Why funding health sufficiently will stimulate economic development in South Africa

More than 20 years ago, the World Health Organization (WHO) established a Commission on Macroeconomics and Health, whose members included South Africa’s then Director-General of Health, Dr Ayanda Ntsaluba. The Commission marshalled substantial evidence and in its final report made an argument that not only is good health important for human dignity and human rights, it’s also important for economic growth and development.

In its recommendations, the WHO pointed out that “the role of health in economic growth has been greatly underestimated”, calculating that “each 10% improvement in life expectancy is associated with an increase in economic growth of 0.3% to 0.4% per year, other growth factors being equal.”

In the first decade of the 2000s, in keeping with the WHO’s findings, South African health spending grew significantly. For example, nearly 100,000 more people were employed in the health system.

But despite the WHO’s insights – and South Africa’s active involvement in drawing them up – post the 2008/09 financial crisis and in the face of fears about rising debt-to-GDP, in 2012 the South African government commenced a decade-long period of imposing fiscal austerity on public services, including the public health system. For 15 years, per capita expenditure on public health has been steadily declining.



The cash crunch was exacerbated by State Capture, endemic corruption and maladministration. It brought about a deepening inequality between the private and public health systems.

Budgetary trends in health spending and their impact on health services have been documented in excellent research led by the Public Economy Project (PEP) at Wits University. Even though it is often noted that SA spends a relatively large 8.5% of its GDP on health (close to R600-billion per annum), albeit inefficiently and unequally, in an April 2023 report prepared for the Presidential Health Summit’s Pillar 6, the PEP argues that:

“At 8% [of GDP], the argument that South Africa spends enough in healthcare is valid on a macro level but lacks credibility at the level of public sector spending which sits at only -4% of GDP in SA (which needs to support 84% of the population’s healthcare needs). A review of the allocation to health across the public sector board is recommended.”

Numbers talk, but the chronic underfunding is also plain to see in deteriorating health infrastructure, a shortage of critical cadres of health workers (our doctor to patient ratio is 0.31/1,000 in the public sector) and diminishing capacity to manage and treat a mushrooming of preventable diseases (what we call non-communicable diseases or NCDs).

Source: Rising Non-Communicable Diseases: a Looming Public Health Crisis. (Source: Stats SA)

See also: Stats SA; Stats SA, Mortality and causes of death in South Africa: Findings from death notification

Today, not even the government disputes that large parts of the public health system are in a state of near collapse and are not meeting needs.

Finance Minister Enoch Godongwana. (Photo: Misha Jordaan / Gallo Images)

In a radio interview on the day of his 2025/26 budget speech, Finance Minister Enoch Godongwana admitted that:

“We have been [giving] budget cuts for a number of years and they’ve not achieved the desired outcome. We’ve not achieved fiscal consolidation.”

In the budget speech itself, Godongwana said that “deferring the funding [of health and education] further would compromise the government’s ability to meet its constitutional obligations to the people.” (My emphasis) Among other things, this was the justification for an unusual R28.9-billion addition to the health budget “mainly to keep 9,300 healthcare workers in our hospitals and clinics.”

From load shedding to life shedding

But how did we get here?

Over the past few years, people in South Africa have reluctantly accustomed themselves to load shedding. However, there’s a lesson in the underlying causes of the Eskom crisis for the health system as well. It is a simple one: that long-term underinvestment in any social infrastructure leads to its eventual collapse. Underinvestment in health systems carries with it direct economic costs (a decline in productivity and GDP, as I show below), and – at the point when the system collapses – necessitates much higher expenditure than would have originally been necessary to rescue the system.

The same rule applies to both the physical and human infrastructure of South Africa’s large public health system.

Prof Alex van den Heever, chair of Social Security Systems Administration and Management Studies at the University of the Witwatersrand. (Photo: Wits)

Prof Alex van den Heever, the chair of Social Security Systems Administration and Management Studies at the University of the Witwatersrand, says: “We have been underfunding maintenance for roughly two decades” and that now, “An entirely new framework for asset maintenance is needed.”

Van den Heever claims that “South Africa probably only spends around 1.3% of the public health system’s asset value on maintenance, when it should be 5%. Much of what we do spend is irregular (subject to corruption). The current allocations for maintenance are insufficient to maintain the assets, resulting in more rapid depreciation and increased costs down the line.”

But the problem of underfunding extends way beyond asset maintenance.

The problem is that it appears the Cabinet has not understood that population health is a multidimensional economic issue. For example, the fact that the health sector employed nearly 350,000 people directly in 2020 means that it is a creator of value in the economy – as much as it should protect value by protecting health and productivity.

Conversely, when public health is mismanaged, it is equally a destroyer of social capital and value.

A few examples should serve to illustrate this point.

Disease and ill health have an impact on the productivity of the employed.

It is estimated by health economists at Investec that treatable mental illness alone costs the economy more than R150-billion rand per year “as a result of lost days of work on account of illness, “presenteeism” (working longer hours), and in extreme cases, premature mortality.”

Similarly, although spending on basic education is the third-largest chunk of the Budget, a significant part of this investment is lost by the cost of poor monitoring of infant and young child health and child malnutrition. The result is an epidemic level of stunting, which affects 27.4% of children by the age of five and, among other things, impairs future cognitive ability.

According to David Harrison, executive director of the DG Murray Trust, which focuses on child health and wellbeing, stunting costs at least one percent of GDP, that is R72-billion per annum. Harrison points to peer-reviewed research, including by the World Bank, to justify this figure.

If you add to these examples the destruction of human and capital resources in the health sector through poor stewarding and insufficient funding we can understand why, when a sudden crisis such as the Covid-19 pandemic forces the neglect of health systems to the surface, it costs significantly more to revitalise and repair infrastructure than it does to maintain it properly in the first place.

Prevention is better than cure in fiscal care as much as it is in healthcare.

Breaking the vicious cycle of poverty and ill health

The vicious cycle looks like this: poverty and inequality are a determinant of poor health, and the costs of poor health borne by poor families become a cause of further and deepening poverty and dependence on the state.

The failure of any government in the past 30 years to plan forward and invest proactively in health and health systems in South Africa has undoubtedly contributed to what the WHO has termed our country’s unique “quadruple burden of disease”. These are:

1. Simultaneous epidemics of communicable diseases such as HIV and TB;


2. Non-communicable diseases (such as cancers, diabetes and mental illness);


3. Poor maternal and child health; and


4. Injury-related disorders, linked to driving, violent crime and substance (especially alcohol) abuse.

Apart from their impact on people’s dignity and opportunity, these diseases also lead to ever-escalating and unmanageable costs on the public health system. Ultimately, what happens is not just triaging at the point of healthcare by health professionals, but triaging by Treasury bureaucrats who decide whole programmes for healthcare and treatment that can be afforded – and that cannot.

In this way, the vicious spiral into a worsening health crisis continues unbroken.

The cost of ill health versus the cost of health

These are just some of the reasons why, within the Government of National Unity’s (GNU) three stated priorities of “driv[ing] inclusive growth and job creation, reducing poverty and building a capable and an ethical state”, concrete programmes to urgently improve health and access to healthcare services should be given much greater priority.

The termination of billions of rands of funding for HIV, TB and health systems by the Trump administration will exacerbate the health crisis.

Thanks to activism and international funding, there has been sufficient funding for HIV prevention and treatment for more than a decade. It has shown the successes that can be achieved with sufficient resources. But the same cannot be said for mental health, diabetes, cancers and effective health promotion programmes.

This is yet another reason why 2025 is an opportune time for a radical rethink about both the quantum of the health budget, where funding is targeted, and the efficiency and honesty of government departments that spend it.

The PEP, at the end of its analysis, made a set of recommendations that included:

• “Public policy on funding and staffing levels should reflect the needs of the health system, and the norms and standards established by national health policy.


• “The moratorium on filling posts in the public health sector should be lifted. Priority should be given to critical services and ensuring that statutory requirements for internship and community service are met and resourced. A second priority is upskilling and formalising the employment status of community health workers.


• “Budget allocations for essential goods and services (medicines, medical products, medical equipment and machinery, etc.) should be sufficient for the need.”

It is promising that in the 2025/26 Budget, the Treasury broke with a decade of austerity and increased the health budget. But it’s not enough.

An R28bn additional allocation, when Provincial Health departments sit with R22bn in accruals “for services already provided” (never mind another R75-billion at least in medico-legal liabilities), and when there are many areas of the health system that are crumbling, leaves healthcare services way behind the curve.

The National Treasury would do well to carry out and cost a needs assessment across the health system to quantify what resources are really needed to stabilise health over the next 10 years.

The bottom line is that unless the government begins to take health and the healthcare system more seriously, catastrophe awaits. There is a need for much greater political prioritisation of health by the GNU and the Treasury. However, what this article has tried to show is that the imperative to do this now is not just a human rights one, but an economic one. DM