Table 3 Participants responses on the budget process

Budget allocations

“How the budget works in government: after the taxes are collected by SARS (South African Revenue Service), it goes to the National treasury. The National treasury will do equitable allocations between all provinces. This goes to the Provincial treasury which has its own committee of members of different departments, they allocate to different departments… Then we work from the departmental level, at department level… there will be allocations for tertiary hospital services… and then they will further break it down according to their needs.” (Fig. 3)

Provincial and National Department of Health (NDoH) allocations

“Province would get an allocation and then the Provincial treasury will do further allocations within the province. This is guided by what national says, but the allocation will be done from the Provincial treasury.”

There are two different types of budgeting in the pharmaceutical budget. There is what you call the:

1. “Equitable shares—the Provincial treasury will allocate the figure, then the Provincial department of health will allocate the money according to the cost centre.” (Fig. 2)

2. “A conditional grant—will be allocated by the National Department of health. This is currently for TB/ antiretroviral (ARV) medicines and certain vaccines, we don’t buy outside the conditional grant and this is allocated to us by the National Department of health treasury.” (Fig. 2)

When the budget is allocated to province the equitable share, conditional grant and National Tertiary Service Grant (NTSG) amounts are stipulated but the exact amounts for specific services and conditions are not indicated. The province will use their discretion from the equitable share budget on the funds required for communicable diseases, non-communicable diseases and other conditions, programmes or services. As explained by a participant:

“It doesn't just appear to say it’s a portion for non-communicable diseases, it just says that this amount is for tertiary services, this amount is equitable share, and this amount is for vaccines… So those are the main score line items that they get… We use our discretion based on the previous consumption.”

Budget process timeline

All participants used a timeline for when they started planning for the financial year and when it was finalized but were not in agreement of their timelines. The allocation of funds was received by provinces at the same times, but the differences in planning could be due to the size and different requirements of the provinces

Budgeting tools/methods used

All participants stated that in the past the budget was based on historical values also known as baseline budgeting with inflation taken into account, but in 2019/20 and 2020/21 a new initiative was implemented to allow for a more evidence-based approach, this was explained in detail by participants:

“You have now forecasted using the historical data but you then need to factor in what is going to happen going forward, is there going to be a reduction, or be an increase then you need to adjust for that, this is called forecast enrichment.”

The budgeting process is being:

“Revised and strengthened by accurate quantification of requirements which is based on forecasting. Processes utilizing forecasting tools and consumption-based quantification are enriched by real users such as pharmaceutical personnel, programme management and others to determine the quantity and translate it into a monetary value based on current prices.”

“A mixed model was used. This method made use of a zero-based calculation which focused on real requirements, with demand planning being a critical function.”

“So we work from a zero budget and we said these are the requirements.”

A participant elaborated on the factors that have to be considered with historical budgeting:

∙ “Birth rate” (especially in the case of immunizations)

∙ “Population growth rate”

∙ “Demand data and adding adjustments” (such as inflation)

“This data is converted into product units and then Rands (South African currency).”

“I interact with national to give me a growth factor for a specific disease; HIV and AIDS in the district: they would give me the percentage of growth. I also get what I call the inflation medication impression, I normally take the percentage higher than the normal inflation.”

“We usually forecast to our projections based on the actual product items that we've used for the previous two financial years, and take those quantities cash them into a rand value using the previous tender prices that we had… we'll then add the current CPI (consumer price index) to that price.”

“Provinces will be required to provide inputs such as demand planning processes.”

“The NDoH will look at demand data for the last three years, based on procurement and demand from facilities.”

“Population size” and “population growth” were the greatest considerations

“The headcount” was considered, “which includes not only patient numbers but the number of patient visits.”

“Treasury currently uses a formula which is a population-based, to allocate the budget for the equitable share.”

“The equitable share to some extent is determined by the part of the population that is not covered by medical aid. Based on the non-insured population the province will be granted a proportionate part of the total healthcare budget.”

The level of care that you are treating a patient at will also assist the budget: “One of the factors that we need to take into account, is the nature of the level of care, meaning that at the clinic level you look at the normal types of illnesses that people have.”

Initiative to secure the pharmaceutical budget

With a more evidence-based approach to determine the appropriate budget for pharmaceutical services, a method to preserve or protect the budget can be applied. For the 2020/21 financial year, the NDoH aims to implement a ring-fenced budget for pharmaceuticals which will ensure availability of funds

“Starting in April 2020 what is called the ring-fenced budget for pharmaceuticals will come into play.”

“Ring fenced meaning protected so it’s only moved for procurement of medicine. But it will not take into account all the accruals that come from previous year.”

“It gives pharmaceutical services a concrete budget to work with, at the moment that figure is fluid.”

“It is something that pharmacy has been anticipating for quite a while and to date not been successful until recently where it was identified as critical to ensuring availability.”

“It's going to be very crucial if you have that in a separate bank account once it's approved because by doing that, we can actually hold people accountable to that account.”

A participant stated that even before this initiative they ring-fenced their pharmaceutical budget:

“In our province, we ring-fence medicines because it is non-negotiable, we won't touch it. But the province has a right to move that money, because of other needs. We reinforce it because of limitations of resources. Only in a dire situation then the leaders will decide where to move it.”

Data sources used to determine the budget

“I was involved in the process, in terms of identifying data sources: identifying information that will enrich the numbers of the information that we get from the data analysis.”

“We looked at historical consumption data and put a ± 10% Increase on previous demand data. We looked at the demand data. We went into the database, we had three sources of databases:

Medicine demand or usage data was analysed using three sources:

1. RX Solutions—institutional stock management system

2. MEDSAS—depots data management system

3. LOGIS—National treasury assistant, used to procure items that are not coded, e.g. buyouts.”