Improving the fiscal space for health: lessons from South Africa

Transcription

1 Improving the fiscal space for health: lessons from South Africa Doherty J, 1,2 McIntyre D 1 1 Health Economics Unit, University of Cape Town, South Africa 2 School of Public Health, University of the Witwatersrand, South Africa WHO pre-conference session: Why and how to approach Universal Health Coverage from a public finance perspective in Africa? African Health Economics and Policy Association Conference, Rabat, Morocco 25 September 2016

2 Session outline Methods How did South Africa improve its capacity for tax collection? Explanatory factors Future challenges Which sectors benefited from improved fiscal space? What happened to the health sector? What happened to other sectors? What explains trends in the fiscal space for health? Conclusions How can Ministries of Health influence resource allocation decision-making in their favour?

3 Methods part of a multi-country study including Kenya and Nigeria (Lagos State) South Africa chosen as a case study because: upper-middle-income country quasi-federal post-apartheid era provided opportunity for extensive reform after 1994 health relatively high on the political agenda tax revenue increased around 70% between 2000 and 2010 reduction in personal income and corporate tax rates mixed methods common research framework time-frame data collection: document review, revenue collection and expenditure data, interviews data analysis: thematic content analysis, trend analyses

4 How did South Africa achieve improved tax collection?

5 Explanatory factors (1) A favourable external environment: governmentlegitimacy strong economic growth (at times) A favourable public sector institutional environment: strong political support for tax policy reform and the tax collection agency tax policy reform that expanded the tax base through eliminating inappropriate exemptions and changing incentives semi-autonomy for a stream-lined tax collection agencythat enabled operational efficiency and recruitment of highly skilled staff while retaining political oversight continuity of strong leadership in both the Ministry of Finance and tax collection agency, as well as shared values Effective task networks: strategicuse of consultants in reform of tax reform and the tax collection agency, while building internal capacity and retaining control over reform processes intense cooperation with banks and other government departments in developing information systems that support automation and audit of tax returns

6 Explanatory factors (2) A transformed and strengthened tax collection institution: structure and culture: drew on a culture of activism to bring unions into negotiations around transformation, consult widely with staff, flatten the management hierarchy and make management accessible across the organisation invested in the recruitment and development of skilled staff coalesced activities around integrated teams, encouraging innovation mobilised the organisation around a sense of higher purpose backed up by a policy of zero tolerance towards corruption. prioritisation of tax collection activities to focus on high-yield tax-payers, ease tax filing for ordinary taxpayers and reduce administrative tasks multiple strategies to promote tax compliance, including building positive public perceptions of taxation and the tax collection agency strong tax enforcement strategies, including public shaming of tax defaulters

7 Explanatory factors (3) Development of human resource capacity: improved numbers and retention appropriate deployment according to skills positive and negative incentives, including prosecuting corrupt staff

8 Future challenges globalisation of trade and e-commerce changes to political system and support economic instability the informal economy public perceptions

9 Which sectors benefited from improved fiscal space?

10 What happened to the health sector? (1) South Africa 14 South African Rands (billions) % Total government expenditure Health expenditure Health as % total expenditure 0

11 What happened to the health sector? (2) South Africa South African Rands (real, 2010 prices) GDP per capita Health expenditure per capita

12 What happened to other sectors? 25 South Africa % share total government expenditure Health Education Social protection Housing, community, water Defence Police, law, prisons Economic affairs

13 What explains these trends in the fiscal space for health?

14 Economic, political and administrative factors (1) fiscal policies reined in public expenditure required rapid servicing of debt (which peaked at 21 per cent of total government expenditure in 1998/99) de facto prioritisationof other sectors e.g. economic growth through productive sectors and infrastructure spending on the social determinants of health 25% cap on tax:gdp ratio Latin America: 32% Central and Eastern Europe: 37% OECD countries: 34%

15 2011/ / / / / / / / / / / / / / / /04 30% 25% 20% 15% 10% 5% 1994/ /96 0% SARS autonomy Corporate tax rate cut SARS transformation Personal income tax rate cut Corporate tax rate cut Government tax revenue as % GDP

16 Economic, political and administrative factors (2) fiscal federalism(introduced in 1996) created a number of technical and political barriers: parallel processes for budget development at the provincial and national levels the need to reconcile these with the Medium-Term Expenditure Framework complexities and trade-offs inherent in the budget cycle provincial autonomy in deciding health allocations an opaque and fluid health budget development process aggravated by weaknesses in parliamentary oversight and limited advocacy by civil society limited technical capacitywithin the Ministry of Health to motivate for increased allocations: shortage of health economists methodological difficulties demonstrating effectiveness the absence of technical experts from the Ministry of Health on high-level budget finalisation committees

17 Economic, political and administrative factors (3) personal attributes of some South African Ministers of Health were better than others at protecting and expanding the fiscal space for health: politically well connected gained Cabinet s trust through proving their effectiveness brought persuasive arguments to bear when motivating for increased funding, by explaining why health interventions are good for the country s development and demonstrating past implementation successes. To be a successful Minister, yes, you must have your own vision and you must be passionate about that vision, but actually a critical point is to turn what s your pre-occupation, your vision, into a shared collective vision of your Cabinet colleagues.

18 Economic, political and administrative factors (4) relative power of the Minister/Ministry of Financewhich can either be won over by an effective Minster of Health or over-ride the Minister s decisions, especially when they distrust the public health sector s ability to deliver: efficiency is a key concern Before you go asking for more money, demonstrate that you can spend what s been allocated to you.

19 Conclusions The South African case study shows that: it is possible to increase domestic revenue (even without raising tax rates) this creates fiscal space for increased government expenditure however, this does not mean that the fiscal space will improve, even in countries with considerable health and health care problems, and highprofile health policies the complex interplay between political, economic and administrative factors explains this

20 How can Ministries of Health influence resource allocation decision-making in their favour? engage Cabinet and Treasury around appropriate fiscal policy choices: make trade-offs explicit persuadethat investing in health is a productive choice that helps to grow the economy and achieve development goals develop the capacity to mount and defend strong bids for additional resources improve efficiency document successes and demonstrate the debilitating effects of underfunding develop clear advocacy strategies with the support of civil society

21 Acknowledgments Jane Doherty and Di McIntyre are members of the Consortium for Resilient and Responsive Health Systems (RESYST). This presentation is an output from a project funded by the UK Aid from the UK Department for International Development (DFID) for the benefit of developing countries. However, the views expressed and information contained in it are not necessarily those of or endorsed by DFID, which can accept no responsibility for such views or information or for any reliance placed on them. The authors of this presentation thank the South African experts who were interviewed for their time and insights. We also thank the other RESYST consortium members who participated in the collaborative, cross-country project of which this South African study was part. More information on the study and RESYST can be found at: Website: