tax revenue
collection allow for generous increases in spending on social
services in the budget. During the 2006/07 fiscal year,
spending on social services, consisting of education, health,
welfare, housing and community development expenditures, should
constitute 52.7% of total government spending. The total
commitment to social services will rise by 11.6% annually over
the next three years. Education and welfare constitute the top
two priority spending areas, at 17.8% and 15.5% share of total
governmental spending during next fiscal year. Health, at
10.5% share of total government spending in 2006/07, is third
overall.


3. Expenditures in the South African budget are presented by
either departments or function (protection, social services,
economic services and general governmental services).
Functional expenditures include spending by government and
important public sector entities, such as state-owned
enterprises and institutions such as the South African Research
Council, Human Sciences Research Council and the National
Health Laboratory Service. Government spending on health
(classified by function rather than department) will average
9.7 % of total consolidated expenditure (including national,
provincial and some public entities) over the next three years.
A substantial amount of total 2006/07 health spending of R54.5
billion ($9.1 billion) is targeted at improving health care
infrastructure and service delivery. The hospital
revitalization program received an additional R900 million
($150 million),increasing the national budget funding for
improvements to provincial hospitals from R1.2 billion ($200
million) in 2005/06 to R2 billion ($330 million) in 2008/09.

HIV/AIDS Spending
--------------


4. From a departmental perspective, the Health Department is
the major source of HIV/AIDS expenditures, followed by the
Departments of Education and Social Development. Other
departments such as the Departments of Science and Technology
and Public Services Administration have announced HIV/AIDS
programs but have not given definite planned spending amounts.
Table 1 gives planned HIV/AIDS spending for the top three
departments in billions of rands from fiscal years 2004/05
until 2008/09.

Table l, HIV/AIDS Spending by Department, billion rand
-------------- --------------
2004/05 2005/06 2006/07 2007/08 2008/09
Health 1.11 1.57 1.98 2.08 2.19
Education 0.13 0.14 0.14 0.15 0.16
Social Development 0.01 0.05 0.06 0.06 0.60
Total 1.25 1.75 2.18 2.29 2.41
Consolidated spending including transfers to provinces

Department of Health Budget
--------------


5. The National Department of Health's budget will increase
nominally from R9.8 billion ($1.6 billion) in 2005/06 to 11.2

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billion ($1.9 billion) in 2006/07, a real increase of 10%.
Note. National Treasury forecasts South African 2006 targeted
inflation to increase by 4.3%, while nominal health
expenditures increased by 14.3%. End note. The highest growth
in the health sector budget is in the HIV/AIDS subprogram.
This budget has risen from R454.6 million ($75.8 million) in
2002/03 to a projected R2.2 billion ($367 million) in 2008/09,
a 21% annual increase. As a result of providing more anti-
retroviral treatment, real health expenditures will increase
7.3%, 3.6%, and 3.1% in fiscal years 2006/07, 2007/08, and
2008/09, respectively.

HIV/AIDS Priority
--------------


6. The Health Department's spending on HIV/AIDS in 2006/07 is
R1.9 billion ($320 million),up from R1.5 billion ($250
million) in 2005/06. HIV/AIDS spending by the Health
Department is expected to reach R2.1 billion ($350 million) in

2008. Funding for condoms has increased from R70.8 million in
2002/03 to a projected R147.9 million in 2008. Treasury
Minister Manuel announced an allocation of R40 million ($6.7
million) to manage and monitor the government's national HIV
and AIDS plan and an additional R52.7 million ($8.8 million)
for non-governmental organizations. The HIV/AIDS program
consumes 94% of the total budget available for Strategic Health
Programs in 2006/07, up from 64% in the 2002/03's budget.
Note. The Strategic Health programs consist of: maternal child
and women's health; medicines regulatory affairs, HIV and AIDS,
Pharmaceutical policy and planning; and communicable disease.
End note.


7. The Department of Health dominates HIV/AIDS spending, at
80% of the HIV/AIDS budget, although the Departments of
Education and Social Development do allocate some funding for
HIV/AIDS. The Department of Education's Lifeskills AIDS
Education Grant will receive R144 million ($24 million) in
FY2006/07, increasing 2% (real) in 2007/08. The Department of
Social Development will receive R46 million ($7.7 million) in
2005/06, increasing to R55 million ($9.2 million) in 2006/07,
R56 million ($9.3 million) in 2007/08 and R59 million ($9.8
million) in 2008/09. These funds will support access to social
development services for the HIV-affected population.


8. In addition to conditional grants to provinces which are
designated to support HIV/AIDS services, provinces receive
equitable share funding. Provinces decide on how to spend
equitable share funding. Recently, the Community and Home
Based Care Services Grant, formerly supported by the Department
of Social Development, has been moved from a conditional grant
to the provincial equitable share funding. This change could
result in some provinces redirecting previously earmarked home
based care financing to other provincial funding priorities.


9. Other departments support HIV/AIDS programs, but the
national budget does not include specific information. For
example, the Department of Science and Technology plans to cost-
share an AIDS vaccine program with the Department of Health,
and the Department of Public Service and Administration
mentions increasing HIV/AIDS expenditures for civil servants.
Through the President's Emergency Plan for AIDS Relief, the USG
is also supporting significant projects with the Departments of
Defense, Justice, Correctional Services and Provincial and
Local Government. Because of these commitments which are not
specified in the published national budget summaries, a
comprehensive government HIV/AIDS funding total is difficult to
obtain.


10. As of the end of December 2005, National Treasury
estimates that 112,000 patients were receiving antiretroviral
treatment in public clinics. National Treasury also reports
that the treatment component of the comprehensive HIV/AIDS plan
now reaches 192 sites in all 53 health districts (and more than
170 local municipalities),compared to 139 accredited
facilities in 2004/05.

Comment
--------------


11. Given the increasing amount of HIV/AIDS funding allocated
to equitable share funding and the difficulty of obtaining

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government-wide HIV/AIDS funding totals, civil society and
Parliament will need to monitor HIV/AIDS provincial spending
closely to make sure HIV/AIDS funding gets spent for the
designated purpose.

TEITELBAUM