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Viewing cable 06PRETORIA1052, SOUTH AFRICAN HIV/AIDS SPENDING IN 2006 BUDGET

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Reference ID Created Released Classification Origin
06PRETORIA1052 2006-03-14 11:48 2011-08-24 01:00 UNCLASSIFIED Embassy Pretoria
VZCZCXRO7958
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #1052/01 0731148
ZNR UUUUU ZZH
R 141148Z MAR 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 2170
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPDC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAUSA/DEPT OF HHS WASHDC
RUEHPH/CDC ATLANTA GA 1065
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 
 
PRETORIA 00001052  002 OF 003 
 
 
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 
 
PRETORIA 00001052  003 OF 003 
 
 
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