Major public service union urges Ramaphosa to delay the NHI

 ·17 Apr 2024

The Public Servants Association (PSA) is urging President Cyril Ramaphosa to delay the signing of the National Health Insurance (NHI) Bill into law, saying that the proposed funding mechanisms for the scheme are not sustainable.

The National Department of Health confirmed again this week that it would use budget reprioritisation and new tax measures—including a payroll tax and surcharge on income tax—to fund the scheme.

Clause 49 of the NHI Bill outlines the funding mechanisms for the NHI, which include:

  • General tax revenue, including the shifting of funds from government departments and agencies and provincial budgets and conditional grants;
  • The removal and reallocation of funding for medical aid tax credits;
  • Payroll taxes on employers and employees and;
  • Surcharges on income tax through a Money Bill by the National Treasury.

However, as has been the case for the entire processing of the NHI Bill, the department has not been specific about what the scheme will actually cost, or how much more taxpayers will be expected to pay, saying only that the funding mechanisms will be determined by the finance minister at some point after the NHI Bill has become law.

The department has only indicated that a “small” 2% income tax surcharge and a 2% payroll tax would be used to fund the scheme, with the balance (unstated) coming from budget reprioritisation.

The NHI Bill also states that the scheme will be phased in until 2028, with “mandatory prepayment” funding mechanisms only kicking in during the second phase (2026-2028).

Growing opposition

According to the PSA—which represents some 235,000 members in the public service—the stated (or unstated) funding mechanisms have set alarm bells ringing about the sustainability of the NHI.

Particularly as further taxes on an already strained taxpayer amid rising costs, lower salaries, and other pressures are not viable, it said.

“The funding model presented by the Department of Health lacks sustainability. It disproportionately burdens the poor who are already struggling to make ends meet amidst the high cost of living, constant increases in petrol prices, and soaring interest rates.

“In addition, salary increases have consistently lagged behind inflation rates, exacerbating the financial strain on households,” the union said.

While the department makes no specific mention of hiking VAT to fund the NHI, the PSA said any move to do so would be “alarming”.

“Estimates suggest that the government would need nearly R200 billion annually to sustain the NHI. However, with the proposed tax increases falling short and economic challenges persisting, citizens will undoubtedly bear the brunt of the financial burden.

“This will perpetuate financial constraints on households and deepen socio-economic inequalities,” the PSA said.

“Given the uncertainty surrounding the political landscape after 29 May 2024, the PSA advises the President to delay the signing of the NHI Bill,” it said.

Alternative means of funding the NHI must be explored, rather than solely relying on tax increases, it said.

The government should instead focus on creating jobs to bolster revenue and alleviate pressure on taxpayers.

It added that the government should rather raise funds by recovering money lost to corruption, streamlining the cabinet and reducing “unnecessary expenditure associated with an oversized government structure”.

Ramaphosa has vowed on several occasions, including his February State of the Nation Address (SONA), that he would sign the contested bill before the 2024 elections.

He infamously stated during the SONA that he was “looking for a pen” to sign the bill into law. He has since signed many other bills into law, but the NHI has not yet made the cut.

The PSA now joins a growing list of political parties, business groups, industry organisations, legal advisors and South Africans calling for the NHI to be put on ice until a better plan for universal healthcare can be drawn up.

Read: NHI tax hikes are coming

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