Budget basics

Budget basics

How health is structured

Our public health care system is divided into several different levels. Each level has particular responsibilities to ensure that people have access to health care services. These levels are the National Department of Health (NDoH), the Provincial Departments of Health (PDoH), and district or municipal health departments.


National Department of Health (NDoH)

The NDoH is responsible for developing the government’s health policy. It does not provide health care to people directly. Instead, the NDoH tries to regulate how health care services are provided to the public. It does this by formulating legislation and issuing regulations and guidelines that determine the levels of care a person is entitled to receive when he or she goes to a hospital or clinic. The NDoH must also monitor the programmes that provinces put in place, to check that they provide quality services.



Provincial Departments of Health (PDoH)

The PDoHs are primarily responsible for providing health care services to people. They structure the health care system for the province and determine the placement of hospitals and clinics. PDoHs spend most of South Africa’s health budget. For example, KwaZulu-Natal alone spends more money on health than the NDoH. This is because the PDoHs have to maintain hospitals, pay doctors, nurses and other health workers, and buy all supplies, such as medications, that people use when attending public hospitals or clinics.



District or Municipal Health Departments

The job of providing health care services is sometimes also the responsibility of a local district or municipal health department. This is becoming less common though because provincial governments often do not believe that local government will be able to manage the facilities better than they could. However, this often makes it difficult for members of a community to raise their concerns or to demand action from the PDoH, because the PDoH may be located far from that community. Fortunately, greater control at the local level is one of the priorities of the National Health Insurance Proposals. This would give communities better access to officials to make complaints or to demand action.


Budget Buzzwords


Appropriation Act: Act that allocates money to different departments for spending. The Appropriation Act is essentially the national budget. Parliament and every provincial legislature passes an appropriation act.

Adjustment Appropriation Act: An Act generally passed in November that adjusts the allocations from the Appropriation Act to take into account new information about the amount of money available.

Conditional Grants: Money given to provinces by the national government that comes with conditions on how it must be spent. It is monitored by national departments.

Division of Revenue Act (DORA): Act that divides money between national, provincial and local governments and provides conditional grants.

Equitable Share (ES): The ES is a constitutionally required distribution of money from national government to the provinces, district and municipal governments. This money is allocated according to the Equitable Share Formula.

Equitable Share Formula: The Equitable Share Formula determines how much money from the ES each province and district or municipal government should get.

Financial Year: The year for which the budget is set. It runs from 1 April to 31 March every year.

Medium Term Expenditure Framework (MTEF): The MTEF is a preliminary budget plan that covers three financial years. It is usually presented in October or November.

National Revenue Fund (NRF): The NRF is the main fund in which almost all money collected by national government must be placed before being spent according to a budget.


Almost all money spent by government comes from the National Revenue Fund (NRF). The NRF is like a bank account into which all the money collected by national government is deposited before it can be spent. At the beginning of each financial year, all of the money in the NRF is allocated for spending in two acts passed by Parliament: the Division of Revenue Act (DORA) and the Appropriation Act.

What does DORA do?

DORA first divides the NRF into three large pots: the National Government Revenue; the Equitable Share for Provinces; and the Equitable Share for Local Governments. These three pots of money are used to fund the three different spheres of government.

Of the money allocated via DORA in the 2010/11 financial year, the national government got R359 billion (44%), followed by the provinces with R323 billion (39%), then R71 billion for the state debt, R59 billion for local government and R1 billion for contingencies. Local governments are expected to raise most of their own money in the form of fees and taxes on the services they provide, which is why they get little from the national government.

What is the Equitable Share?

For provinces, something called the Equitable Share Formula is used to determine how much money each province will receive from the Equitable Share. This money is not simply divided according to the size of the population in each province because the circumstances of each province vary. Therefore the Equitable Share is divided based on six factors:

  • Education (51%)
  • Health (26%)
  • Percentage of Population (14%)
  • Administration (5%)
  • Level of Poverty (3%)
  • Level of Economic Output (1%)

Importantly, despite the Equitable Share Formula dividing the money up according to these factors, there is no obligation on the provinces to spend according to this formula. Money given out through the equitable shares to provinces and local governments is called an “unconditional allocation”. This is because the money can be used in any way that provinces or local government determine is best.

Conditional Grants

DORA also creates conditional grants. Conditional grants are allocated by national government to the provinces, but the provinces must spend them according to conditions set down by national government. There are many conditional grants.

Conditional grants are designed around a single programme that national government recognises requires a significant amount of money and is of national importance. Importantly, conditional grants are only meant to supplement provincial funding for a programme. They are not the total amount that a province spends on that programme.

One example of a conditional grant is the Comprehensive HIV and AIDS Grant. It is intended to help pay for each province’s HIV/AIDS programme.

When a conditional grant is allocated to a provincial department, that department must submit a business plan showing how it will spend the money. In the case of health-related conditional grants this means the provincial departments of health submit their business plans to the NDoH which must approve the plans as being strategically and financially reasonable. If the NDoH does not agree with a plan, it can reject it and force the provincial department to develop a new plan that is more reasonable according to NDoH criteria.

What is done in the Appropriation Act?

While DORA makes major decisions about how to divide money between national, provincial and local governments, the Appropriation Act makes detailed decisions about how each sphere of government will spend money across different departments through a series of “Votes”.

Each of these Votes sets out a budget for a single department. So, for example, there will be one Vote for the National Department of Health, one Vote for the National Department of Social Development, one Vote for the National Department of Home Affairs, etc. Parliament passes an appropriation act for national departments and each provincial legislature passes an appropriation act for its province’s own departments.

Timeframes for the budgeting process

The South African government’s financial year runs from 1 April to 31 March. Budgets for all departments are negotiated between the National Treasury and provincial treasuries, national departments and local governments. These negotiations start almost as soon as the previous year’s budget begins. This means, to get involved and have an influence on budget decisions, as civil society, we need to act early and be proactive. (See page 30 for more on the budget cycle.)

The MTEF and long-term planning

Part of the budgeting process also includes planning for more than one financial year through the Medium Term Expenditure Framework (MTEF). The MTEF guides spending over three years so that departments can have a longer-term view of how much money they will get each year.

The budgets include targets so that government can both estimate how much it will cost to achieve those targets and also hold departments accountable if they do not meet them. As an example, a target in every provincial health budget is the number of patients who will be on ARV treatment by the end of the financial year.

Usually the MTEF, with the exception of new programmes, is incremental. This means that targets and budgets are increased every year to account for inflation and achievement of the previous year’s targets. They are not estimated using a thorough review of the targets themselves.

Ideally every health facility should develop a budget based on government policy and on the needs of the community that it serves. These clinic budgets should then be consolidated into district budgets. District budgets should be used to construct provincial health budgets. National government should then try to ensure that there is enough money in conditional grants and the equitable share to cover these budgets. At every stage budgets should be negotiated, discussed and verified. If there is not enough money to cover the budgets, the most important areas of need should be determined through a consultation process. Unfortunately South Africa is a long way from implementing this kind of system.


Demand district health and human resource plans

Every health district in the country is required by law to develop annual district health and district human resource plans that explain how they intend to provide health services to the people in that district. These plans are extremely important as districts and municipal governments are directly responsible for providing services to people. Without these plans, it is not possible to develop accurate budgets. These plans should be developed with community involvement and be open to scrutiny by community members. As far as we can tell, very few—if any—districts actually do this.

Sit on clinic committees and district health councils

Every district is required to have a District Health Council and all clinics are required to have a Clinic Committee in terms of the National Health Act. Many of these councils and committees do not yet exist, but community members should demand that they be established! Clinic committees are required to have representatives from the community. District health councils can have community representation, but are not obligated to do so at the moment. Nevertheless, communities should demand representation on district health councils.