Budget to answer questions about what Covid vaccines are costing South Africa – and who is going to pay

Finance minister Tito Mboweni’s 2021 budget speech should provide full details on the total costs of implementing the Covid-19 vaccine rollout in South Africa, says professional services firm PwC.

Given the improved revenue outlook for the country, the firm said that it down expect tax hikes to be used to cover the cost of the vaccine. It added that government is in talks with medical aid schemes for the funding of non-scheme members.

“This would, in effect, amount to a tax on the medical schemes and be borne indirectly by medical scheme members,” it said.

While this would be the ideal scenario, PwC said that a lot of analysts have pointed to possible tax hikes to fund the vaccine.

“We do not believe that this is necessary, given the significantly improved revenue outlook in the short to medium-term. Much will, however, depend on the ultimate clarity cost of the rollout a vaccine – which would include not only the direct cost of the vaccines themselves but also the cost of implementing a vaccination programme.”

To the extent that the National Treasury does not secure funding from the private sector, PwC said that it expects the costs will be funded from existing revenue sources or debt.

This could be done by either a temporary increase in the expenditure ceiling, a reprioritisation of expenditure, utilising the contingency reserve, or a combination of all three, it said.

In a January interview with 702, Treasury director-general Dondo Mogajane said that South Africa typically gets money from two sources – taxes and borrowing from the market.

“Neither of the two options are ideal, as you can imagine. However, at this point in time, we are facing a pandemic and the president confirmed that we will do anything possible to ensure we find the money,” he said.

Mogajane said that the reprioritisation of existing budgets was one option; a second option was to borrow more and increasing the deficit. The third option was taxing citizens to make up the shortfall.

He said that an official decision will be communicated in Finance minister Tito Mboweni’s budget on 24 February, and will be detailed thoroughly to indicate where the money comes from.

Despite the financial considerations, the director-general said that ultimately the decision was about saving lives.

“One way or the other, we will have to bite the bullet, we have to do it for the sake of South Africans and saving lives. We have to do everything in our power to make sure that we buy these vaccines and vaccinate South Africans.”

Read: Mboweni ‘not oblivious’ to South Africa’s shrinking tax base, as emigration numbers rise

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Budget to answer questions about what Covid vaccines are costing South Africa – and who is going to pay