“Exchange rate decline fuels unauthorised expenditure”
The over-expenditure of R90,4m occurred on items in programme 2, entitled district health services of the Health department. It resulted from the settlement of the Medico legal claims, the pressure to supply additional drugs and vaccines as well as the effects of the fluctuations in the currency exchange rate.
The high cost of Medico legal claims is something that can be brought down, if not avoided altogether. Between 2012 and 2015, legal costs incurred by the Health department amounted to R170m and in those same three years, R270m was paid out in legal settlements.
I understand that in some years the claims against the department has run into billions. It is only when disciplinary action is taken against the officials involved and that they are held liable for their negligence that these claims will come down. This House needs to be assured that action will be taken by the department against those involved in negligence.
The second issue which I want to address is the impact of the exchange rate on this over expenditure. If the exchange rate had an impact in the 2014/15 year, it is going to be horrific in the 2015/16 year. In the last year, the Rand has depreciated against the Dollar by 30%.
Does the Department of Health, who is reliant on the importing of drugs and equipment, take exchange rate fluctuations into account when doing their planning?
This Finance Bill is evidence first hand of the impact of our economic situation on the supply of services. This problem has been exacerbated by the firing of the previous Finance Minister Nhlanhla Nene. As a result of his firing, the Rand crashed and R150b was wiped off our stock exchange. This has resulted in rising inflation and rising interest rates. All of this is going to impact negatively on the poor.
In the United States of America which has a highly developed economy, the politics do not derail the economy to the extent that it does in a developing country like South Africa. The events of the last few days where the President has failed to resign will hasten the creation of negative sentiment in our economy and will also hasten the downgrade of our sovereign credit rating.
Standard and Poor’s and Fitch rate South Africa’s debt just one notch above junk status. Moody has it two notches above junk but is on review for a downgrade. The South African Reserve Bank warned on Monday that a cut in South Africa’s sovereign credit rating would hit the currency hard and push up short-term interest rates. As a result of the events of Tuesday, where the President did not resign, the Rand dropped 2%.
What this all means is that our economy and our politics and our capacity to deliver services are very much interlinked. We will never get our economy right unless we get our politics right.
The consequences of the political turmoil in which this country finds itself are:
- A declining growth rate under 1%;
- Rising interest rates;
- Rising inflation;
- And a falling Rand
All of these factors impact negatively on the poor. It means that more and more money will have to be paid for debt redemption, which means a lot less will be spent on service delivery.
If the Rand continues to decline, it means we will have to pay more and more for the same drugs and medical equipment. It also impacts on the cost of food which we need to import. The Honourable Members of this House need to ensure we take the necessary steps to get our politics right so we can get our economy right. You all know exactly what I am referring to.
We also note that there has been a decline in unauthorised expenditure over the last three years. We welcome the fact that over the last three years the total amount of unauthorised expenditure which has been subsequently authorised has decreased from R2,8b to the R90,4m before us.
We also support the view that disciplinary action needs to be taken against the officials involved, because there are provisions in the PFMA for emergency funding when you are going to over-spend on a vote. They should have been followed in this case.
The Democratic Alliance supports the Finance Bill to authorise R90,4m of unauthorised expenditure (over expenditure) incurred by the Health department in 2014/2015 financial year as a charge against the provincial revenue fund. This matter has been thoroughly interrogated by SCOPA, who supports the recommendation to authorise this expenditure.