The Treasury stated on Wednesday that no relief is in the budget to mitigate the impact of US President Donald Trump’s sudden termination of grants to HIV/AIDS organisations in South Africa. The Health Department has yet to finalise its analysis of the required resources.
Trump’s administration has thrown organisations reliant on US foreign aid into turmoil worldwide, first with a shocking announcement that all funding was paused pending a 90-day review and then with the abrupt termination of grants issued by the US Agency for International Development (USAID).
For the past two decades, South Africa has received primary support from the US President’s Programme for Emergency Aids Relief (Pepfar), which channels grants through various agencies, including USAID.
Budget Uncertainty and HIV/AIDS
Shortly before the cabinet rejected his proposed budget on February 19 due to his plan to raise VAT from 15% to 17%, Godongwana stated that work was underway to assess the resources needed should the worst-case scenario arise and all US aid to South Africa’s HIV/AIDS efforts cease. South Africa has the world’s largest HIV/AIDS burden, with an estimated 7.8 million people living with the disease and 5.7 million receiving treatment.
Three weeks later, this work remains incomplete, and the spending plans for the public health sector outlined by the Treasury in the Budget Review and estimates of national expenditure remain unchanged.
Response to funding shortfalls
So far, the only response to Trump’s aid cuts has been the National Health Department’s decision to appoint the staff working in its central chronic medicines dispensing and distribution programme, whose salaries were previously covered by donor funding, as detailed in the February documents.
The Health Department will reprioritise R21 million from its existing budget over the medium-term expenditure framework to fund that personnel.
The Treasury has provisionally allocated an additional R29.9 billion to health’s baseline over the medium term to cover wage increases, hire 800 unemployed post-community service doctors, and pay for goods and services.
The Treasury noted that additional funds reserved for several departments, including health, correctional services, and education, are provisional because they will only be available when they demonstrate readiness or meet specific conditions.
The health budget is set to increase by an average of 5.9% over the medium term, marking the first real increase since 2020. The Treasury anticipates that inflation will average 4.4% during this period.
Consolidated government expenditure on health is set to rise from an adjusted estimate of R227 billion in 2024/25 to R299 billion in 2025/26, followed by increases to R314 billion in 2026/27 and R323 billion in the outer year.
Medical tax credits have been frozen with no adjustments for inflation.
Taxation on health measures
Despite pressure from public health advocates lobbying for an increase, the Treasury has upheld its position on the health promotion levy. In the Budget Review, the government proposed cancelling the inflationary adjustment due on April 1 “to allow the sugar industry more time to restructure in response to regional competition.”
The government introduced the health promotion levy in 2018 to reduce the consumption of sugary drinks and help combat South Africa’s rising obesity and related diseases. It currently stands at 2.1 cents for each gram of sugar exceeding a 4-gram threshold per 100ml and is limited to sugar-sweetened beverages.
Health activists have called for the sugar tax to be raised from an effective tax rate of 8% to 20% and expanded to fruit juice.
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