The SA Constitution mandates that all citizens have the right to access healthcare services, but this right is restricted by limits to the available resources at the National Health Department’s disposal. For health managers, this means that every rand must be utilised with unprecedented precision.
While the 2026 Budget reflects a welcome 4.2% growth in health spending compared to the previous year, much of this is absorbed by the first three-year public service wage agreement since 2018. Consequently, the National Department of Health has doubled down on its commitment to greater efficiency, better management of commuted overtime and intensified promotion of preventative care.
Furthermore, medical inflation in South Africa has averaged 8.2% since 2010, consistently outstripping the headline Consumer Price Index (CPI) of 5.2%. For a health manager, a budget that only tracks CPI represents a real-term cut, necessitating a shift toward value-based care and resource optimisation. Navigating these constraints requires specialised financial acumen, such as that provided by the FPD Advanced Certificate in Health Management, which bridges the gap between clinical outcomes and operational sustainability.
The challenges of health service budgeting in 2026 are exacerbated by large cuts to international donor support. Across Africa, Official Development Assistance (ODA) has plummeted from a 2021 peak of $80 billion to just $24 billion in the current cycle. This decline is particularly acute in South Africa after the suspension of US funding in 2025. At the time of writing this article in March 2026, the $115 million PEPFAR Bridge Plan, which served as a short-term lifeline for core HIV services, is set to expire without an extension plan.
This disruption has forced the South African government to intervene with an emergency allocation of R754.5 million to prevent clinic closures and staff redundancies in provinces with high HIV prevalence. For health managers, this shift from reliance on external sources to domestic accountability requires a fundamental realignment of resource management strategies.
In South Africa, the distribution of resources also remains highly inequitable; 8.5% of GDP is spent on health, but nearly half of this benefits only 16% of the population through private medical schemes. The National Health Insurance (NHI) Act, signed in May 2024, aims to address this by creating a central state fund to purchase services from both public and private providers. However, the implementation is currently hindered by court challenges and the need to capacitate public facilities for accreditation. This transition demands that managers tighten their efficiency and effectiveness in expenditure, a core focus of the Advanced Certificate in Health Management offered by the Foundation for Professional Development (FPD).
A granular understanding of cost drivers is essential for stretching resources. In the public sector, the "compensation of employees" (CoE) accounts for the largest share of expenditure, often exceeding 75% of provincial budgets. Rising unit costs from centralised wage agreements often force the reprioritisation of funds away from "goods and services," potentially compromising medicine availability.
Other significant drivers include:
Disease Complexity: Managing the 95-95-95 HIV/AIDS targets while addressing a surging burden of non-communicable diseases (NCDs).
Technological Growth: Minimally invasive surgeries and advanced diagnostics improve outcomes but increase the cost per treated patient.
Private Sector "Upcoding": The Health Market Inquiry found that private costs have risen due to "upcoding" (billing for more complex procedures than were performed) and a "hospicentric" model in which patients are treated in hospitals for care that could be provided more affordably in primary settings.
Traditional incremental budgeting often perpetuates historical inefficiencies. To stretch resources, managers are adopting more dynamic methodologies:
ZBB requires every department to justify all expenses for each new period from a zero base. Hospitals employing ZBB can potentially reduce costs by 20% to 40% by reallocating funds to high-priority clinical areas.
In a volatile environment, annual budgets can become obsolete. Rolling forecasts allow managers to update financial projections monthly or quarterly using real-time data. This provides the flexibility to respond to changes in patient volume or reimbursement rates.
To assess financial impact, managers must track the cost per patient:
Cost per Patient = Total Operating Costs ÷ Number of Patients Served
Lean Management is a powerful tool for improving patient experience without additional capital. A case study at New Somerset Hospital (NSH) demonstrated that by staggering appointments and improving signage, the facility achieved a sustained 18.2% reduction in patient waiting times. This focus on removing "wasteful blockages" enables increased quantity and quality of care within existing resource constraints.
The Fourth Industrial Revolution (4IR) further enables efficiency. AI and machine learning can improve the efficiency of budget planning and risk assessment in Public Finance Management (PFM). Digital health tools, such as Electronic Health Records (EHR) and telemedicine, reduce costs by improving coordination and access, particularly in rural areas.
In a resource-limited setting, the health workforce is the most valuable asset. Effective budgeting focuses on "task-shifting", delegating tasks to less specialised health workers to lower unit costs while maintaining quality. The professionalisation of the public service is a priority, requiring leaders with the skills to manage complex budgets under the Public Finance Management Act (PFMA).
As South Africa moves toward NHI, the role of the manager will evolve into "strategic purchasing", which requires active, evidence-based decision-making about what services to buy and at what price. This requires merging fragmented funding pools to increase bargaining power and reduce administrative overhead.
The challenge of health service budgeting in the mid-2020s is no longer a simple accounting task; it is a strategic leadership requirement. Successfully stretching resources without cutting quality requires a comprehensive approach: adopting ZBB and rolling forecasts, implementing Lean methodologies to eliminate waste, and leveraging digital innovations.
The Foundation for Professional Development (FPD) Advanced Certificate in Health Management is designed to equip managers with these vital skills. By empowering leaders to navigate tight budgets and understand cost drivers, the programme helps ensure that healthcare as a constitutional right remains a reality for all South Africans.
A manager should immediately perform a "root cause" variance analysis to determine whether the deviation is a "volume variance" (treating more patients than expected) or a "price variance" (increased supply costs). Once identified, a Rolling Forecast should be used to adjust operational plans for the remainder of the year.
While salaries are often fixed, ZBB is highly effective for "goods and services," maintenance, and capital expenditure. Managers must justify the need for every item each period, which often uncovers "waste" such as unused stock or poor-value maintenance contracts.
Medical inflation is driven by the rapid development of expensive technologies, the rising cost of imported medicines, and specialised labour requirements. In South Africa, medical inflation has averaged 8.2% compared to CPI's 5.2%, meaning managers must budget using medical-specific inflation rates rather than general consumer inflation.
Key indicators include "medicine availability" (targeting 80% or higher), "patient waiting times," and "infrastructure maintenance." A facility that stretches its budget effectively will maintain high scores in these areas despite fiscal constraints.
Cost-cutting typically involves reducing inputs (like staff or medicine), which can lower quality. Lean Management focuses on reducing "process waste"—such as patient waiting times or redundant administrative tasks. This allows a facility to provide more and better service using the same resources.